Amazon execs in Israel to solve delivery logistics problems

Amazon Photo: Reuters

Sources believe Amazon will begin operating a Hebrew-language ecommerce website in the first quarter of 2019.

Ecommerce giant Amazon, controlled by founder, chairperson, and CEO Jeff Bezos, is still moving closer to Israel. Sources inform "Globes" that Amazon's representatives will land today in Israel in order to find  logistical solutions and meet with local players in the sector. This will be the first visit by Amazon representatives in Europe designed to prepare for working in the local market.

The sources added that the three-day visit would include two executives from Amazon's European headquarters: Amazon senior network strategy manager Antoine Mosneron Dupin and cross-border transport AGL manager James O'Leary. Sources in the sector increasingly believe that Amazon will begin operating a Hebrew-language ecommerce website with a local Internet address late in the first quarter of 2019.

The confidential visit is the first of its kind in Israel by Amazon representatives in Europe aimed at preparing for work in the local market. Amazon's visits to date have focused on the analytical aspect: studying the market, surveys, and mapping the work environment. This visit has practical aims. The preparatory work done will be transformed into commercial activity: meetings with local delivery players in order to consider joint work and individual details, such as prices and VAT payments in Israel. As far as is known, Amazon is not currently considering renting logistical warehouses in Israel, and is likely to use logistical centers in Turkey, which became active last month in a single day, with no prior announcement.

The aim of the visit is meeting with delivery companies operating in Israel, such as Bar Group, Cheetah Deliveries, UPS, DHL, YDM, and FedEx Israel. Amazon is looking for an efficient local alternative for its shipments for when it begins activity in Israel and operating its Hebrew-language website. In countries in which it operates a local website, Amazon usually makes its deliveries through a local player, rather than through the registered mail services.

The still unanswered question is whether Amazon will select a single local player and operate closely with it, as it does in other countries, or work with more than one player. As far as is known, up until now, Amazon's meetings with the players operating in Israel were more strategic, through the US parent companies of these companies and involving Amazon's US representatives, and did not take place in Israel. The aim of this visit is believed to be more tactical.

The stage of challenging all the retailers

One of the major challenges currently facing online retailers is the last mile. This refers to the final stage in the distribution chain of online deliveries needed to bring the delivery to the end-consumer's door in as short a time as possible. This stage in the distribution chain, which poses a logistical challenge to the retailers, is a very expensive one for them. This challenge is even greater when it involves fresh food that must be preserved through refrigeration and reach remote locations within a short time.

US retail giant Walmart recently declared that it was changing its ecommerce system in order to eliminate orders when delivery is too expensive, so that a bottle of cleaning fluid or a can of food stored at too great a distance from the customer's address will not be available for purchase. Walmart previously sent items without taking distance or the delivery cost into account, in contrast to Amazon, whose prime service (with the accompanying extra payment) allows free deliveries. This measure explains how difficult this challenge is and how critical it is for Amazon to maintain its competitive advantage in every market it enters.

Tension and curiosity in the local market

The visit is stirring tension and curiosity in the local market among both delivery companies and retail players and suppliers of non-food products. These companies are currently preparing for Amazon's possible entry into Israel. For example, several months ago, "Globes" revealed that Israeli company Sano had begun a pilot for selling its toiletries and cosmetics in the US market with the Natural Formula and Careline brand names, and that Sano and Amazon had discussed future cooperation in sales in the Israeli market. "Globes" also revealed that Amazon's representatives had visited local food companies over a year ago, including the headquarters of the Osem-Nestle group.

Amazon's exclusive club

Israel is not the only country in which Amazon is believed likely to start doing business in 2019; a similar measure seems to be in store for Ireland. As in Israel, a process has begun in which the counterparts of the Federation of Israeli Chambers of Commerce are trying to take preventative action against the upheaval likely to take place when Amazon enters the market.

There are countries, however, in which activity is already taking place publicly. Last month, Amazon's first official activity began in Turkey, a country with a population of 80 million. Amazon has named 15 product categories that it will sell in the country, including books, toys, electronical goods, etc. In Amazon's announcement at the time, the manager of its activity in Turkey promised that Amazon was committed to consolidating its activity there in the coming months and would expand the range of products offered for sale, together with a delivery option. In the framework, a local Amazon website began operating with an Internet address having tr on the end, thereby making Turkey the seventh European country with Amazon activity and the 16th country worldwide.

How broad is Amazon's international deployment, and to what extent will Israel join the exclusive club, if and when Amazon sets up shop here? Amazon currently has activity in 11 of the world's leading and most powerful countries, including the US, France, Germany, the UK, India, Canada, China, Australia, and Japan. It sells to customers from 180 different countries worldwide through 109 delivery storerooms around the world in more than 30 activity categories.

Amazon's current market cap is $860 billion. It began operating in Germany and the UK in 1998, and launched a website in France in 2000. It entered the Italian market in 2010, followed by Spain in 2011 and the Netherlands in 2014. In December 2017, it began operating in Australia. On each of its local websites, Amazon sells locally adapted products, many of which come from local merchants in those countries. The selection is not as comprehensive as on the Amazon.com website, which went on the air in 1995.

Published by Globes, Israel business news - en.globes.co.il - on October 16, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Amazon Photo: Reuters
Amazon Photo: Reuters
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