Israeli Online Retailers Weave a Price Web for Customers

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Siton's warehouse in Shoham, central Israel.Credit: Ofer Vaknin

A stand set up in a mall in the central city of Petah Tikva last March urged passersby to get to know Siton. Sales reps offered shoppers a range of promotional accessories, as well as come-ons in the form of six-packs of Coca-Cola, bottles of fabric softener and diapers, all given away for free to those in the area.

It was a way of attracting attention to Siton, a new website and digital app through which consumers can order nonperishable supermarket items at what the company touts as “wholesale prices.” Even the name of the company comes from the word “wholesale” in Hebrew.

A post on the company’s Facebook page prompted a response that the company’s prices may be comparable to wholesale prices at small groceries, but not at the country’s major supermarket chains. In fairness, however, a price comparison conducted this week by TheMarker showed prices at Siton to be comparable to the discount supermarkets. They were a little more expensive than Rami Levy supermarkets and a bit cheaper than the Victory chain. And, contrary to the comment on Facebook, they were significantly cheaper than the major food retailers Super-Sol, Mega and Yeinot Bitan.

A shopping basket of 25 items chosen at random for comparison purposes cost 400 shekels ($117) including delivery at Rami Levy, while through Siton it was slightly more expensive at 420 shekels ($123). For comparison purposes, online shoppers through Mega’s website would have paid 486 shekels – 17% more than Siton – even though Mega, as the second-largest food retailer in the country, clearly has greater bargaining power with manufacturers. Siton’s offerings are limited to foods that do not require refrigeration, as well as toiletry products.

“We want to be Israel’s deliveryman,” says Yefit Abecassis, who started Siton as a family business along with her husband, David, and two of their children, Aviv and Omri. “The existing players don’t have an interest in having you reach them via the Internet. They’re afraid that all their real estate, along with municipal taxes, rent and air-conditioning systems, will become irrelevant overnight. They leave the Internet on a low flame. For a long time, until [which has a feature enabling consumers to compare retailers’ prices] entered the picture and newspapers began price comparisons, Internet prices in general were higher.”

According to industry estimates, about 30% of Israeli consumers buy food on the Internet, although not necessarily on a regular basis. That may seem low, but in 2010 the comparable figure was less than 0.5%. It was 17% in 2012.

Two years ago, TASC Strategic Consulting noted the factors needed to penetrate the Israeli market: a user-friendly website; mobile applications that allow the user to survey a range of products and manage a shopping list at any time and any place; quality logistical service, including maintaining products at their proper temperatures in convenient packaging and protecting them from damage while being delivered; short delivery times; and the availability of stock with a minimum of substitutions.

“We can offer competitive prices because we don’t have refrigeration rooms. We can store merchandise at our logistics center in Shoham 14 meters high, because [members of the public] don’t come to us and there are no thefts,” she says, adding she hopes to add additional logistics centers around the country. Siton currently only serves parts of the Tel Aviv metropolitan area.

The Abecassis family acquired their knowledge of the food retailing business through Aviv Retail Software Technology, which they have run since 1997 and which has several supermarket chains as clients. “We’ve been living with this market for 20 years,” Abecassis says. “It’s just that now we are moving to the front lines.” Siton is currently making hundreds of deliveries a day and is set up to make thousands on a daily basis, she adds.

When asked whether her business can make it without also selling perishables such as fresh fruit and vegetables, eggs and frozen items, she notes that there’s “no shopping experience involved in dragging ammonia or a six-pack of Coca-Cola home. And, in any event, people are leery of buying meat and vegetables long distance. We have eliminated this barrier for them. Let us bring you the cornflakes, the toilet paper and the canned goods every three weeks, and you can buy the vegetables and eggs at the neighborhood grocery. That’s a good option considering that we offer rather competitive prices.”

Abecassis adds that Siton doesn’t run sales, preferring to maintain its set prices. And it does not allow its delivery people to accept tips.

Another online retailer trying to give the stores a run for their money is Habaitta (which roughly means “going home”). Founded more than a year and a half ago and headed by Sami Levy and Michael Sessler, the site recently embarked on a prime-time television advertising campaign highlighting its three retailing areas: toiletry items, cosmetics and baby products. The venture has an impressive group of investors, including the CEO of Facebook in Israel.

“The last financing round ended in January and it enabled us to embark on a big launch. Our goal at the moment is to build the brand,” says Levy, Habaitta’s CEO, adding that it has attracted thousands of customers since starting to advertise aggressively.

TheMarker found that Habaitta’s prices are lower across the board than brick-and-mortar pharmacies. Perfume prices are not only quite low but are also competitive with long-standing online retailers such as Habaitta is up to 29% cheaper on vitamins than major retailer Super-Pharm, but not as low as Shor Tabachnik, which runs the site. Prices on baby formula, diapers and cleaning products are higher than Internet-based competitors such as Rami Levy’s website and Siton.

We put together a list of 17 products for comparison purposes. At Habaitta, the list cost 532 shekels ($155), which was 9% less than Super-Pharm, but it was still 11% more expensive than Rami Levy on the Internet (including the price of delivery) and 7% higher than Siton.

Super-Pharm responded that it has 200 locations around the country and a range of “attractive” promotions and coupons for customers. “In addition, the chain offers a parallel product line for most products, including Life and Sunday brands, which provide a quality alternative at an attractive price. The parallel product line is 35% less expensive than the list in [TheMarker’s survey],” the retailer says.

“We’re happy that there are competitors on the Internet,” Habaitta’s Levy says. “It just increases consumer awareness of the possibility of buying on the Web in Israel. There are several proper players, but they still don’t equal us in the level of geographic presence.”

Indeed, the website’s ability to distribute to customers in outlying areas makes it a pioneering presence in peripheral parts of the country. Habaitta views the physical drugstore chains as its primary competition, Levy adds.

The pile 'em up approach at Siton's warehouse.Credit: Ofer Vaknin

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