Amazon sending signals of long-awaited Israel service, but will it deliver?

There aren’t any Amazon drones plying Israeli skies just yet, but rumors are flying on whether the mammoth online retailer is preparing its entry into Israel.

To Dvir Cohen, an entrepreneur who helps Israeli businesses start stores on Amazon with his company Amazon in a Click, it feels like the company is on the cusp of setting up warehouses in Israel.

Last week, the international online retailer told its Israeli sellers that they could update their shipping settings to have Israeli customers in Israel purchase their products with a transit time of 2-3 days or 3-5 days, depending on the shipping provider. It’s an Amazon service called Fulfillment by Merchant, and Israeli sellers with their own warehouses can now send products to Israeli buyers through Amazon.

“It’s not a big change, but it’s another step for Amazon in Israel,” said Cohen. “It could also be that they won’t come in here and it won’t be worth it for them. But according to all the signs, it looks like they’re coming.”

Dvir Cohen, who helps Israeli sellers set up stores on Amazon, thinks the online retailer is poised to begin operations in Israel (Courtesy Dvir Cohen)

He thinks Israelis will welcome the online retailer.

Israeli customers who buy products online most often order via such giants as Amazon, eBay, and China’s AliExpress, which deliver to Israel from foreign warehouses, according to a recent article in the Calcalist business daily. So products from Amazon make their way to Israel via Germany, the UK and sometimes the US, which leads to higher delivery prices and longer delivery times.

If Amazon sets up a warehouse locally, it could lower the price of Amazon products for the Israeli consumer and cut back on delivery times, said Cohen.

“Amazon does it in a few stages,” said Cohen. “It’s been checking locations for storage; everyone knows about that.”

Jones Lang LaSalle, or JLL, an American commercial property realtor with a branch in Israel, handled the search for Amazon’s Israel in Tel Aviv and Haifa. The local representative of JLL wouldn’t comment.

But other local commercial real estate firms said it was widely known that Amazon rented ten floors of office space in Tel Aviv’s Sarona Market area, and an entire building in Haifa.

Those spaces are presumed to be used for Amazon’s research and development teams, as the retailer has been aggressively targeting programmers and developers in Israel.

Amazon began operating in Israel with the 2015 acquisition of Annapurna Labs for $350 million. The firm today employs some 200 people in the development of chips to improve the efficiency of the servers that Amazon uses in its retail and cloud computing businesses, TheMarker business daily said.

The local spokesperson for Amazon would not comment on any of the retailer’s business.

In this Wednesday, Dec. 20, 2017, photo, a clerk picks an item from a shelf and scans it with a hand-held device to fill a customer order at the Amazon Prime warehouse in New York. (AP)

The consumer business, however, is what most Israelis are thinking about when it comes to Amazon.

Israelis averaged two online orders per second during 2017, according to data from the Israel Postal Company, with the nationwide total coming to 61 million packages, 15 percent more than in 2016. Clothing and shoes, houseware, accessories, gadgets, vitamins and cosmetics topped the Israeli shopping list.

Part of the rise in internet shopping comes from online food purchases, led by chains such as Shufersal. There have been reports in Israeli newspapers about Amazon sniffing out online food shopping in Israel, but Cohen didn’t think that was on the horizon.

“Amazon first comes in with digital books, then electronics and then clothing and shoes,” he predicted.

Amazon tends to enter new markets quietly, without much noise, said Cohen. Local chains get nervous, he added, as the enormous online retailer snags customers with the benefits of Amazon Prime, a two-day delivery service that also offers as access to TV and music streaming.

That appears to be taking place in Australia, where Amazon entered the market in late 2017.

While Australian press reported a less than stellar welcome for Amazon, research from Morgan Stanley showed widening price discounts between the site and local retailers on many goods. The investment bank noted that local retailers would have to lower prices and improve delivery service.

Amazon Australia has had other issues, however, with lower online shopping penetration and geographical challenges that have made it difficult to fulfill a two-day delivery pledge, particularly to the distant outback.

Tiny Israel, of course, presents less of a challenge when it comes to distance, and is likely to respond enthusiastically to an online seller that offers everything from apparel and garden equipment to toys, books and electronics, said Cohen.

“You’ll look for matkot on Amazon,” said Cohen, referring to the popular beach paddle-and-ball game, “and you’ll find it.”

Cohen also thought that Amazon would eventually use Israel as a gateway to Egypt, Jordan and other Arab states.

He noted possible difficulties including Israel’s tax regime and the Sabbath closure of the postal service and delivery companies, which would create a bottleneck for Amazon Prime deliveries.

Ultimately, however, said Cohen, Amazon’s entry could be a boon for the Israeli economy.

“It will bring down prices and real estate will change,” he said. “A store in the mall will have to lower prices because if you can get the same things on Amazon for less, that creates competition.”