Mouse Clicks and Shekel Chicken Clucks

The announcement this week that Rami Levy will start selling groceries online- and at low prices - has not yet caused a ruckus in the supermarket industry.

A Panels Institute survey for TheMarker found that 50% of the public would shop at a Web site operated by supermarket chain Rami Levy Shivuk Hashikma, granted the prices were low enough.

Rami Levy
Daniel Bar-On

The announcement earlier this week that Rami Levy will indeed start selling his store's products via the Internet - and at low prices - has so far not caused a ruckus in the supermarket industry.

The chain's competitors say a Rami Levy shopping site will not dramatically change the Internet sales arena.

"Internet sales at Supersol and Blue Square account for less that 1% of their overall sales," said a senior executive at one of the big supermarket chains. "It was obvious Levy would enter this field, because Internet supermarket shoppers make large purchases, people are willing to try things out, and can be attracted by the prices."

"The disadvantage [for supermarket owners] is that [Internet stores] are complicated to operate," continued the executive. "Levy will not change this sector. He doesn't have a delivery setup, so he'll outsource this service, and will probably focus on the Tel Aviv region. Now that he has built up his image, he wants to leverage it to be cheap and high-tech. People who shop on the Internet are not the type of people who will start buying at Rami Levy."

The Panels survey found that 70% of the public never buys food over the Internet. Still, about 50% of respondents said they would buy food at Rami Levy's site - if he keeps prices as low as at his stores.

"Ostensibly, the main reason people do not buy food online is because they can't see what they're buying, but that seems to be only an excuse or a mental block that can be overcome," says Sarit Sternberg, deputy CEO for research at Panels. "If the public is given sufficient incentive to switch to online shopping - specifically, lower prices - a large chunk of the public will switch. This is precisely the reason that such a high percentage of electrical appliances are sold online."

Pilot in Tel Aviv

Levy operates 17 branches around Israel, including in Tiberias, Jerusalem, Kiryat Malakhi, Kiryat Gat, Ramat Gan, Shilat, Zichron Yaakov, Pardes Hannah and Haifa.

He is planning an Internet pilot in Tel Aviv and Ramat Gan, and a month later will open the online service to all parts of the country.

He says that 95% of the products will be sold at the same prices as in his stores, while prices for the other 5% will be based on the regional competition.

Prices at Blue Square's Web site are on par with those at its relatively expensive Mega in the City stores, while Supersol's Web site, Supersol Direct, offers prices similar to those in the upmarket My Supersol stores.

The delivery charge for purchases at Rami Levy's website has not yet been decided, by Levy says it will be lower than the competition.

Blue Square charges NIS 19 for delivery, but orders over NIS 500 are delivered free to customers paying with a You customer club credit card.

At Supersol Direct, the delivery of orders under NIS 150 costs NIS 26, and is NIS 18 on orders over NIS 150.

A rising tide

"The logistics costs are covered by the delivery charges," said Rami Levy on Monday, in response to comments that running the Web site would be difficult. "We are running a pilot in Tel Aviv to see what works best, and if we need to manage a separate warehouse for each area, this is what we'll do. We will not buy trucks and will outsource the deliveries, which we already do, and the orders will be filled by our employees."

Levy says creating competition will help all the stores selling over the Internet.

"It's just like the trend we are seeing today, of higher sales at the heavy discount stores," he said. "Sure, the consumers want to touch the products, but beside the generation that barely knows how to operate the Internet, there are people who want to order online and others who have difficulty getting to our outlets. The Web site is for everyone who wants to come and buy from us, but it is not an alternative to the opening of more branches, including in Tel Aviv. If 2% of the Israeli market buys from me online - that will be 40% of my sales."