Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
Armenia’s domestic distribution channels are adequate for the country’s small size, population, and market. The main storage facilities and wholesale companies are based in Yerevan, the hub for domestic distribution. Distribution most commonly takes place via truck; domestic distribution via rail and air is uncommon. Retail and wholesale operations are often combined. Brand name recognition depends on the type of product, and the Armenian public tends to give loyalty to established brands. Armenian and foreign freight-forwarding companies have established a reliable system for transporting goods to and from Armenia. While Armenia’s closed borders with Turkey and Azerbaijan limit trade routes and raise the cost of transportation, Armenian producers, importers, and freight forwarders have adopted reliable, but expensive, transport routes through Georgia. Goods from or bound for Europe and beyond enter or exit the Georgian ports of Poti and Batumi on the Black Sea coast. The overland trip between these ports and Yerevan often constitutes the most expensive part of the journey. The price for the shipment of a 40-foot container from Yerevan to New York can fluctuate significantly during the year due to disruptions in the global supply and logistics chains.
Most imported products and services are handled by agents and distributors. Most companies in Armenia are relatively small and family-owned and operated, although there are some notable exceptions, including several major local and European supermarket chains and a few department stores. Big companies representing multiple brands often have their own distribution centers based out of Yerevan.
Using an Agent or Distributor
Given Armenia’s market size and the staff and resources required for a U.S. firm to establish a presence in the country, it is often more effective to sell in Armenia through reliable and qualified representatives who understand the local environment and dealing with partners in both the private and public sectors. There is no legal requirement to use a distributor.
Armenian companies are usually willing to become agents or distributors for American products. In recent years, local companies have agreed to become distributors for U.S. companies including Procter & Gamble, Mars, Johnson & Johnson, FedEx, UPS, Dell Computers, Intel, IBM, and Nike. U.S. companies seeking local agents or distribution partners may contact an Armenian legal consulting firm for assistance in finding a partner here. Contracts for agents and distributors may vary significantly depending on the sector.
U.S. firms should carefully evaluate the reputation and bona fides of any prospective representative or agent before entering into contractual agreements or conducting any other business with such partners.
The American Chamber of Commerce in Armenia has experience identifying prospective agents and distributors and can serve as a resource for obtaining information about local companies, distributors, wholesalers, and retail outlets.
Practical information on company backgrounds, contact details, physical locations, and product offerings is also available via Armenia business directories such as Spyur.
Establishing an Office
Foreigners may choose from a wide range of available organizational forms to conduct business in Armenia. The Civil Code of Armenia defines the following forms of legal entities: Entrepreneur/Sole Proprietor, Business Partnership (Full Partnership and Trust Partnership), Limited Liability Company, Supplementary Liability Company, Closed and Open Joint Stock Companies, Cooperative and Representative Office and/or Branch. Representative offices of foreign companies can be established in Armenia for the purposes of representation and protection of the rights of its founding company but are not entitled to perform commercial activities. It is strongly recommended that interested companies retain legal counsel or other expertise on entity formation and corporate registration processes. The U.S. Embassy in Armenia makes available a list of attorneys, some of whom may be able to provide appropriate guidance. The use of an accountant for tax planning purposes is also recommended.
In general, the process of registering a business in Armenia is quick and straightforward. Registration is handled electronically through the State Register of Legal Entities of the Ministry of Justice. A single window service facilitates name reservation, state registration, and tax registration as part of a single registration process. Required documents can be submitted either in hard copy or electronically. Registration can be completed immediately if documents are submitted electronically. Approval can take up to two working days for registrations submitted physically using approved templates.
Office space is widely available in Yerevan, but demand has picked up in recent years, reducing the stock of available property. Commercial property prices in the center of town have increased significantly in 2022 due to company relocations and the large inflow of foreigners affected by the war in Ukraine.
The eRegulations Armenia Portal is a guide on business and foreign investment-related procedures providing step-by-step rules through detailed, practical, and up-to-date descriptions, as seen from the user’s point of view. Users have a possibility to obtain online information on business processes in simple (non-legal) and comprehensible language at no cost.
The growing number of European franchises in Armenia and the prevalence of copycat shops and restaurants, together with a general premium on name brands and a consumption-driven economy, suggest additional opportunities for U.S. franchises in Armenia, especially in Yerevan. Franchise offers from well-known U.S. brands stand to attract substantial interest in Armenia, both from customers and local investors. Franchises tend to be concentrated in fast food restaurants and retail apparel. Fitness concepts have also seen growth in Armenia Yerevan in recent years. There is no specific legislation in Armenia for franchising.
The use of direct marketing is growing in Armenia, particularly among information technology and telecommunications companies that use direct mail, text message advertisements, and leaflet distribution. The digital marketing landscape continues to grow at a rapid pace and the number of marketing agencies has increased. Digital marketing is a ripe space given a high degree of interconnectivity to the internet throughout the country and extensive degree to which Armenians engage via social media platforms. While printed materials are still used, businesses increasingly deliver special offers through social media platforms, mobile applications, and email messages to existing or potential customers. The use of direct mail is limited because regular postal services are not widely used, and many direct marketing efforts lack clear market segmentation based on targeted consumer profiles. Network marketing is used by a number of direct sales companies, particularly in the beauty sales segment.
Although Armenian law generally permits 100 percent foreign ownership of business enterprises, joint ventures are a popular arrangement between Armenian and U.S. companies as a means of penetrating the local market. Joint ventures are often registered either as limited liability companies or joint stock companies. In most cases, it is advisable for the U.S. partner to retain managerial and voting control.
Many types of businesses are required to have a license.
Armenian and foreign postal and delivery companies have established a reliable system for the shipment of goods to and from Armenia. HayPost CJSC is the official national postal operator of Armenia. The company provides postal, payment, and retail services. Haypost currently operates through 900 postal offices across Armenia, including in some of the country’s most remote rural areas.
Express courier services operating in Yerevan include FedEx, UPS, EMS, and DHL. Delivery times from the United States are generally around five to seven days.
According to EAEU customs legislation, the shipment or transportation of goods and products for personal use via international mail delivery services by individuals and foreign individuals is duty-free if the goods total weight is less than 31 kilograms, and the customs value does not exceed 200,000 Armenian Drams (about $490). For the customs procedures and duties exceeding the above-mentioned limits, please visit the Customs, Regulations, and Standards section of this report.
U.S. companies are advised to perform due diligence prior to signing contracts with new partners. Companies are responsible for complying with all applicable laws and regulations of the United States, including the U.S. Foreign Corrupt Practices Act. While western-style legal consultancies exist to help find partners or perform due diligence, their capacity to act as responsible agents is limited, largely due to the lack of transparency in the business culture as a whole. Most successful foreign investors have Armenian partners who are familiar with the local business environment.