Analysis |

Israel's Patchwork Third Lockdown Rules Will Finish Off Small Businesses

While it’s business as usual for much of the economy, small merchants have been forced to close yet again, needlessly

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Shop owners protest in south Tel Aviv, October 29, 2020.
Shop owners protest in south Tel Aviv, October 29, 2020.Credit: Motti Millrod

The truth has to be told: Israel did not really enter a third lockdown this week. What’s actually been shut down is retail, especially small businesses. Day care centers and schools have remained open, public transportation is operating as usual and businesses that are not public-facing can operate as long as staffing is at 50%. People are supposed to remain within one kilometer from their homes, but there are many exceptions and in any event the rule is practically impossible to enforce.

What there is is a detached government that decided to shut small businesses. There is no way of making that pretty. The third lockdown is a death sentence for 7,500 businesses, most of them small- and medium-sized, that are expected to fail during the lockdown and join the 70,000 others that already have this year. That’s 7,500 families whose worlds are being destroyed.

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These are businesses without lobbyists. They don’t belong to any party that looks after their interests, and in contrast to big business they don’t have a direct line to the treasury. The only thing the state has given them are small, mostly symbolic payments to cover their losses and loans they will almost certainly never be able to repay.

Some have been demonstrating for months, burning unsold merchandise and being portrayed in the media as tragic figures, but the government doesn’t care. Instead of finding creative solutions that would enable small businesses to stay open and compensate those that have to close, it’s been the victim of pressure groups protecting their own interests, whether it is big business or the ultra-Orthodox.

Israel has about 100,000 street-front stores, three-quarters of which are considered essential for the purposes of the lockdown. About 9,400 of those nonessential stores went out of business this year. The third lockdown is expected to increase that number by about 3,600, according to the market research firm CofaceBDI for TheMarker. Those nonessential stores have seen their turnover fall by between 40% and 60% this year.

With all its holes, the third lockdown is unlikely to reduce the rate of new coronavirus cases enough for it to end anytime soon. It is going to last several weeks, during which the owners of small businesses will inevitably find themselves with no choice but to break the rules, either out of desperation or lack of faith in government decisions. That will lead to more COVID cases and chaos.

Who can blame them? The lockdown is too replete with absurdities to be taken seriously.

For instance, a friend or family member isn’t allowed to visit your home or pop over to a neighbor to borrow some milk. But you can have appliances delivered to your door and have a technician install them, even though the technician is probably visiting multiple homes every day.

A call to A.L.M. Electrical Appliances asking about ordering a television set (hardly an essential device) found that the nationwide electronics chain is operating normally during the lockdown. You can order a set and have it installed anytime you want. “You can even ask for more than one technician because they’re wearing masks,” a phone representative said. Does the product have to be essential to get it delivered and installed? The answer: “You can buy and install whatever you want.”

Another absurdity: Toy, book, apparel and other speciality stores have been dealt a double blow. All these retailers have been ordered closed for the lockdown, but other stores that sell the same merchandise, such as supermarkets and off-price retailers that have been deemed suppliers of essential goods, remain open and can sell the same products.

Tehila Yanai, the co-CEO of CofaceBDI, estimated in June that essential stores, chiefly supermarkets and pharmacies, had been selling items like toys, baby products and housewares at a rate of 70 million shekels a month during the first lockdown. “Half of the sales in these areas are extras thanks to the coronavirus,” she estimated. The owners of shuttered shops fear their customers won’t return after the lockdown.

While supermarkets and pharmacies are allowed under the rules of the third lockdown rules to sell nonessential products, other stores that sell only essential goods aren’t allowed to expand their inventories to nonessential goods. Even so, as the start of the lockdown, dollar stores like Max were open for business.

A queue outside a Max Stock store, Rishon Letzion, November 22, 2020.Credit: Eyal Toueg

Gideon Fisher and Matan Gutman of the Gideon Fisher & Co. law firm, which represents the toy-store chains Idan 2000 and Kfar Hashashuim, have asked the Israel Police and the Public Security Ministry to enforce to lockdown rules against dollar stores, but as of Tuesday they continued to operate as usual.

One of the most controversial cabinet decisions for the third lockdown was the ban on takeout and curbside pickup from restaurants and stores, allowing deliveries only, citing the crowds that sometimes form outside these businesses.

But instead of ordering increased enforcement of the rules to curb the ad-hoc gatherings, the ministers decided to ban pickups altogether – a move that hits the hardest small businesses without the resources to sell online or to pay the fees that delivery services like Wolt and 10bis demand.

As a result, just two days into the lockdown many restaurants began to break the rules and allow takeout orders. The difficult situation in which the restaurant industry finds itself, with one-third of eateries going out of business, leave small players little choice.

While the big malls and the chain stores that are their main tenants will survive this closure as they did its predecessors, many street-front stores, which are more likely to be mom-and-pop businesses, will not.

That makes the decision to force street-front stores to close a surprising one. The kind of crowding and lines public health officials are trying to deter in order to halt the spread of COVID-19 took place in malls.

Shoppers wait in line to enter a store in Ramat Gan's Ayalon Mall, November 27, 2020.Credit: Moti Milrod

Some owners of small stores suspect the blanket ban on nonessential retail was due to lobbying by the malls and chains, but the latter argue that the purpose was to deter people from breaking the one-kilometer distance limit.

Exceptions to the distance rule are supposed to be limited to essential errands, such as buying food and medicine and getting essential services. But it also includes going to the mikveh ritual bath (for women), court, getting vaccinated, attending a brit milah or funeral, donating blood, assisting the disabled, visits to the veterinarian and commuting to a job deemed essential, among others.

In short, if you want an excuse to wander around, you have a lot of excuses.

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