I’m a pretty serious online shopper. I’ve become accustomed to hounding sites for sales, filling up virtual shopping carts at The Gap and Old Navy, searching Delia’s for teenage-friendly bargains, and looking through Land’s End Overstocks for deals on men’s no-iron shirts. I consistently renew my Amazon Prime two-day free shipping deal, wait for the February white sales to order whimsical bedsheets from Garnet Hill and scour the Internet for coupon codes to save on shipping costs.
As an American living in Israel, I’ve found ways of getting merchandise I’ve purchased online in dollars — and had sent to various addresses in the US — delivered to me in Israel by friendly “mules” who tuck my treats inside their luggage.
But one doesn’t always want to ask favors of friends, particularly with the recently imposed limit of one free suitcase per traveler to and from North America instead of two, which makes it much more difficult to request schlepping services. On the other hand, prohibitive customs taxes charged for shipping directly to Israel had made it less than cost effective to shop US retailers online.
That seems to be changing now. As of January 31, the Finance Ministry canceled customs taxes on all toys, electronics, clothing, luggage, medicine, tires and appliances. Instead of paying 12% in customs taxes as in the past — if one were enough of a freier (the local colloquialism for a pushover) to have something sent directly from the US — one now can shop like other global customers. Almost.
The three forms of taxes that have always applied to imported goods are customs, purchase and VAT, or value added tax. Customs duties are levied on all imported or exported goods; purchase taxes are charged on certain goods; and value added tax is calculated on any good or service in Israel, as well as imported goods.
Now, customs taxes have been eliminated as of January 31 on purchases up to $325 or NIS 1,200, and all purchase taxes on purchases up to a $75 total. It’s important to note that the purchase tax is still levied on many items, including DVDs, CDs, answering machines and cellphones, while the customs tax is now eliminated from all those orders up to $325 — as long as the purchase is for personal use, and the cost of the entire transaction, NIS 1,200, includes shipping.
But can I shop?
What does this mean for the average Israeli consumer? I went online to check out the pricing in this new web commerce world, where, in addition to the changes in the Israeli tax scene, online retailers have also been making changes for their customers living abroad.
You may have already come in contact with sites that identify non-US customers upon entrance to a retail site, popping up a window that tells you to select your country and currency before beginning your shopping trip.
That pop-up is courtesy of global e-commerce provider FiftyOne, an Israeli-founded and New York-based company (originally known as EFX) that integrates with various merchants to offer global shipping. The expatriate community worldwide is a big consumer group for FiftyOne, “whether in Israel, Germany or wherever,” says Kevin Frisch, senior vice president. “Not all expats have the availability of someone visiting [from home] or maybe they want [their item] right now. Someone’s always going to have Mom bring them jeans, but there’s so much demand for that American online retailing experience, and people like to have control of the process.”
FiftyOne offers currency exchange and shipping for a significant list of retailers, including Aéropostale, Barneys New York, Bloomingdale’s, Brookstone, Crate and Barrel, Gap, Gilt Groupe, J.Crew, Johnston & Murphy, Macy’s, Overstock.com, Sears, Shoes.com, Tilly’s and True Religion.
International ordering from any of these retailers, however, is still a far-from-perfect process. If a retailer such as The Gap has a brick-and-mortar presence in your country, as it does in Israel, chances are you won’t be able to order many of the items that are already available in your local Gap store. I tried to order a few pieces from The Gap, including children’s and women’s clothing, and was notified on the pop-up window of each item that it was “not available for international shipping.”
Other websites add insult to injury, said Frisch, allowing you to choose an item, only to let you know once it’s in your shopping cart that it can’t be purchased for shipping abroad.
“That’s the most frustrating, and we fight not to have that happen,” he said.
