Coronavirus Spells a Comeback for Israel's Plucky Grocery Stores

Mom-and-pop stores are seeing business surge due to the lockdown. Can that reverse the sector’s slow death?

Sivan Klingbail
Adi Dovrat-Meseritz
Shelly Elish
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Oren Sheetrit's grocery store at Moshav Ben Shemen, April 5, 2020.
Oren Sheetrit's grocery store at Moshav Ben Shemen, April 5, 2020.Credit: Eyal Toueg
Sivan Klingbail
Adi Dovrat-Meseritz
Shelly Elish

Rami Yosofov hadn’t had a chance to sit down since the morning. At his small grocery store in Bnei Brak, customers were streaming in nonstop and he tried to give each of them personal service.

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“How are you all doing?” he asked one. “I haven’t seen your wife in a while,” he told another. “Send her my regards and wish her a happy holiday.” Every once in a while he reverted to his native Russian, which comes in handy; his store is in the only non-ultra-Orthodox neighborhood of this Tel Aviv suburb.

Yosofov lives in Ramle more than 10 miles to the southeast, but despite the lockdown, he opens his grocery every day. The document he shows the police attests that his business is an essential service. And essential it appears to be. Yosofov says he hasn’t worked so hard in years.

Yosofov, 47, began in the grocery business when he was 14. He started at a store owned by his sister, and after he completed his army service he bought one of his own. Many others in his family have gone into the same business and own and operate groceries in Bnei Brak, Modi’in, Petah Tikva and Rehovot.

Lev Leviev’s grocery on Tel Aviv’s Oliphant Street also operates around the clock. At 7 A.M. he’s already hard at work. “I can’t rest a minute. I’m constantly going up and coming down ladders,” said Leviev, who shares a name with a much more famous businessman.

Many of his customers call in their orders for delivery. Sales are up 25%. “People would rather not leave the house. Because there’s no delivery from the supermarkets, they’re calling me,” he said.

The local grocery, or makolet in Hebrew, is a fixture of every Israeli neighborhood. There are an estimated 2,800 of them across Israel with a combined turnover last year of 8.8 billion shekels ($2.5 billion). But it was a dying business.

Against competition from the big supermarket chains, and especially discounters, groceries couldn’t compete on price or selection. Unlike many Europeans, who make their food purchases daily, Israelis shop like Americans – loading up their cars with supersizes and buy-one-get-one-free items.

According to the market research firm Czamanski & Ben Shahar, small groceries accounted for just 11.8% of retail food sales in Israel last year.

Just the basics

Yosofov experienced the drop personally. The population of his grocery’s neighborhood, Pardes Katz, changed over the years, filling up with young couples whose family finances are stretched.

“They buy bread, milk and one yogurt. If something costs 10 agorot more, they’ll go to the supermarket,” he said. “I can’t blame them – they have children and a mortgage. I can’t match supermarket prices – they buy by the truckload. That’s why a lot of businesses around here have closed.”

Rami Yosofov in his grocery store in Bnei Brak, April 6, 2020.Credit: Eyal Toueg

The coronavirus pandemic has spurred a sudden change in shopping habits. Data from Storenext, which tracks retail sales based on aggregated data on cash-register receipts, showed that in the week of March 8-14, sales at neighborhood groceries and minimarkets were up 39% over the average the preceding 52 weeks. This was just as Israel was starting to impose coronavirus restrictions.

Sales at the discount supermarket chains were up an even sharper 49%, but since then, the growth has favored mom-and-pop groceries. In the following week, sales at groceries were up 45%, while at the discounters growth slowed to 41%. By the third week, the numbers were 28% and 20% in favor of the grocers.

Groceries have the advantage of being close to shoppers’ homes. Unlike the big supermarket chains, where online delivery times have lengthened to as much as two weeks due to the surge in shopping, groceries get the goods to customers quickly. They may even be benefiting from shut-ins hoping to meet neighbors on the street while making their shopping trip.

Hadas, a resident of the outskirts of Tel Aviv who only gave her first name, said she’s one of those who has altered her shopping habits. “I got used to go to big supermarkets, but in the last two weeks I started going back to the neighborhood grocery,” she said.

“I tried to order online from a big chain, but they could only promise delivery in two weeks. But the grocery said it could get me my order within an hour and a half. That makes all the difference.”

The only problem is that her local grocer has raised prices sharply. “He’s charging for a lemon almost twice what the supermarkets ask and has raised prices for a lot of basic products,” she said. “But I don’t have a choice and I’m shopping there. When everything returns to normal, I’ll go back to shopping at the discount chains.”

Some groceries managed to keep their turnover steady over the years despite the competition. At the grocery of Simin and Itzik Soleimani in Koranit in northern Israel, turnover has risen since the outbreak of the coronavirus, but the couple never experienced the downturn many other groceries did beforehand. The nearest supermarket is at least a 20-minute drive away, which discouraged shoppers.

Now that so many residents aren’t working or are working from home, there’s even less of a reason to make the trip. The Soleimanis have hired two workers on top of their usual four to handle the increased business.

