Israeli Consumers Kept Spending Heavily Throughout Coronavirus Upheaval, Figures Reveal

Shoppers have bought more online and used savings from the absence of travel and restaurants to buy products, and experts say the changes are here to stay

Send in e-mailSend in e-mail
The newly reopened Ayalon Mall in Ramat Gan on November 27, 2020.
The newly reopened Ayalon Mall in Ramat Gan on November 27, 2020.Credit: Moti Milrod

Israel’s economy is shrinking, unemployment remains in the double-digits and many stores remain closed, but the drop in consumer spending that should have followed has not. A review of credit card spending data from providers Max, Israel Card and Shva (Automated Banking Services) shows that in many areas, monthly household spending has not declined much in the year of the coronavirus.

Since March, spending on items related to pandemic fears, such as food and insurance coverage, has actually grown. So has spending on goods and services that replace those that can’t be purchased because of pandemic restrictions.

“Since Israelis couldn’t fly abroad and spend money overseas or eat out at restaurants, people spent the money they were saving in other places. So, consumption levels were similar to those before the crisis, sometimes even higher,” said Alex Zabezhinsky, chief economist at the investment house Meitav Dash.

Spending on airline flights and tourism dropped from 5.6% of the average household monthly total to just 1.1% during the coronavirus months, according to Max. The figure packed up starting in August, when the travel to a small number of designated “green” countries, but it is still far below the pre-pandemic level, it said.

Although it has spiked with the re-opening of stores following each of Israel’s two lockdowns, spending on clothing and footwear has also shrunk. From 5.9% of monthly household expenses on average, since March it’s fallen to 4.8%.

But instead of saving the money, Israelis chose to spend it other ways. Purchases of electronics, such as television sets, air conditioners and refrigerators, have risen as more people spent days at home.

Electronics purchases, which before the crisis, accounted for 3.4% of monthly average household expenses, have climbed to 4.3% during the coronavirus. Even though electronics are a consumer durable, spending on the category has remained steady throughout the crisis, the figures show.

Increased spending also occurred on furniture and “do-it-yourself” products. Computer and software spending rose dramatically during lockdowns and remained strong between them.

Consumers directed more of their monthly spending on off-price and department stores, which unlike others have remained open throughout the coronavirus months. Those two categories of retailers drew 2.8% of household monthly spending pre-crisis and 3.3% during the crisis as they captured purchases of clothing and toys, for instance, from their shuttered competitors.

Supermarkets and groceries were another big retail beneficiary of the crisis, with their share of household spending rising to an average of 23.6% in the pandemic months from 20.2%. In the first months of the crisis, their share reached as much as 29.7% in April amid hoarding and worries about food shortages.

Hoarding fears subside

Those fears have, of course, subsided and food spending as a share of household totals has begun to fall back to pre-crisis levels in recent months. If they are not quite there yet, it’s because people are still spending more time at home than before and restaurants remain closed for sit-down dining.

Shva, which processes all credit card payments in Israel, said that while the components of credit card spending changed during the coronavirus, overall spending did not. During March through October, Israelis spent 225.3 billion shekels ($68.8 billion), about the same as they did the same time in 2019. However, based on pre-crisis spending trends, had there not been a pandemic, spending wouldn’t have held steady but risen about 3.5% year on year, Shva noted.

It added that in November, as Israel was emerging from the second lockdown, credit card spending was up 3.6% from a year earlier. Withdrawals from cash machines were also up by the same figure.

“November was a great month, compared to November 2019,” said Yaron Tiktin, executive vice president for consumers and credit at Max. “We were seeing more spending in most categories, apart from air travel, tourism and gas, which still haven’t returned to last year’s levels. Compared with March, we’ve seen rising spending in most categories except for food, which saw a slight decline. People aren’t buying less – they’re buying more in Israel and less overseas.”

Zabezhinsky said he wasn’t surprised that consumer spending has held up so well during the crisis. He said that in recent months, people had been spending less than they are earning because there were fewer spending options while incomes were not severely harmed by the crisis

“Most Israelis weren’t laid off from their jobs and their income wasn’t hurt. In addition, the government gave money to people who were hurt financially, whether it was grants to the self-employed or extended unemployment benefits,” he explained.

Another major consumer trend that emerged during the coronavirus months was a sharp increase in online shopping. According to data from Max, shopping over the internet or by phone climbed 15 percentage points since the start of the year to reach 69% of the total in November. Today, a third of all food purchases, including grocery shopping and restaurant orders, is done remotely, it said.

Tiktin predicted that the move to more online shopping was here to stay, even after the pandemic has passed. Retailers acknowledge this. “Until now, the competition between the [retail] chains was for the best location for their stores, now they are competing on the best [product] and on price,” he said.

Online spending jumps

Isracard also tracked a rise in online spending of no less than 147% for apparel and shoes in March-September, compared with the same time in 2019. Online purchases of jewelry and watches jumped 102% while the average transactions in all three categories rose by 6% to 11%, it said.

“When the coronavirus erupted, part of the public were in shock and stopped shopping almost entirely, except for food and pharmaceuticals,” said Uri Alon, a deputy CEO at Isracard. “As time passed, the drop in consumer spending moderated. Companies themselves recognized the situation and started to invest in online and other ways of enabling them to resume activity.”

Meitav Dash’s Zabezhinsky said the change in shopping habits would survive the coronavirus. “The rate of internet purchases may moderate, but it won’t go back to the levels we saw before the coronavirus.”

It will also bring a long-lasting change in buying habits, he added. “At some places, it seems, where employees continue to work at home full-time or part-time after the coronavirus and that will reduce spending on clothes and shoes, makeup and office food services while increasing demand for electronics and computers.”

For the short and medium term, Zabezhinsky says consumer spending will continue to rise before plateauing or even declining in 2022.

“The time people spent on shopping didn’t fall during the coronavirus months but moved from stores to online,” he said. “People remain hungry for goods and services.” The year 2021 will be strong for consumer spending. Nevertheless, in the long run, it will hinge on the rate of economic recovery from the crisis. If the economy rebounds quickly, consumer spending in 2022 will be responsible, but it’s quite possible we’ll see a slowdown and decline after a jump in 2021.”

Comments