When international fashion chain Forever 21 opened its first store in Israel earlier this week, its prices were newsworthy. Jeans from NIS 50, and shirts from NIS 30. Its prices were the same as its prices in the US and at its 800 stores worldwide.
This is big news in Israel, where most fashion labels cost more than overseas. An inquiry by "Globes" at seven international labels - Zara, Mango, GAP, H&M, Celio, United Colors of Benetton, and Carter's - found that Israelis pay 15-50% more than in other countries for the same items.
Industry sources claim that to survive, the minimum price in Israel must always be higher than abroad, and that the real effort is to narrow the gap caused by the price the local franchisee obtains from the foreign manufacturer. Additional costs include shipping, storage, advertising, and rent at malls.
"These costs are much higher in Israel, especially rent and advertising, and the consumer is the one who ultimately pays. The objective is to reach an average uniform difference of 10% over the foreign price for a product line. This means that some items in Israel will cost more than overseas and other items will cost less. In any event, the gaps will be less than before."
This may be the reason not all international labels succeed in Israel. An example was Benetton's previous attempt to win a foothold in the country ten years ago. Israelis were not prepared to pay the premium, preferring to pay far less when travelling abroad. On the other hand, Israeli consumers are hungry for international labels, which is why so many fashion chains have made their way here. What does a premium matter when the consumer is prepared to pay it? This is the equation that the Israeli franchises seek to reach.
An even greater challenge than parallel imports is dealing with online prices. H&O VP marketing Chen Eshed said, "Every fashion label has been hit, and manufacturers must let franchisees lower prices."
One of the solutions to narrow the price gap is through customer clubs. Members pay less for items, whose prices approach international levels. For example, a Carter's infant overall, which costs NIS 70 in Israel - 52% more than its online price of NIS 34 in the US, but an H&O club member pays NIS 63, narrowing the difference to 46%. Carter's is sold in Israel by H&O Fashion Ltd. (TASE:HAO).
Mango is offering end of season discounts of 40%, but only to its members of its customer club. The result was record sales, which totaled NIS 3 million over the previous weekend, double the sales in the corresponding end of season sales.
Below is the price difference at the seven labels between Israel and overseas:
- H&M - 18%
- Benetton - 15%
- Zara - 15-25% between the shekel and euro price Carter's - the US online site is 30-50% cheaper than Israeli prices
- Mango and GAP, imported by Elbit Imaging Ltd. (Nasdaq: EMITF; TASE: EMIT) subsidiary Elbit Retail and Trade Ltd. - end of season sales equal regular prices overseas.
- Forever 21 - raises the price list according to the shekel exchange rate
- Celio - 15% more in Israel than in France. The Israeli franchisee is Fishman Holdings, owned by Eliezer Fishman, the controlling shareholder in “Globes”.
Published by Globes [online], Israel business news - www.globes-online.com - on December 22, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011