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Leading local retail chains like Fox, ml, and Ace Hardware, will most likely pull out of supermarket issued gift certificate programs, starting next Rosh Hashana, say retail industry sources. The chains refuse to cover the cost the food companies incur in selling the certificates, and then apparently pass it along to them.

The major food chains - Clubmarket, Supersol, and Blue Square, sell the certificates to workers' committees for NIS 74-87 per NIS 100. The committees give them as holiday gifts to company and organization employees.

The three competing certificates - Supersol's Tav Hazahav, Clubmarkets' Extra Tav and Blue Square's Rav Tav - include "accompanying chains", expanding the buying options of customers. Though the customer gets full value at places like Kravitz and Tower Records, accompanying chains only get a ballpark 85 percent of the certificates' value when redeeming them with the original food chain.

Now, the food chains are planning to redeem only 80 percent or less to the accompanying chains. A discount already considered steep is now threatening to push these chains out of the gift certificate market altogether.

"The food branch wants us to fund their discounts", a senior retail sector source complained. The executive notes that the fashion stores are discounted 20 percent, receiving only NIS 80 per NIS 100 certificate.

Another senior source said he has been requested to take a 23 percent discount. Market sources claim that it is likely that Fox will drop out of the certificate program.

Harel Weisel, Fox CEO, refused to comment on the issue. Avi Malka, ml CEO and owner, said "ml is considering not being in the certificates." Yaki Vedamni, Ace Do it Yourself CEO, confirmed his company would withdraw from Extra Tav because of the demand to pay a higher percentage, adding that the chain has still not decided about Tav Hazahav because it has a contract with Supersol until the end of the year. Weight Watchers Israel decided to shed Rav Tav for similar reasons.

Kravitz decided to pull out of all certificates. The consumer does not appreciate in the end the discount that Kravitz is required to give, and therefore the company has made a strategic decision to simply give its customers direct discounts, said Kravitz VP Menashe Zilka.

Gershon Weisman, Clubmarket VP for Marketing responded: "Clubmarket does not intend to earn off its partners rather to cover the expenses of the certificates. The considerable costs involved in the certificates range from manufacture and collection to existing market discounts. During the last holiday season Clubmarket subsidized its partners and now it is asking of them to participate according to its outlays."

A Supersol spokesman said, "we do not know of any change or desire for change by our Tav Hazahav partners."

"Blue Square does not discuss its business relationships with the media," said one of its spokespeople.