An eCommerce Sogo Shosha - a solution for Armenia’s small businesses and startups

What is a Sogo Shosha? How is it a solution to Armenia’s economic problems? The idea behind our “Setting Ideas in Motion” section is to highlight issues and put the ball in motion to finding a solution to the problem. The current issue on eCommerce got me thinking…What is a major inhibitor to Armenia’s economic progress? Lets just toss out a few issues:

Lack of Entrepreneurism?
An economy dominated by Oligarchs?
Language issues for many?
Large Income gap between the rich and poor? Small middle class. Brain drain.
Difficulty for startups and small businesses to export their products.
Weak marketing, sales and customer support.
People are comfortable to an insular way of life and are just looking for a stable job.
Exports are difficult and expensive compared to China.

Well I have news for you. The above points describes Japan about 100 years ago. Their solution to fixing the problem still has relevance today for Armenia. Sogo Shosha (総合商社) means “general trading company”, a business entity unique to Japan. They traditionally traded in a wide range of products and materials. In addition to trading, they have historically acted as investment banks and private equities. You may know the the seven largest Sogo Shoshas by name Mitsubishi Corporation, Mitsui & Co., Sumitomo Corporation, Itochu, Marubeni, Toyota Tsusho and Sojitz.

Japanese Sogo Shosha act as an international sales force for medium- and small-sized companies in Japan who lack the ability to market and maintain distribution channels overseas. They also often act as the linchpin for large consortium contracts by arranging finance, helping on brand building, product marketing, assisting in production schedules and arranging for shipping logistics. In effect they are the primary resource needed by the smaller Japanese companies that would never have succeeded without a partnership with the Sogo Shoshas.

My point is simple: I am approached on a regular basic about a business idea that can make good money in Armenia - with minimum risk and has a social benefit component. But the starting conditions are so hard. Well, my answer to that is that Armenia needs a modern digital Sogo Shosha focused on eCommerce.

Brand Building, PR and Marketing

This is the most critical area where a large Armenian Sogo Shosha would help. When I sit and talk with Armenian statups, in the tech field and out - the #1 issue is always marketing. What they are asking is “How can I use brand building, public relations and marketing to increase sales?” I find that the most needed skills in Armenia are these 3 skills. There are so many talented people that don’t know how to sell to the outside world.

Finance

Most startup and small companies don’t face a big cash crunch because the cost are relatively low. Helping share the risk and some critical cash in the beginning, would give Armenian startups more confidence of their success. The fear component of making an investment is reduced a lot. This is not just a Venture Capital or equity type of relationship. It is one where the two companies become actual partners.

Mentorship

Many of young startups in Armenia, and around the world, are in need of experienced business people for guidance. Not to run the company, but just act as a mentor and sounding board. I think an Armenian digital Sogo Shosha could provide this critical service and would help young companies mature and grow stronger. A strong Armenian Sogo Shosha with experienced managers would have an enormous impact.

Payment Process

Given all the issues with PayPal and the problems of setting up a low-cost merchant account to accept credit cards globally, this would be one of the areas that a Sogo Shosha would help the small, independent freelancers in Armenia. Many of the small businesses will grow, but not if they can’t get paid by clients from abroad.

International Shipping Logistics and Distribution

One of the main issues facing Armenian manufacturing and tech companies is exporting the produced goods and getting them to customers at a reasonable cost. Traditional Sogo Shosha arranged for shipping and distribution so the small business could concentrate on producing products. What our dream company would do is take care of fulfillment and distribution of Armenian products like TNT Post or UPS.

Conclusion

I did find two examples of Armenian online stores that are trying to sell and market Armenian goods. But I think what we need to do is develop the brands of the companies, not just resell the products. Shop LAVENK seems to have the right idea, but it is primarily focused on Armenian crafts and charity work. ArmenianVendor.com is another online store, but again, it was more like Armenian specialty items. The question is how to we bring all of these functionalities into one company and make it effective for Armenian small businesses? Give us your thoughts…