When I tried ordering from Banana Republic — part of Gap Inc., but without any stores in Israel — I was able to choose several items, including those on sale. The Timeless Crew Tee was priced at $17.99 on the US site, and NIS 73.20 on the Israeli site. If I added the Accordion Pleat Tank ($32.99 on the US site, NIS 132.30 on the Israeli site), it totaled NIS 207.50, plus another NIS 166.70 for shipping (arriving via DHL Express in 5-9 days), NIS 48 for purchase tax and VAT, coming to a total of NIS 422.20 for the two shirts. If I were to have ordered it all shipped to a Massachusetts address, it would have come to $50.98, including free shipping (the total varies by state due to different sales tax rates).
Using the NIS 4 exchange that is currently the standard rate used by FiftyOne for Israel, that’s an approximately NIS 200 difference in price, due to the considerable charges for shipping.
Shipping rates are fairly standard among merchants, said Frisch, and are set according to weight and destination. Some merchants do offer subsidies, shipping deals and coupon codes, but those are set by the merchant, not FiftyOne.
For example, hip jeanmaker True Religion charges NIS 1,576.10 for its Women’s Billy Straight Leg Jean, plus NIS 239.60 in customs (since the price exceeds the NIS 1,200 limit) and VAT, but ships for free in three to nine business days. A bargain.
Yet the steep shipping costs of other purchases (Sears charges NIS 365 to ship a wool jacket, a heavier package) are not always a deterrent to global buyers, said Frisch.
“There are many buyers out there who want to be able to buy things they can’t get abroad, like something from Macy’s,” he said, referring to the American department store giant. “Macy’s is a powerful online retailer because it has no store outside of the US. Plus sizes are also a big part of our business, because there’s a wide range of options in the US that aren’t available in other countries.”
What do Israelis want?
It’s that wide range of options that appeals to Israeli online shoppers, agreed Keren Cohen, one of the founders and CEOs of Buy America, a new Israeli company that competes with FiftyOne. Currently in operation only with Amazon, the company does plan to expand to other retailers, specifically of clothing.
Amazon is “the biggest global store,” Cohen said. “Israelis love Amazon. They always check it for prices, even if they end up buying the item in Israel.”
Shoppers go directly to the Buy America site, where they can either browse a selection of Amazon items or go on from there to Amazon, where they open a Buy America shopping cart that will automatically calculate an item in shekels, as well as shipping and taxes.
“Even with the added cost of shipping,” said Cohen, ”the prices are so much cheaper in the US that it’s still worth it to have things sent here.”
What has surprised the company, which launched in January, is the variety of purchases as well as the range of buyers. For now, 70% of Buy America’s customers are men, purchasing electronics, sports equipment and children’s toys. Tablets, such as the iPad and Amazon’s Kindle, are popular (Russian-speaking Israelis buy the Kindle, which supports Russian but not Hebrew), as is the Lego line of toys, which can be prohibitively expensive in Israel but far cheaper on Amazon. The Buy America team also thought the bulk of purchases would come from the firmly entrenched middle and upper-middle classes in the country’s center, but have found that most buyers are from the periphery, including small towns and kibbutzim.
“It’s the ease of getting it sent straight to your house,” said Cohen, explaining why Israelis are buying into the concept. “Yes, you still pay some customs, but the price is lower. And most people aren’t flying to the States — or they are, but they don’t want to wait to get a particular item, so they order it, as well as a few other things.”
For now, the average total purchase is $250, she said, which allows a buyer to stay within the $325 customs-free limit, without going over and incurring additional charges.
Will you take the plunge?
So, what’s the upshot? It depends. If you’re living here without access to friends, family or colleagues who travel regularly to the US — and can find room in that single, regulation-size suitcase — then it may pay to order online and have your item sent to Israel. The shipping is expensive but not prohibitive, and the cheaper prices in the US, coupled with the newly lowered customs taxes, may make it a worthwhile way to shop.
For those with easy access to US shores, it’s hard to imagine spending several hundred shekels in shipping costs — not to mention the additional customs fees that can mount up if you exceed the prescribed amount – when you’re used to paying zero. But there are times when you want something now, and don’t feel like waiting until that next business trip or Mom’s upcoming visit. The choice is yours, and it’s just a matter of money.