my baby - Eyal Toueg - September 23 2011
'Customers tell me it is very American, that it looks like a Walmart for children. I have never been to the United States, I have no idea what a Walmart looks like.' Photo by Eyal Toueg
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Eyal Toueg
Knaan and his store. Photo by Eyal Toueg

One-hundred types of strollers, 30 furnished rooms on display, a huge Gymboree play area on the roof, maternity clothes, 300 suppliers, 140 workers and 15 cash registers - welcome to My Baby, the country's largest store for children's and baby's supplies, spanning 11,000 square meters in the Druze village of Yarka in the western Galilee.

The long drive did not deter Karen and Kobi Beinishi, from Lod. They were browsing through the store on a recent Saturday afternoon with their 7-month-old daughter Noa and a full shopping cart.

"We heard of the place from friends and online," says Kobi. "Our stroller cost NIS 400 less here, the games are almost half price and the selection is enormous. You can't find anything like this in the center of the country, with different departments specializing in different things and lots of salespeople trying to help."

They are right: There are no similar stores in central Israel - or anywhere else in the country, for that matter.

"I wanted to do something big, like Ikea for children," says Jess Knaan, one of the store's owners and founders, who grew up in Yarka. "Customers tell me it is very American, that it looks like a Walmart for children. I have never been to the United States, I have no idea what a Walmart looks like."

But My Baby does not really resemble Ikea, nor any of the chain stores specializing in this market. "I am not a Shilav, Dr. Baby [both baby-product stores] or a kid's clothing store such as Yaldooti, I am everything," Knaan explains, adding that his store gets some 1,000 to 2,000 customers on a weekday, and 5,000 on a weekend.

On this exceptionally hot Saturday in August, we found young couples from Tel Aviv, Haifa, Ashdod and Holon, among other locales. Many were looking to buy all the basics for infants - a stroller, a crib, a car seat and other items - which usually come to thousands of shekels. They were willing to travel a distance to find a store with a large selection and low prices. And most of them apparently found My Baby through the cheapest, easiest and best means of marketing: word of mouth.

"People don't come to Yarka because of my pretty eyes. They come because of the service and the prices," says Knaan, who is not the first person in Yarka to learn that the secret of attracting customers is attractive prices.

"In the 1980s people came to Yarka from all over the country to buy cheap Levi's jeans," he recalls. "Everybody knew that this was the place to get Levi's at a good price, and it was crazy here. Since then everyone has considered this the place for good prices. Once Yarka was the center for Israeli jeans - and now Yarka is America."

Behind the jeans story was a relative of Knaan's, who had contacts at the town's Levi factory. So even as a child, Knaan says, he realized that a small Druze village can become a pilgrimage site if it offers better prices than Tel Aviv.

"We wasted quite a lot of gas to get here," laugh Victor and Asia Garbuozov of Hadera, who are wandering around the store with a long shopping list. "We downloaded it from a website for new mothers and compared prices. This is our second visit. Last time we just looked around and now we're here to buy. We've been here for more than two hours."

"Look at the selection," adds Victor, pointing at the child-proof gate in their cart. "Other stores have two or three types, at most. Here they have seven."

Around us, smiling salesgirls do their best to deal with the flood of customers. "This is an American standard of service," Knaan tells us later, in an interview in Tel Aviv.

Meanwhile, we found that the prices at My Baby were 10 to 35 percent below the lowest prices on the Zap price-comparison website. This means that in practice, My Baby is probably even cheaper than competing baby-goods and toy-store chains, since the prices online are generally lower than in the stores themselves.

Prices and protests

Among other issues on the public agenda which are related to the cost of living, the high cost of raising children has been among the many focal points of the recent social protests. Specifically, this problem includes everything from the lack of subsidized day care, to the disparity between school vacations (4 months ) as opposed to the vacation time allotted to working parents, to the high price of baby formula, which is provided by only two companies (Similac and Materna ).

In March, TheMarker compared the prices of dozens of goods used by children in Israel and around the world. It found that Israelis pay relatively more for cereal, diapers, strollers, baby carriers, toys and furniture.

"I identify with the protest and I think it's justified," says Knaan. "There is no logic to the prices parents pay for basic items like strollers and car seats. Why can a mother in the United States buy a stroller for $250 while an Israeli mother has to spend several thousand shekels? If the suppliers would only get tax and customs benefits, lower port fees, cheaper transportation and better understanding at the Standards Institution [of Israel], they could lower their prices and consumers would pay less, too."

Importers and competing chains apparently consider Knaan to be a good businessman; none of the competitors interviewed said his usually cheaper merchandise is not as good. One supplier told TheMarker that My Baby does not "abuse" him as do the big chains, explaining: "He expects a low profit margin of 30 percent, compared with the chains' 50 percent - and he knows how to get low prices."

Another supplier said, "[My Baby] prices all the goods the same way, and does not try to make an extra profit from certain brands."

The competitors acknowledge that there are advantages to the locale as well: "They are in Yarka, where the taxes and wages are low, and they are open on Saturdays, which gives them more sale hours," said one source affiliated with a chain.

