Online Comparison Shopping Shows Israelis Still Getting Short-changed

Israelis traveling abroad seem to have a penchant for checking out prices on familiar items and comparing them to those at home, a pastime that commonly leads to sticker envy. With the launch of mysupermarket.com in the U.S. by its namesake Israeli-based online shopping company, this can now be done without boarding a plane or even setting foot out the door.

The new website allows American consumers to comparison shop between national chains like Target, Walmart, and Costco. Israelis can also use the new format to compare local prices to those in the U.S. The bottom line is that the Israeli consumer still pays much more for the most of the same grocery items.

Allon Bloch, manager of the company's overseas operations along with Lior Ash and Eyal Livne, claims the comparison-based format aims to revolutionize shopping. "The U.S. website provides a new system offering a 'mega-store' where users can choose products, with the results showing the lowest price for the product," he explains. "The premise is that the consumer doesn't really care whether he gets the chosen product from Target or Walmart as long as it's at a good price."

In contrast to Israel, where delivery for Internet purchases is still expensive, averaging NIS 25, most chains in the U.S. provide free delivery on purchases in the $30 to $50 range, according to Bloch. Mysupermarket.com, founded in 2006 by Amir Ofer, allows customers to spread their purchases over a number of stores to take advantage of the lowest prices offered by each.

Bloch anticipates that Israeli consumers will catch up to their American peers and shop online more. "Israel is no longer a small-market country and its standard of living has gone up, so there's no reason it should be different than the U.S. in terms of competition," he says. "Comparing prices can only contribute to this."

Meanwhile, it seems food items in the U.S. are less expensive.

TheMarker, with the help of the mysupermarket.com and mysupermarket.co.il websites, surveyed prices on 30 items on June 10, according to the same day's representative exchange rate of NIS 3.63 to the dollar. It compared the lowest prices offered in Israel to those in New York State among stores with online sales. The basket of products was found to be 10% more expensive overall in Israel than in the U.S., but the price difference for individual items was often much greater.

The wide gulf in prices is mostly explained by consumer behavior and not necessarily by high costs, import expenses, or other reasons generally given by Israeli importers and marketers. For example, the largest price discrepancies found were in the category of personal care products. Lady Speed Stick deodorant cost NIS 7.20 in New York while in Israel the lowest price was NIS 17.80 – 147% higher, and climbing to more than 250% higher at most Israeli stores. The big difference is that while we found a 'low' price at just one Israeli store, in the U.S. we found a wide range of prices and various promotions.

Sticking to expensive labels

One food industry executive says that Israeli consumers are no less responsible for these prices than the importers. "If consumers continue buying the same products at such high prices even after being exposed to figures showing these large gaps, this indicates they prefer to maintain brand loyalty regardless of how much the price goes up," the industry executive said. "They also need to grasp that this is precisely the way to drive up the price over and over again."

These types of products are usually brought into Israel by a specific importer who manages to shape the market and manipulate it at will thanks to consumer support, the executive said. This is particularly evident when it comes to international brands that Israeli consumers are reluctant to forgo for cheaper, locally made substitutes – despite concern about the high cost of living.

Importers often justify price differences by pointing to high shipping costs and other associated expenses passed onto consumers. Food industry sources, however, claim this hasn't been true for a long time and simply serves as an excuse to charge more. "If you calculate the shipping cost, you can see that it isn't a major pricing factor," says a high-placed industry official. "The cost is $1,500 for a container than can hold NIS 200,000 worth of goods. The difference can't be more than 2% to 3% in price when in fact we see a much greater difference."

Baby products cheaper in Israel

The opposite, though, seems to be true when it comes to baby products. Consumers generate competition by voting with their feet and choosing carefully where to shop. The result has been evident at supermarket and pharmacy chains where, over the last two years, products like formula and diapers have been on sale perpetually and draw customers into the store.

Consequently, a can of Similac priced at NIS 64 in the U.S. is sold in Israel for just NIS 40, at a savings of 37%. Pampers Active Baby diapers – offered in the U.S. with a wider selection of packaging and models – cost 5% less in Israel.

Israeli shoppers, however, still need to stay on their toes. In recent years, food chains have refused to carry certain brands of canned tuna, for example, in protest against escalating prices charged by distributors. They're now back on the shelves, but at an unappetizing cost of NIS 21.15 for a package of four tins of light tuna in water, a 40% premium over the NIS 15.25 charged in the U.S.

Bissli no longer cheaper in the U.S.

The survey also discovered that Israeli-made brands are no longer cheaper in the U.S., a pleasant surprise following the storm of protest that erupted over Israelis paying more for blue-and-white brands.

Israeli-made items, including those produced by Osem and Kvutzat Yavne products, were found to be priced lower in Israel this time, although often the difference was only marginal. For example, a bag of Osem pretzels cost just 1% less in Israel while a package of the company's couscous costs only 3% less locally – a difference measurable in agorot.

The companies simply want to penetrate the highly competitive U.S. market, a retail executive explains. "It's nice that the companies are doing so, but it only goes to show that prices here can be reduced further and the Israeli public can be offered better discounts," he says. "If that doesn't happen, we simply need to stop buying and apply pressure until we see results. There are alternative products for almost everything, so it isn't always necessary to pay any price. There are many ways to change market prices."

Another food industry executive, however, pointed out that taxes on food products in the U.S. are lower than in Israel.