Ecommerce in Israel: Cross Border Shopping Dominates

With a population of 8.2 million, Israel might not look like a particularly lucrative ecommerce marketplace. However due to unique domestic conditions, Israel is an exceptional candidate for cross border ecommerce.

Only one-quarter of Israeli companies sell online as well as their prices are much higher than those of foreign firms due to large value-added taxes (VAT) and monopolies on many consumer products. According to the Israel Internet Association, 75 percent of Israelis make online purchases — largely from China, followed by the U.S., the U.K., and Brazil. Seventy-nine percentage of online Israeli shoppers have made purchases from overseas sites, according to a joint study from PayPal and Ipsos, the global research company.

Receiving products ordered online from an Israeli company can be an ordeal. Many domestic online orders are not delivered by Israel Post and orders which do reach clients can take weeks to arrive. In contrast, orders from Amazon are delivered usually in five days. Foreign goods are also not as costly, putting Israeli businesses at a disadvantage.

While Israel is known for innovation and advanced technology, its consumer products are often poor in quality to those made in foreign countries and much more expensive. Residents are eager to buy everything from jeans to kitchen gadgets from overseas nations. China’s Alibaba, the biggest ecommerce business in the world, has invested in many Israeli technology startups. Israelis like to buy products from Alibaba, which leads to Chinese businesses, together, being the best ecommerce destination for Israelis.

The largest domestic ecommerce website concerning traffic is Shufersal Yashir, the electronic branch of the largest supermarket chain in Israel. 1 Israeli firm, Buy2Networks, is trying to implement one-day delivery to many major cities.

The Statistics

According to research company Statista, 2016 ecommerce revenues in Israel will amount to $3.6 billion and grow to $4.9 billion in 2020, a compound annual growth rate of 8.3 percent. Consumer electronics and media include the largest sales section, garnering 32 percent of revenue. Food and drinks are the next largest category.

The average annual revenue per user is $904. Males dominate both the 25-to-34 and 35-to-44 age groups of ecommerce buyers. However the 16-to-24 age bracket is heavily female.

Nearly all Israelis speak and read English. There’s absolutely not any need for a Hebrew site. Mobile penetration is well over 100 percent.

Demographics

Seventy-five percentage of the population is Jewish and 21 percent is Muslim. Persons of American and European ancestry comprise 36 percent of the Jewish inhabitants.

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Taxes

Earlier this year the Israeli government changed its rules to make foreign firms subject to VAT collection on digital services. A business must collect VAT if it’s an internet presence targeting Israeli customers, has agents trying to locate Israeli clients, or has an internet presence targeting Israeli customers. Downloaded apps, software, music, games, television programs, movies, and internet gambling are subject to the nation’s 17 percent VAT.

But, physical products are often undependable. Physical products worth around $75 are exempt from all taxes and purchases of up to $500 are exempt from VAT. So, by way of instance, Amazon must charge VAT on virtual goods such as ebooks, but not on physical books costing less than $75.

Payment Providers

Israelis are avid credit cards users with MasterCard being the hottest. PayPal is growing in popularity. Other top payment processing companies include the following.

  • AllCharge, based in Israel, specializes in billing and processing solutions for merchants. The business is a full-service provider offering credit card processing, fraud and risk management, and content management.
  • ImGlobal Payments is an Israeli payment service provider that provides payment solutions and multi-currency processing (supporting 150 currencies).
  • Tranzila is a merchant services and ecommerce payment processor based in Israel. Tranzila provides credit card processing as well as ecommerce hosting, ecommerce management, and fraud detection.
  • Zooz enables merchants to connect back-office functions to international payment systems. It joins with numerous financial institutions and incorporates acquirers, e-wallets, alternative payment procedures, fraud management, and other third party solutions, while routing transactions through the payment procedure.

In short, Israel represents a superb chance for foreign sellers of consumer products due to high retail prices in Israel and the absence of national ecommerce competitors. The country’s middle class is searching for high quality, cheaper goods and are eager to purchase from overseas ecommerce merchants.