On November 20, 2020, HayPost, Armenia’s national postal operator announced that it would be increasing prices for international shipments. The threefold rise in prices was a particularly severe blow for small businesses working with foreign markets.
After 14 years under private management, HayPost was renationalized in 2020. Its shift in strategy is hoping to break out of current financial difficulties with big plans that include a new credit company and the construction of a new multi-storey building.
A Return to the Public Sector
In 2004, HayPost was handed over to “Converse Invest,” a trust management company registered in Latvia. The state retained ownership, but assigned a management concession to its new private sector partner.
Two years later, the trusteeship was taken over by HayPost Trust Management B.V., a company registered in the Netherlands, the owner of which was Argentinian-Armenian billionaire Eduardo Eurnekian.
Eurnekian’s company managed HayPost for 14 years (another one of his companies operates Yerevan’s Zvartnots Airport on a similar management concession arrangement). However, in April 2020, management was once again returned to the State, under the purview of the Ministry of High-Tech Industry. Hayk Karapetyan, who has a background in financial technology, was appointed CEO.
Drastic Price Changes
After returning to state management, HayPost started reviewing its existing tariffs. Sending letters within the territory of Armenia became more expensive, while sending parcels became cheaper. The picture looked different for international deliveries.
In September 2020, an agreement was signed with Russia’s postal operator to reduce the price of parcels being sent to Russia, due to which the price of sending parcels to Russia decreased by several times. Sending a 1 kg parcel to Moscow now costs 2,950 AMD. To other parts of Russia, the rate is 6,000 AMD.
However, this decrease does not apply to other international destinations. On the contrary, international rates rose sharply on January 1, 2021. The price to ship a 1 kg parcel to the EU rose to 14,900 AMD, and to the USA or Canada, 17,900 AMD.
On February 17, HayPost announced that following an agreement with France’s national postal service “La Poste,” postal fees for sending letters/parcels to France would decrease by 35%. Parcels up to 1 kilo will now cost 9,900 AMD compared to the 14,900 AMD and for each additional kilo, the customer has to pay an additional 2,900 AMD, compared to 6,000 AMD (a decrease of 52%).
Before this change, HayPost’s services were the cheapest in the region; now they are the most expensive. Sending a 1 kg parcel from Georgia to the United States costs 109 GEL (approx. 17,000 AMD). A parcel weighing 1 kg can be sent from Azerbaijan to the U.S. for 22.2 AZN, the equivalent of 6,700 AMD.
This increase upended small businesses working with foreign markets. Many individual entrepreneurs and family businesses that exported their products to the EU or U.S. suffered from this sudden sharp change in prices.
Yeva Gevorgyan, Co-founder of In-Art Studio said that the price increase for them is not threefold, but fourfold. “In December, we used to send two kilograms for a maximum of 7,000 AMD. Now it is about 29,000 AMD. The weight of our smallest order was 300 grams. It was heavy ceramic. It used to cost 3,000 AMD to send, now it costs 15,000 AMD,” she explains.
The studio holds ceramics courses and has received orders for their creations from abroad, mainly for the U.S. but also France, England, Lithuania, etc. “Due to the epidemic and the war, we stopped the courses. But we focused on the orders, and it seemed that things were starting to fall back into place. But because of HayPost’s decision, the orders stopped completely, and the studio shut down,” Gevorgyan says.
“We have been working since 2015. My husband and I are the founders, and we had two employees. We are not the only ones. There are many who have been forced to close.”
Armine Harutyunyan, founder of Seeds of Wind makes jewelry which she sells through Etsy and on Facebook. The majority of her orders come from the U.S. “Previously, the price to send packages by HayPost was very reasonable. The average weight of my orders is usually up to 100 grams, for which I used to pay 1600 AMD, and 500 AMD for each subsequent 100 grams. Today I went to HayPost. The weight of my package was 105 grams. I had to first pay 4000 AMD, then another 2000 AMD for that additional 5 grams. It is not the end of the world of course, but․․․,” she says. “If previously someone would consider buying two items or three or four, now they buy only one, or none at all, because they see that the cost of shipping is quite a large part of the price of the product.”
Nana Manucharyan, founder and director of Terracotta Studios says that many companies producing artwork suffered during the COVID-19 pandemic and quarantine. “The shops we worked with either closed altogether or shut down our section, since our section had never been the most profitable,” Manucharyan says. “The goods were simply returned to us in boxes. That was when we started a new business: making cakes. Thus, the pottery studios were preserved, and we were able to pay about ten of our employees.”
Although orders from abroad were limited, today, because of shipment costs that were often more costly than the products themselves, those orders have also dried up.We were getting orders from abroad, though not many.
“I have been looking for alternatives to HayPost, but there are none. It turns out that we are only left with the connection to Russia, where the price has not increased – and in some cases it has even decreased,” Manucharyan explains. “But the US and European diaspora remain ‘outside;’ neither Onex nor Globbing have convenient options. So we will not be sending orders out anymore; we will not offer or advertise our products. I was planning to offer the products of our Bari Kendan clothing brand to Armenian communities abroad, but it’s meaningless because the delivery, even in the case of light goods, is very expensive.”
HayPost’s Losses Were Unsustainable
During the last five years, HayPost delivered about 825,000 packages and parcels annually throughout Armenia, and about 290,000 abroad.
According to HayPost spokesperson Gevorg Abrahamyan, the company has not revised its tariffs in 20 years, and has been operating at a loss in recent years. “The tariffs for HayPost’s deliveries, both domestic and international, were lower than the cost price,” says Abrahamyan. “The principle of setting new, changed tariffs is as follows: 60% of the price is the amount that HayPost pays to overseas partner postal operators to deliver the item to the destination, 30% is the cost of logistics and transport, and only 10% of the pricing is controlled by HayPost.”
CEO Hayk Karapetyan posted a video of a HayPost branch that was in an awful condition on his Facebook Page. “Practical steps are already being taken to correct the situation, and the first step will be to renounce the harmful practice of working at a loss,” he wrote.
However, the immediate and significant rise in prices became a cause for discontent. The head of the Consumers Association of Armenia, Armen Poghosyan, told EVN Report that the association had received a complaint from a group of people regarding the change in HayPost’s prices. The complaint has been sent to the State Commission for the Protection of Economic Competition, which must study it and respond.
It was not just in Armenia that postal prices increased in 2020. According to Bloomberg, almost half the world’s air cargo was carried by passenger flights. However, the coronavirus pandemic led to a sharp decline in air passenger travel, while the demand for air cargo remained high. As a result, air cargo prices around the world increased by about 19%.
HayPost Has Big Plans
Despite financial difficulties and problems caused by the pandemic, HayPost has big plans. CEO Hayk Karapetyan announced that the company would be building a new office tower on Saryan Street, next to the existing post office building. According to Karapetyan, the new multi-storey building will be linked to the old building by a skywalk; it will house a bookstore, a hotel and even a museum.
The company also plans to expand the list of services provided. It has already applied to the Central Bank of Armenia to officially register and license a subsidiary credit company called Post Credit.