Is Israel’s Retail Sector Headed for a US Style Collapse?

Don’t say you weren’t warned! We all watched the US retail collapse that began with the Great Recession. At first, we were told it was because of the bad economy. Then, the US economy made slow gains, and retail tanked like never before.

Today, Macy’s, Ralph Lauren, Toys ‘R’ Us, malls and stores are taking the heat. Beaten and shrunk by the One-Click Purchase.

Amazon, eBay, AliExpress and disruptive online shopping are changing the world, and with it, reducing the footprint of brick and mortar stores and malls. There are currently 1,100 malls in the US and experts warn that 25% are at risk of closure. 7,000 retail stores closed in the US in 2017, up 200% from 2016. Don’t expect this trend to change in 2018.

Israelis Are Shopping Online

It started with tech professionals — we were the first ones to get used to shopping online from overseas in Israel. When AliExpress went public and was in the news, many Israelis tried it and got hooked. Israelis have been ordering from Amazon and eBay for over a decade.

In 2018, you can hear your non-tech friends talking about online shopping strategies — where to shop, how to avoid paying customs. The Israeli Finance Ministry seems to always be working on yet another plan to make online shopping cheaper — we are not a manufacturing nation, so why over-tax things that aren’t made here to begin with?

Israeli Stores and Malls

Malls in Israel are packed — so much so, that I savor the quiet Sunday-Tuesday mornings at local malls. Try visiting Ikea during peak hours – like Saturday night – and it will be as packed at Disney World during July.

But looks can be deceiving. How many people at the mall are actually shopping, and how many are families with small children getting out of the house for a few hours? That the food courts and cafes are packed doesn’t mean that people are spending money.

Evidence is anecdotal, but I believe that online shopping will hit Israeli retail in 2018. The first to get hit will be stores that sell “small, light stuff” — watches and home accessories as well as clothes. It will eventually expand to larger, heavier and more expensive items. Many people will prefer to pay customs and have a much larger pool of items to choose from.

A part of me feels that many local stores deserve it. They did nothing to earn our loyalty — often charging fees to join “club memberships” that give us minor discounts in return for giving them our email addresses and phone numbers so they can advertise to us 24/7. I learned to refuse to give my info out for the rare times I do join a store’s club. Who wants to be bothered with text messages about hamburger or soap sales while busy at work or relaxing at home?!

What’s Next for Israeli Retail

2018 will be an interesting year for Israeli retail. Sales at local stores will take a hit, but the million dollar question is, by how much? Enough to cause stores to close? Enough to cause many stores to close? Enough to cause malls to close down?

The smart bet is the status quo bet — Israeli retail sales will take a minor hit with no or few store closures. I’m not so sure. With all the technology disruption going on around us, it is hard to believe that retail will take a hit all over the west and leave Israel untouched. Consider that many of us are responsible for creating, marketing and selling disruptive ecommerce technologies, it seems to be fantasy that the nation that creates ecommerce technologies will not endure a retail collapse.

About the Author
Kenny Sahr is a startup marketing executive. His first startup, founded in 1996, was featured in Time Magazine and on 60 Minutes. Kenny moved to Israel from Miami, Florida. In his spare time, he is an avid music collector and traveler.
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