Israel Shop Sales Down Ahead of New Year

Shoppers are stingier and floor space at stores has grown too quickly. Retailers are hoping for last-minute boost following weak summer.

Eyal Toueg

With only two-and-half shopping days left until Rosh Hashanah, Israelis have been spending a lot less than at the same time a year ago, with consumer spending power weakening at a time when stores have added a lot more selling space.

Figures from Retail Information Systems, which monitors sales at 2,000 stores across the country, found that holiday gifting-buying in the two weeks through the end of last week was down 6% from the two weeks preceding the Jewish New Year in 2013.

The biggest drop, which RIS measures as sales per square meter of floor-selling space, was for gifts, houseware, books and jewelery, a category that dropped 12% from a year ago. Apparel and women’s sales were down 5% year on year, RIS reported.

“First and foremost, the reason for the decline is the general slowdown in the economy and reduced household spending,” said Tamir Ben-Shahar, from consulting firm Czamanski & Ben-Shahar. “Household income after inflation isn’t growing, while the cost of housing continues to grow, leaving less money in consumers’ pockets for ‘frivolous’ spending.”

Another reason for the decline is that retailers have been adding selling space at a far faster rate than their sales are growing, said Ben-Shahar. Shoppers also seem to be spurning big enclosed malls in favor of so-called power centers, or strip malls.

Sales at stores located in power centers were down just 3% from a year ago in the two weeks, against more than 10% for Israel’s 30 biggest malls, RIS said.

Nevertheless, shopping center managers, who conceded they don’t yet have up-to-date sales figures for their tenants, report higher traffic.

“We’re seeing a 15% increase in visitors compared to a year ago. We’re feeling it in the parking area and in the concourses,” said Nir Barkan, manager of a mall in Petah Tikva owned and managed by Ofer Malls. “I think the holiday will end with higher sales, because consumers have more time to organize their purchases.”

In 2013, Rosh Hashanah – whose date is fixed by the Jewish calendar – occurred on September 4, just days after the end of summer vacation. This year, the holiday begins the night of the 24th, more than three weeks later.

Book sellers face another challenge to luring shoppers. Under the Book Law, which went into effect in February, they are barred from offering discounts on new titles. Thus, the two big chains are offering sales on older titles – Steimatzky with a second book for 15 shekels ($4.10), and Tzomet Sfarim an 80% reduction on a second book.

“I think people are less excited about buying for the holiday,” said Avi Schumer, CEO of Tzomet Sfarim. “There’s no holiday atmosphere and the sense is that people are trying to cut back expenses, so they buy small presents. That works in our favor, because a book is seen as a small gift.”

Nevertheless, he says, more customers will opt to buy a single book, rather than four as they would have in the past, so he doesn’t expect a rise in unit sales this year.

Ofer Schechter, CEO of Ariel Pro-Mall, which manages 35 shopping centers, said September sales were higher among his tenants. Nevertheless, they wouldn’t be enough to make up for poor summer sales and the loss of shopping days in September.

“As I see it, the best scenario for this year will be about the same as last year, which was worse than the year before,” he said.