Amazon Angst Spurs Israeli Online Retailers to Speed Up Delivery Time

Amid reports the U.S. ecommerce giant may set up an Israel operation, locals are working to mimic its promise to deliver orders within 24 hours

Click and Collect center in Ashdod.
Click and Collect

There’s no shortage of places to order products online in Israel. Veteran retailers like Super-Sol and Super-Pharm are entering the segment or substantially upgrading their offerings and new ones seem to emerge every few days.

And then, of course, there are the reports that Amazon is looking to set up local operations in Israel. Real estate industry sources say the company is scouting out sites for an Israeli logistics center and others say it has been in talks with local delivery companies.

But the big problem for everyone is how to get the goods to the shopper speedily and efficiently. In the United States, Amazon promises to deliver within 24 hours; in Israel the government’s Israel Post it took an average of 22 days after a package ordered from abroad to arrive.

With the threat of Amazon looking Israeli companies are working overtime to solve the logistics problem as online shopping surges, boosted by lower prices abroad and exemptions for customs and value-added tax on smallish orders that have made international sites like Amazon and Alibaba the preferred place for consumer clicks.

This year, Israel Post will handle 59 million packages delivered from overseas, up from 53 million in 2016 and just 22 million five years ago.

Israel Post’s new logistics center in Modi’in.
Ofer Vaknin

Israel Post has the most to gain, or lose, from the growing use of online. The Antitrust Authority says controls 99% of all package delivered to Israel from overseas (industry sources say it’s more like 90%), but if then reports about Amazon in talks with private sector rivals it could lose a big chunk of the business.

“Today it takes Israel Post a relatively long time to make deliveries,” said Tamari Ben-Shshar of the business-consulting firm Czamanski Ben-Shahar.

“If there’s someone who can do it better it’s Amazon, who knows how to deliver inside 24 hours. IN some parts of the U.S. you can get a package in three hours from the time your order. If Amazon does come to Israel, I doubt it will use Israel Post. The post office would have to change its pots to come close to Amazon’s requirement,” he said.

Israel Post opened a new logistics center in Modiin in September and it has set itself a target of delivering goods to the consumer within 48 hours after the order has arrived in Israel. It has made some small progress in that direction, but it’s still far away.

Still, when Terminal X, the shopping site developed by the apparel retailer Fox, opened for business last month, it chose to us Israel Post to handle deliveries. Fox has big aspirations for Terminal X, which is carrying a growing range of Israeli and international fashions, many of them exclusively in Israel, like Uniqlo.

Deliverance: Overseas packages handled by Israel Post, millions
*Estimate

Fox, which is aiming for same-day delivery service, can’t afford not to get the logistics right, said Elad Vered, deputy CEO. After 18 months studying the matter, it decided Israel Post was the way to go.

“Someone who buys a product and then decides to return it has to send it abroad – and he has no idea how long that will take,” explained vered. “With us there is an address – all 700 post offices around Israel. The consumer has hundreds of places to return the product and we can credit him with a few days. That’s a unique service, which we’re doing in cooperation with the postal service.”

At its warehouse, Fox uses a mix of human and mechanized labor, said Vered, with workers labeling and packaging goods while the job of keeping track of inventory is entirely computerized. “This mix makes us faster and results in zero errors,” he said.

Gold Bond, which handles logistics for importers, will be offering retailer and importers a state-of-the-art facility soon. Last week it unveiled plans for a 20,000-square meter facility at Ashdod Port to serve as a warehouse and logistics center for any and all businesses – established retailers, importers who want to sell direct to consumers and small start-up retailers.

Like Amazon, Gold Bond said it will be able to get a package to a shoppers’ doorstep within 24 hours, which will mean finding a delivery contractor.

“Our logistics center will lower costs,” said Ori Panini, who is responsible for the business at Gold Bond. A blouse you buy for 100 shekels [$28.40] at a store costs the store just 50 shekels. A big part of the price the consumer pays goes towards municipal tax, wages, electricity, etc. At the end of the day they’re left with a profit of 2-3% on the blouse. Merchants can store goods with us and pay 10% less for everything – and that’s a lot.”

Another approach to the problem is being taken by the Big, the shopping mall owner and operator. Two months ago it launched its Click and Collect service at its Big Fashion mall in Ashdod. The service lets people collect goods they’ve nought online overseas and competes with Israel Post.

At a Click and Collect center, shoppers can try on clothing they’ve ordered and return items at a service counter. Big is working with the UPS and DHL delivery companies as well as with the French postal service.

Meanwhile, Azrieli, another mall owner, launched an online mall last February called Azrieli.com. It offers everything from fashion to holiday packages and in the case of products boasts free delivery within 24 hours of placing at order.

Azrieli.com has its own warehouse, outfitted with state-of-the-art equipment, that it operates with Cargo Amerford, a logistics company. It uses an assortment of companies to deliver products.