Amazon on Sunday launched its retail operations in Israel, a move that will make online ordering easier for Israelis. Analysts say they do not expect a huge immediate impact on Israeli shopping patterns.
The dedicated website, albeit still in English, will enable Israeli retailers to sell directly to customers in Israel using its online platform. Amazon itself has stayed officially mum about its plans, just saying in an email that the firm is “currently working with sellers in Israel to help them sell worldwide with Amazon Global Selling.”
On the website, under the deliver to Israel tag, the Israeli companies listed include Electra, Newpan, Brimag and Dynamica, while clothes retailers included Israeli stores such as Adika, Crazy Line, and Style River.
Over the past few months Amazon called on Israeli manufacturers to join the company’s services and ship their products internationally to customers around the world, as well as to local buyers. The products and services offered by the Israel-dedicated site will specifically target Israeli users, but the US firm is not planning, at least initially, to set up a local logistics center. Instead, merchants that list their products on the dedicated Amazon website will have to supply the products directly to the client from their own warehouses, rather than using Amazon distribution services.
“The initial impact won’t be dramatic; there won’t be a booming impact,” said Ilanit Sherf, head of research at Psagot Brokerage, a unit of Israel’s largest investment house. “But it will grow with time, also offering Israeli manufacturers a way to reach global audiences.” The platform will also give a wider marketing scope to local stores that cannot afford to set up branches within malls, she said.
Some retailers will be hurt by the start of the Amazon local operations, Sherf said, but much will depend on how wide the scope of products offered by the US firm is. “If the products on offer are limited, the impact will be limited as well.”
Amazon’s entry into the Israeli market is part of a trend, including in the local market, of greater online activities, which will only grow in the future, she said.
“This is where the technology is going. The service will be more convenient, products more easily available and delivery times shorter. There is a natural transition from offline to online, and you can see it happening. Amazon’s local presence will strengthen this trend.”
Israelis were already able to order from Amazon via its UK, German or US sites.
“Amazon is already here, and I can already buy from Amazon,” said Yaniv Pagot, an economist and head of strategy at the Ayalon Group, an institutional investor, in a phone interview. “I don’t see a local operation significantly impacting the market, and I don’t believe it will significantly deter traffic from our malls or our stores.”
If Amazon decides on a policy of aggressive pricing then there could be a greater impact, he said, and some businesses would be hurt, especially in the clothing and shoe sectors. At the moment, Israelis who buy from a foreign site are exempt from taxes for orders below $75, while orders up to $500 are free from custom taxes, making it attractive to buy products from abroad.
The shares of mall operators such as Azrieli Group Ltd. and Melisron Ltd. have declined, at times sharply, every time news of Amazon entering Israel is reported, Pagot said. But then they pick up again, as “there are forces in play that are greater than Amazon,” he said, referring to the low interest rate environment that makes borrowing cheap for businesses.
The shares of Melisron, the operator of the Ofer Ramat Aviv Mall and the Ofer Malls around the country, have surged 36 percent in the past 12 months, and Azrieli shares have advanced 40% for the period, compared with a 3.5% decline of the TA-35 blue chip index, as of end of day Sunday.
A local Amazon site, explained Sherf, especially if eventually also in Hebrew, will make it easier for many to order, especially those who were deterred by interfacing with a foreign language and the fact that the products need to be shipped from abroad.
“Language is a major barrier,” she said. “If the service is more accessible, and the interfaces friendlier, then people will find it easier to buy, and this will lower a psychological barrier that many have.”
Even so, Sherf said, shopping patterns in Israel are still very different from those in the US. And the demise of the shop or the mall is not imminent, she believes.
“Unlike the US, Israelis don’t have to drive far to reach a mall,” she said. Thus she believes malls and brick-and-mortar stores will continue to play a part in the shopping experience of Israelis, albeit more and more for the older generation.
“I still go to the shops and the malls for my shopping,” said Sherf. “But my children buy everything online,” and all Sherf gets to do is pay, she said.
“Habits of people are changing,” she said. “But it is a process that takes time.”
Pagot added that malls are learning to diversify their businesses to outweigh the lure of online shopping. “They have made going to the mall an outing experience,” he said, offering movie services, restaurants, gyms and entertainment programs. “They have changed their mix of offerings, as have malls around the world, and this is keeping them attractive to customers.”
Amazon said in its email: “Local Delivery is one aspect of Global Selling that looks to improve the opportunities for sellers in Israel to sell more effectively to customers in Israel who shop on Amazon.com. We hope that through this programme, we will be able to provide our customers in Israel with even more local products to choose from, with quicker deliver speeds. We will share more information shortly.”
Although the local e-commerce platform would start Amazon’s e-commerce activities locally, the US tech giant began operating in Israel with the 2015 acquisition of Annapurna Labs for $350 million. Last month, Amazon announced that it was expanding its operations in Israel by launching local infrastructure for its CloudFront content delivery network, which allows clients to easily distribute large data files such as videos around the globe.