When Knaan is asked how he sells at such reduced prices, he explains: "I buy for one store enough goods to stock a chain. Moreover, I own the land, the taxes are low, I do not have managers, only workers, and the [local] council backs me because I employ 140 local residents. You cannot find these competitive terms anywhere else in Israel."

Modest beginnings

The business began modestly. Knaan, 39, is the eldest of nine siblings in a Druze family. He opened a store for babies and children in 1996, in premises rented from a relative; it was only 90 square meters in size. At the time Knaan was also selling electrodes, so he brought his younger brother Wissam into the business to help him.

"Wissam is special, he is my other half," says Knaan. "I told him I wanted him as a partner. I brought the capital, and he opened the store in the mornings, when I was still selling electrodes. Only after a year did I see that it was gaining momentum, and left the electrode business and we decided to expand."

A year and a half later the brothers' store moved to its present location, at the entrance to the village, and expanded to 300 square meters. Over time there was further expansion - and more customers. In 2003 the two decided that in order to maximize profits, they needed to stop paying rent, and to buy the premises in which the store was located. "I did not sleep nights but I fulfilled the vision. I did not get money from my parents; the bank put down money and we invested the profits, and bought a 5.5-dunam plot [about an acre, around the existing store], where I built a 4,000-square-meter compound - the origins of today's My Baby."

Now, 15 years later, in its spacious premises, the store boasts annual sales of more than NIS 100 million a year. Knaan still lives in the village with his wife and three children. They have a large house by local standards; he has a Porsche and his wife has an Audi 4A. Furthermore, Knaan has also begun to dabble in real estate. ("I bought land with my brother using the business's profits." )

Jess is short for Jassam and, for their part, Knaan's children have names that do not sound typically Arab: Eran, Omri and Jessica. Knaan says he's not trying to sound like he's part of the Ashkenazi upper class. "Eran means camel's milk and is also the name of my best friend; Omri is an Iraqi name and Jessica is the name my mother gave my daughter," he says, adding: "You can't live in the past, but you can't forget it. My parents and my family are my blessing. I bless my parents, who did not contribute money to the business, but gave me a good education and values."

Out of the nine siblings, five work at the store. In addition, the brother of Knaan's wife (they are also his cousins ) does all the bookkeeping. And, 15 other employees at My Baby are also relatives.

"It sounds like I run the family," laughs Knaan, adding that even his father is in the business. "He does not get too involved in the details, but I consult him and his blessing comes first and foremost."

Brand names for less

Two years ago, the Knaan brothers bought a franchise to sell children and adult clothes from Sakal's Emporium chain, which imports international brand names such as Timberland, Nautica, Polo Ralph Lauren and others. Their prices are lower that at other Emporium branches because they do not include VAT, plus some of the clothes are surplus.

"It was not easy for Soli Sakal [the chairman of the Sakal Group] to decide to open such a store with us, because he broke the rules with the prices he gave us," Knaan explains, adding that they had previously had other ties with Sakal. "Sakal sells Mattel toys in Israel. They sell Barbie dolls and Fisher Price toys, and I had already sold those, plus Timberland items for children. They knew that if they wanted to open a store in Yarka, prices had to be cheaper."

The Knaans brought in Emporium as part of their vision of creating a one-stop shop for mother and child. That also motivated them to build a big play area on the top floor and on the roof. We joined the swarm of children there.

"In five minutes, the children's train will depart," one of the workers announced over the public address system, and within a minute, small children were standing in a straight line, waiting for a ride (NIS 5 each ). Dozens of other children were jumping on a trampoline and playing with a host of other attractions, including go-carts (NIS 15 for a ride ) inflatables, ball pools, games and a zip line (NIS 15 without a time limit ).

Knaan hopes to expand the attractions. "I am thinking of a museum and of activities with chocolate," he says. My Baby already hosts as many as two birthday parties a day (a party for 20 children costs NIS 500, small change compared with events in central Israel. )

Knaan also wants to open a Cafe Greg franchise next year; the chain is helping him by designing a child-friendly branch, especially for My Baby, called Greg Kids.

"The prices will not be like those at other Greg branches," Knaan promises. "I believe in making a small profit and giving the customer a good product."

Given the success his business has enjoyed, Knaan says opening another My Baby is out of the question: "I have no interest in expanding around Israel. I want Israelis to come to Yarka. But I do intend to sell this concept abroad. Businessmen in Europe have shown an interest and wanted to become partners, but I turned them down."

Are you afraid of competition?

"I am not afraid of anything. With all the competition in this field - and there is competition, it is like a jungle - I am winning because what I give no other store or chain can give. But you must understand that the place's success depends on the size of the store and the low operating costs. If I do not have this, I cannot open another store."

That said, he's planning to expand further: In 2012 he intends to start selling online and to expand the store to 20,000 square meters.

"When you leave my parking lot," he says, smiling, "you will get a cup of coffee and your car will have been washed."