Aviva and Avraham Cohen had an epiphany during their trip to China five years ago. If so many goods sold in Israel are made in China, why should consumers pay the big chains such a large markup? Why not just bring China to Israel?
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The idea was to cut out the middleman and offer consumers the same goods 25% to 30% cheaper. In the last two years the idea has gradually come to fruition, and this July a sinyon – a term based on the Hebrew words for China and mall – will open in Haifa's Congress Center, the first mall in Israel dedicated to Chinese goods.
The Chinese circus performers at the grand opening will celebrate not only the new mall, but also the progress toward opening five larger sinyons in Netanya, Rishon Letzion, Jerusalem, Be'er Sheva and Ashdod.
Israel's first "China mall" is modeled on similar ones around the world; NIS 35 million was invested in the building, which belongs to the Haifa Economic Corporation and Bayside (a listed real estate company locally known as Gav-Yam). The mall should have around 60 stores, each 25 to 160 square meters in area, in a uniform East Asian-inspired design. There will also be Asian restaurants, a tea house, a Chinese-medicine center and a school for East Asian languages.
Filling a niche
Israelis have been flocking to discount chains in recent years, but the main havens for bargain hunters have been the surplus stores that offer goods at discounts but tend not to have the right models and sizes.
The advantage for exporters who sell directly to consumers, says Aviva Cohen, is that they receive payment immediately if they take cash, or soon enough if they are paid by credit card, as opposed to grace periods that can top 60 days when selling to retailers. Except for the stores' rent and salaries, the Cohen's mall handles expenses such as advertising, marketing and maintenance.
"The concept here, in contrast to China malls elsewhere around the world, it that there the idea is bottom-line commerce," says Cohen. "Here there will be much more of an emphasis on Chinese culture and medicine. At this mall, instead of [Israeli pharmacy chain] Super-Pharm, customers will receive an alternative treatment at a low price for communal Chinese medicine, whether shiatsu, acupuncture or a service from a Chinese-medicine pharmacy."
Aviva Cohen is an attorney and accountant by profession with her own private practice. For years she served as finance director at Israel Aerospace Industries; before that she worked at the Jewish Federation of Beverly Hills. Her husband Avraham, an electronics engineer by training, set up a luxury furniture and custom-design business. Eventually the two returned to Israel.
In Israel the words "Made in China" mean a low-quality product. Do you think this will pose a problem in attracting customers?
"[Israeli clothing chain] Fox is all Chinese [goods], the same with Tamnoon and Castro and many other chains," says Aviva Cohen. "I think today people understand that basically everything is made in China …. If China once only manufactured low-quality goods, today the quality range is much wider, from the lowest to the highest quality. People already understand this."
Will the goods on sale really be the same as those sold by the major retail chains?
"It's the same piece of goods at the same quality. It’s a product that was ordered by the company, and the factory produces beyond the quantity requested. "
Israelis traveling to China
"Here's an example. There's a new trend among Israelis buying houses; they travel to China with an architect to buy their home furnishings and save a significant percentage on the purchase price in Israel. An acquaintance of mine did this recently and discovered that on the package of a large vase, there was a logo for [furniture chain] Betili. The company bought however many it bought and the factory sold the surplus. He paid NIS 140 for the vase. Out of curiosity, I went to one of the chain's stores here and saw that it had a list price of NIS 1,300."
What kind of rent will exporters at the mall pay?
"The rent will be in the range of NIS 200 per square meter or 1% of store revenue, whichever is greater. [And] in contrast to [a regular] mall, the rent includes everything: electricity,maintenance, marketing, advertising and special events planned by the mall."
Sometimes when cheaply priced goods are concentrated in one place the place seems cheap, too. Are you worried that this mall will end its life as a kind of bazaar?
"We don't want a Chinatown, but we don't want to be like the established malls with expensive prices. We want a mix of an outdoor market and a tidier established mall."
Are you looking for partners to co-own the mall?
"We're in talks with a businessman from Shanghai who has ties to the Chinese community in Haifa. He's active in malls and he heard from the Chinese that there will be a China mall in Israel. For him it's chump change, but what interests him is the idea of opening a place like this in Israel. Image is very important to Chinese people, and somehow they're always perceived in commercial terms as offering something cheap and of inferior quality. The Chinese in Israel have understood that our place combines culture and commerce, and they're encouraging people to get on board, whether it's an investor or the Chinese Embassy, which has helped find appropriate exporters."
There are Chinese people in Haifa?
"Yes, there is a Chinese community in Haifa and a Chinese community in Israel. They came to Israel for all sorts of reasons. They live here and are Israeli citizens in all respects. Haifa also has a special connection to China and is twinned with three different cities in China."
Do you think the malls will view you as a threat?
"At the moment, I don't think we're a threat because it's just the first branch. But when it becomes a chain it could become a threat like what happened with the discount retail chains …. It's something [the malls] need to learn to live with."