Amazon Showing Signs It May Plunge Into Israeli Retail Market

The company has been sending questionnaires to Israelis about their online shopping habits, what they did before starting commercial operations in Australia

File photo: A UPS serviceman delivers packages from Amazon.com in Palo Alto, California in 2011.
Paul Sakuma/AP

Amazon is showing signs that it’s thinking seriously about launching commercial activity in Israel, meaning that Israeli shoppers will be able to get locally-made products through it, as opposed to only things made abroad – and one day, they may be able to order food from the local Amazon site as well. The company has been sending questionnaires to Israelis who order from it by internet, inquiring about their online shopping habits. Suggestively, it did the same thing in Australia some months before starting commercial operations there.

The company has been asking shoppers how often they shop online and what sites they visit, including for food. Clearly Amazon has been doing its homework about the sites Israel’s food retailers have: It asks respondents to list their favorites among Shufersal, Rami Levy, Amazon, Castro, ASOS, Next, eBay, Deal Extreme and AliExpress.

Another sign of imminent entry into Israel is that local foodstuff manufacturers say Amazon has been sending feelers to them about making products for its private label, Amazon Basic, through which it sells everything from food to batteries to underwear.

Meanwhile, Israelis know the company well. Amazon is one of the five favorite sites among Israelis, along with AliExpress, ASOS, eBay and Next.

Global mall

Amazon began its career 23 years ago as an internet bookstore. Since then its founder and leader, Jeff Bezos, has turned it into a shopping mall with global reach, redefining consumer experience and standards. Until now the general assumption had been that if Amazon got into business in Israel, it would focus on fashion, home appliances, electronics and books, but not food. Just one reason is local barriers, such as the need for a supply chain with refrigeration; another is kashrut. Yet it’s been seeking information about the Israeli food market.

Amazon has been adding foods to its portfolio in stages. It launched a Fresh foods shipments business about a decade ago, but only in the U.S. and Britain. A launch is planned for France too. Then last July it carried out the biggest acquisition in its history, buying Whole Foods Market for $13.7 billion. Whole Foods is associated with costly organic products but in August it announced that it would immediately lower prices (just this Wednesday Amazon announced special discounts for its Prime members in the U.S. who shop at Whole Foods, in a gradual rollout).

In 2016, Amazon launched a pilot in Seattle, Washington, of Amazon Go groceries, involving no checkout or lines. “Our Just Walk Out Technology automatically detects when products are taken from or returned to the shelves and keeps track of them in a virtual cart,” the company explains on its website. “When you’re done shopping, you can just leave the store. Shortly after, we’ll send you a receipt and charge your Amazon account.” The competition is raging: nobody can offer anything of the kind.

Another sign that Amazon is gearing up for business in Israel is that for the first time, it awarded an Israeli company, eCommunity, a Service Provider Network tag (enabling it to supply services on its platform). eCommunity helps companies set up online business properly and efficiently, and runs the business for them. Amazon granted the company the tag after checking it for months, including checking the online shops the company runs for its customers, conversations with the customers themselves, and inspecting the company’s financial statements. Only 20 companies worldwide have been awarded the SPN tag, none of which (other than this one) in countries where it has no local commerce.

Amazon also recently allowed Israeli sellers to sell to Israeli customers through its platform, but without using its storage services – meaning, to sell from Israel to Israel.

The company has also advertised for English-to-Hebrew translators and language experts, for its “localization department” which is developing a Hebrew-language site. The job is at Amazon’s European headquarters in Luxembourg.

Nir Zigdon, one of the owners of eCommunity, says they studied Amazon’s entrance into other areas around the world – Japan, Australia and Brazil: it did the same kind of things it’s doing now in Israel – building a website in the local language, conducting consumer surveys.

The fact that it ran wanted ads for technical support in Hebrew for sellers, and for a product translator, indicates that Amazon Israel will be managed by Amazon Europe, which encompasses France, Germany, Spain, Italy, and Britain, Zigdon says. “The mere fact that the company advertised for a products translator unquestionably shows that it means to translate its catalog into Hebrew – and Amazon usually translates its catalog only in areas where it operates.”

He believes it will start with clothing, books and electronics, and get into foods at the second stage.

“Amazon doesn’t do things on a whim,” Dan Bendler, CEO of the startup Shopic. “They work in a very orderly and methodological way. “I assume the survey shows that this is a preliminary stage, of examining the feasibility of entering Israel. We can assume the company is conducting the survey in other countries too and will decide whether to enter Israel based on the results. Shopic makes software to improve the shopping experience.

Based on the survey answers, Amazon can calculate in which Israeli sectors it could achieve a competitive advantage, Bendler explains. He, too, thinks the company will stay away from food at first, for some years, and even then might confine itself to dry packaged goods with long shelf-lives such as rice and olive oil; but it won’t supply chilled food because of the logistics. He also thinks its entry would stress the competition and lead to lower prices.

Amazon’s most recent international foray was to Australia, starting with supplying books in 2013. But the company encountered difficulties.

Its Australia experience is eye-opening, Zigdon says. “Bezos stated that Amazon would undercut market prices in Australia by 30%. Local retailers resorted to regulatory action, which delayed the opening of logistics storage in Australia to the start of 2018, after a pilot of 500 sellers began in November 2017. I think Amazon is testing the waters in Israel quietly, without making bombastic statements, in order not to provoke local resistance. “

Meanwhile Israel’s retailers are wondering about the day after Amazon arrives.

Online sales in Israel have been growing by almost 25% a year for five years. The strategy consultancy TASC estimates that Israeli internet shopping will double or more by 2020 to over 15 billion shekels a year. Israel Post data say 61 million parcels were sent in 2017.

The retailers aren’t necessarily taking things lying down. Shufersal is working with an American partner on developing a Hebrew-language platform to enable Israelis to order products from the United States, at significantly lower shipment prices than are available now. In May 2016, the Azrieli group bought a company for 62 million shekels to run its online shops. The Golf clothing chain bought the online fashion site Adika; Fox clothing chain set up a virtual mall called Terminal X, which sells brands, including some not available in Fox’s real-world stores in Israel.

Amazon will change local consumption habits, acknowledges Odelia Orbach, among eCommunity’s owners. It will affect the malls and what people do there. The young who live online anyway are especially likely to be affected, she predicts. On the upside, no more will parents have to drive the kid to the mall to buy stuff. While all this had been happening anyway, she says - Amazon is going to take it to whole other levels, because of their sheer power, the vastness of their range – and their attractive prices.