Amazon's Israeli Drive Takes Hit by Coronavirus, Revitalizing Local Online Retailers

Like other global sites, U.S. giant suspended shipments during the lockdown, leaving the market open to local vendors. But will the change last?

Hadar Kane
Hadar Kane
Packages pass through a scanner at an Amazon fulfillment center in Baltimore, August 2, 2017.
Packages pass through a scanner at an Amazon fulfillment center in Baltimore, August 2, 2017.Credit: Patrick Semansky/AP
Hadar Kane
Hadar Kane

The coronavirus lockdown not only caused more Israelis to shop online, it also caused them to do more of that shopping on local e-commerce sites, at the expense of the big international vendors such as Amazon and AliExpress. Even so, industry figures warn that the balance may return to overseas sites now that they have returned to normal operations. That’s bad news for Israeli retailers, who have struggled to retain their customers in the face of the lower prices and bigger selection that international sites can offer.

For most of the past decade, Israelis were relatively slow to give up bricks-and-mortar stores for online shopping. But when they did start going online they preferred what they could find overseas, especially since many purchases were exempt from customs fees and the value-added tax they would have to pay at home.

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Last year, when online shopping reached 19 billion shekels ($5.5 billion at current exchange rates), 65% to 70% of it was done on overseas sites. The 6 billion shared by all Israeli online vendors was largely controlled by supermarket chains such as Shufersal.

The pandemic changed that. The big overseas websites could no longer deliver goods quickly because international flights were suspended and shipping costs rose. The lockdown in China meant factories were no longer producing the goods shoppers wanted and supply chains were disrupted. Some sites, like Amazon and Next, suspended shipments to Israel altogether. Online shopping by Israelis at international sites plunged 60%, according to the delivery firm DHL.

Israeli sites suffered few of those problems and began picking up the slack. A survey conducted for TheMarker by the credit card issuer Max found that the number of purchases at Israeli fashion sites was up 91% at the end of May, compared with the same time in 2019. Sales of computers and software grew 67%, electronics by 51% and at department stores and home improvement sites they were 40% higher.

For the international sites, sales fell sharply from February until the middle of May and have only gradually recovered since then. Still, industry sources estimate they are 20% to 30% lower than they were before the pandemic.

Amazon stopped all international shipments but continued to supply products from its local site. The apparel and housewares site Next initially blocked Israeli shoppers then resumed shipments but restricted shoppers to maximum daily purchases. Many AliExpress vendors froze or delayed delivery to Israel because Chinese factories were in lockdown. Others, such as Asos and iHerb, did their best to continue deliveries, although often with delays.

“My community reflects what has happened with Israeli shopping behavior on the internet,” said Reut Levinberg, whose website Reut Buy It for Me helps Israeli consumers with their online buying.”I saw that the minute Israel went into a lockdown, consumers abandoned the international websites and started buying in Israel. The Israel sites won big – at least until about May.”

She said that in May Chinese e-commerce sites returned to normal operations and delivery times have almost reached their pre-pandemic. Next is back to business as usual and Amazon began offering delivery about two weeks ago after a period when it was charging very high shipping costs to Israel, Levinberg said, but added, “Amazon deliveries haven’t gone back to what they were in the pre-coronavirus period.”

Yonathan Ivgi, director of marketing and sales at DHL Israel, said his company continued to operate normally and even increased the frequency of its cargo jets landing in Israel.

A Next store in London, March 5, 2017.Credit: Eyal Toueg

“There were sites that fought fiercely to keep operating even if the shipping cost them more, and there were those that didn’t,” he said. “Those who fought believed that during the coronavirus, when the whole world was sitting at home and wanted to buy online, it was worth serving consumers and turning them into loyal customers.”

The data, he said, bears that out: At sites that continued shipping to Israel during the lockdown, the average purchases by Israelis increased from 1.6 products per delivery to 2.4. Industry source estimates that the sites that continued serving shoppers saw sales rise 40% over the lockdown.

For Israeli shoppers, Amazon was the biggest letdown. In November the e-commerce giant launched a local site in Hebrew, prices in shekels and free delivery for purchases over $49. The site was a hit until the pandemic struck.

Amazon had a local website but it didn’t have warehouses or logistic centers in Israel. Like in other countries where it has no local facilities, Amazon halted shipments among other reasons because in the United States and much of Europe exports were banned to prevent local shortages and air freight costs skyrocketed. Amazon wasn’t prepared to subsidy Israeli shoppers.

“Amazon’s decision to suspend international operations, on the excuse that there were not enough flights, was unfortunate,” said one Israeli executive in the sector, who asked not to be named. “Amazon has the logistical capability to supply every single person on the planet 20 packages a day – they simply decided not to do it.”

Even today Amazon shipping charges are $4-$10, or more for larger or heavier shipments. The selection is still smaller than pre-pandemic levels, prices are higher.

A store of Israeli fashion brand Adika at Dizengoff Center, Tel Aviv, April 25, 2017.

“Amazon regressed two years. The catalog it offers Israeli shoppers is much smaller than before, many more products are blocked from delivery to Israel,” said Benny Buchnik, an online shopping expert who runs a Facebook page called “I Need It.”

“I think this is because they are giving priority to customers in the U.S. or Europe,” he said.

Nir Zigdon, whose company eCommunity advises online vendors working with Amazon on marketing strategy, agrees and said that was in part due to the criticism Amazon suffered in the U.S. media for allegedly ignoring it American customers.

Still, he said, the company worked hard to ensure Israeli vendors on its local website continued to ship. Before Passover this year, it offered a discount of 10% or $20 (whichever was lower) on all Israeli purchases. “They covered the cost of the discounts and it increased sales fivefold from normal levels,” Zigdon said.

But that was a one-off. Since then, Israeli vendors say they feel ignored by Amazon. Only a few hundred are on the site, far less than was expected by now when it was launched.

“Does anyone know there were Israeli vendors on Amazon during the coronavirus? No one,” said one source in the local e-commerce industry. “Most Israelis felt the minute it stopped international deliveries, there was no reason to go to the site.”

Other sources say the problem is that Israeli vendors don’t know how to market on a big international site. “Israel vendors on Amazon want to have their cake and eat it too. They don’t want to price things more attractively but to maintain a price minimum. That’s not what you do. Amazon offered a 10% discount to bring traffic at a time when there were no international deliveries at all, but the vendors didn’t leverage that,” said Buchnik.

The battle for the Israeli online shopper isn’t over. As the global sites return to normal activity, Israeli sites have to contend with the problem that their prices are higher in most cases.

Many industry sources who spoke to TheMarker say shoppers will return to the international sites but local sites will remain strong. The real losers will be brick-and-mortar stores, as online takes a larger share of all purchases. Many Israelis, especially those over 50, who had shunned online shopping were forced to discover it during the lockdown and won’t go back to their old habits.

“In June and July shopping on the international sites returned to their pre-coronavirus levels,” said Levinberg. What has changed is what people are buying.

“People are interested in products that help them get through coronavirus lockdowns – craft kits, puzzles, games and children’s toys, tablets. Demand for kitchen products has increased greatly, starting with products such as handheld mixers, Ninja food processors and frying pans,” she said.

“They’re buying a lot of baby toys, preparing in advance, because they don’t know what’s going to happen next,” Leveinberg said. “Even apparel has recovered beyond sportswear and pajamas because people have started to leave their homes again for work and other places. They’re shopping but for different things.”

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