Lev Leviev’s grocery store in Tel Aviv, April 6, 2020.Credit: Ofer Vaknin

“Sales are up and so is the pressure. People are tense. They’re sitting at home with nothing to do, so it’s hard for them to wait for their orders to arrive,” Simin said, adding that she’d like to set up another checkout. “If there were more room, I’d hire more workers. There’s a lot of traffic and it’s crowded here already.”

To handle the surge in orders, the grocery is using WhatsApp. Customers send their shopping lists to Simin or Dror, another longtime employee, and receive a message back when their orders are ready for pickup. That helps ease the pressure of shoppers taking things off the shelf or waiting at checkout. Older shoppers and those in quarantine get their orders delivered to their homes.

At Moshav Ben Shemen in the center of the country, the local grocery only takes orders by WhatsApp. Before the coronavirus outbreak, the courtyard in front of Oren Sheetrit’s store would be filled with children eating ice cream and older folks sitting on the steps and chatting.

Today, the grocery’s doors are closed and a sign says that anyone seeking to buy groceries should place their order via WhatsApp and later be told when to collect it. Shelves outside the store have orders awaiting pickup.

Early birds got the worm

On the day TheMarker visited, Sheetrit stood nearby, wearing a protective mask and looking tired. He said grocers who two or three weeks ago saw what was coming and stocked up before shortages set in can enjoy a sales increase of 50% or 60%. Even those who didn’t see it coming are likely to enjoy a 20% to 30% rise.

In Kaukab Abu al-Hija, an Arab village not far from Koranit, Alaa Haj, the owner of a fruit and vegetable market, carefully laid out his produce over four rows of a table, giving shoppers enough space to keep some semblance of social distancing. He also carries frozen food, canned goods and dry food. He has called in family members to help cope with the added business, especially on Fridays.

Haj says both he and his customers are coping with the coronavirus restrictions through mutual respect. He offers deliveries to shoppers who don’t want to leave their homes or are quarantined. He says his customers are largely following government directives – they don’t bring children, wear masks, do their shopping and leave quickly.

Food manufacturers confirm the growth of neighborhood grocery sales in a double-digit percentage since the outbreak of the pandemic, which they ascribe in part to lost sales at convenience stores next to filling stations. But executives say it’s a one-off phenomenon that won’t reverse the long-term trends working against them.

On the other hand, minimarkets – food retailers that have more store space, more modern facilities and carry a wider variety of products – should be able to extend the momentum they’ve gained from the coronavirus.

“Just like many shoppers who have begun shopping online now and will continue to do so afterwards, many who are going to minimarkets and have gotten to know the nice owner, and the good selection of products will keep going. Minimarkets were doing well before the coronavirus and they’ll do even better after,” said an executive who asked not to be identified.

“But the small grocers are dying – there’s no nicer way of saying it. They have no future. The small grocery in a world of social distancing and crowd avoidance is not the ideal place to do your shopping,” he said.

But Sheetrit isn’t quite ready to say Kaddish for himself and his fellow grocers. The attraction of groceries isn’t just the proximity to shoppers’ homes but the personal service.

The personal touch

“Our advantage is that we know our customers personally. We know what people want to buy regularly, so we know what we have to stock up on and how much. We see ourselves like guerrilla fighters who know how to react from moment to moment. It’s not about from today to tomorrow or in two weeks, but in the next two to three hours,” he said.

Indeed, Sheetrit says it’s the personal connection that got him into the business. For more than two decades, before he opened his grocery four years ago, he was in the business of advising groceries and supermarkets.

“Here you can immediately see the results of your work. There’s a reaction, instead of just dealing with numbers that are going up or down,” he said.

Another edge small grocers have is flexibility, Sheetrit says. “If a customer orders online [from a big supermarket chain] and later remembers she forgot something, she can’t add it if the order is already being processed,” he said. “With us, you can send a WhatsApp message saying to add a Kinder egg your kid is asking for.”

He believes small grocers make far fewer mistakes fulfilling remote orders. “Maybe we can’t fulfill 10% of an order, a rate that the chains would kill to have,” he said. “And when we don’t have something, it’s usually because the entire market is experiencing a shortage.”

Tamir Ben Shahar of Czamanski & Ben Shahar is skeptical. Because these are small businesses and suffer from old-fashioned management, they haven’t been able to exploit their built-in competitive edge as a fast and easy way to shop, he says.

Consumers want that option and would even pay extra for it, but if small grocers aim to retain the momentum they will have to adapt for normal times. “Some have already adapted and strengthened their businesses, but the others will suffer again,” he said.

On the other hand, Adi Regev, vice president for sales at food maker Unilever Israel, says these businesses do have a future – and it’s online.

“Even before the crisis we were seeing growth in grocery and minimarket turnover, so we developed Shopo, a digital platform for online groceries. The coronavirus has simply accelerated the trend,” he said.

Shopo already works with about 50 groceries and has 30 more on the way, he says, adding that a store working with the site before the coronavirus could triple or even quadruple the number of sales and raise the average purchase by 100 shekels to 520.

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