Is It Worth It for Business Owners to Get on the Amazon Israel Train?

The e-commerce behemoth wants its sellers ready by September 12; hundreds of sellers are already on board, but they face high overhead and commissions

The logo of Amazon is pictured inside the company's office in Bengaluru, India, April 20, 2018.
ABHISHEK CHINNAPPA / REUTERS

Amazon’s launch in Hebrew is approaching: In an email Tuesday, the online retail giant urged sellers to be ready to start operating by September 12. The missive implies that Amazon Israel’s official launch will happen in late September or early October, barring a delay like the one that scotched the initial June target date.

Selling through Amazon in Hebrew is a very attractive proposition, so hundreds of sellers are already on board. Still, Amazon demands that a variety of products be sold through its platform – from computer peripherals to toys to cosmetics and kitchenware.

“It’s unacceptable for them to have a situation in which a customer enters the site, searches for a product and can’t find an Israeli seller,” says a source working closely with the company.

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At the same time, Amazon doesn’t plan to open Israeli warehouses and logistics centers; its entry is only partial. It’s also setting new standards of service, such as demanding that sellers offer a delivery time of five days at most within Israel. The result is that sellers in Israel haven’t flocked to Amazon.

What are the pluses and minuses for Israeli sellers of working with Amazon?

Minuses

1) Selling shortcomings: The method in Israel will be what Amazon calls Fulfilment by Merchant: The seller is responsible for the supply chain to the customer, credits and product returns based on Amazon’s return policy. This method contrasts with Fulfilment by Amazon, in which the U.S. company is responsible for the entire chain.

“Israeli businesses currently do what they can or want regarding shipments, and the service is mediocre,” says Elad Goldenberg, a strategic consultant in the e-commerce industry. “Amazon demands a standard of five delivery days at most, high product quality and quick handling of complaints. Maintaining such a system as the company demands costs a lot of money, and many businesses aren’t set up for this.”

As he puts it, “That’s a big disadvantage because small business abroad can use Fulfilment by Amazon.” He notes that many small Israeli businesses will have to outsource part of the work to meet Amazon’s standards, which will incur fees.

2) The commission trap: Amazon sellers have to pay the company 15% of every transaction made on its site. Businesses with their own website have costs operating the site, warehousing and delivery. Likewise, everyone has to meet regulatory demands, such as certification from the health or communication ministries.

“If we calculate the operating cost of a page as well as Amazon’s fee, we see that many businesses, mainly those with single-digit profit margins, will struggle to be profitable,” says Dvir Cohen, CEO of EZ-commerce.

3) The bureaucratic challenge: It’s not easy selling on Amazon, which has a complex protocol of rules and standards that sellers have to meet regarding customer service, inventory management and supplier relations. Sellers have to effectively market their products to be highly rated on the site.

“Many companies in Israel have a basic misunderstanding regarding Amazon,” Cohen says. They don’t know in which currency to bill customers or whether or charge VAT, so they’d rather let others try and join later.

Pluses

1) You’re in good hands: “The big advantage of the platform is the Amazon brand,” says attorney Yael Cabilly, who specializes in e-commerce through Amazon. “Buyers trust Amazon and they always prefer buying on its platform over independent sites they don’t know well.” She adds: “Another advantage is simplicity – I can buy a product on Amazon in two clicks.”

2) Traffic like you’ve never seen: Amazon boasts 300 million customers. It broke a record of $4 billion on its Prime Day in 2018. “Exposure to this kind of traffic is an opportunity for small and midsize businesses because to bring traffic to your site or physical store costs a lot in ads and marketing,” says Odelia Orbach, co-CEO of e-Community.

3) Advertising for you: Businesses invest a lot to move up search engines like Google or to appear on Facebook or YouTube. Amazon does this for you. “Amazon invests tens of millions of dollars annually to promote itself,” Cohen says. “If I sell on Amazon, it will do the marketing for me.”