A few weeks ahead of its launch in Israel, Amazon is gearing up for local operations and among other things hooking up with Bank Hapoalim (TASE: POLI) in the small and medium-sized businesses sector. Sources inform "Globes" that tech giant Amazon and Bank Hapoalim are putting together an agreement, in which they will jointly offer services for establishing online stores for businesses.
Amazon and Bank Hapoalim will offer a joint package containing consultancy services, deliveries, and providing loans to businesses for the purpose of establishing the initial infrastructure for founding an online store. The sources added that founding a joint events arena is also being considered.
In addition to the agreements, sources inform "Globes" that Amazon's representatives also expressed great interest in Bit, Bank Hapoalim's payment app, and may have already conducted negotiations about using it. An agreement on Bit appears far from certain, among other things because the Bank of Israel only today published its decision on the way that the banks' payment apps will be allowed to operate with businesses in Israel in the coming years.
The question of loans and management of online stores is important for small and medium-sized businesses, which do not have large offices, and need experienced personnel with an understanding of the online platform, plus a sizeable initial investment. Sources in the sector estimate that an initial launch, including founding a store, studying the category and its pricing, photographing the products according to Amazon's precise requirements, and conducting campaigns and promotion, is liable to cost an average of $30,000. There are businesses that choose to do this by themselves, but a number of companies have already arisen in Israel that provide such store operation services themselves in return for payment, such as eCommunity and iCommerce, which provide ecommerce management services in general, and on Amazon in particular.
This significant measure comes on top of a meeting between Amazon and small and medium-sized businesses in cooperation with Bank Hapoalim, in which Amazon invited the businesses to sell through the local platform that it will launch soon. Amazon Global Selling manager Rolf Kimmeyer is currently leading Amazon's activity in Israel with an Israel and international team operating from Amazon's headquarters in Berlin.
Banks searching for backdoor to credit cards
The launch that Amazon is planning in the next few weeks in Israel is preoccupying not only the retail sector, but also the banking and financial system. Market sources say that Bank Hapoalim is not the only player among the banks and other financial institutions, among them the credit card companies, working towards cooperative ventures with Amazon. The sources explain that a large proportion of the banks and credit card companies are actively considering combining forces with Amazon, and want to create diverse channels of activity with it.
For example, Bank Leumi has now created the first such cooperation with Amazon in Israel, in which the bank will give a $20 benefit coupon during July for each purchase of over $50 on Amazon using a Bank Leumi credit card. As far as is known, other players in the credit card field have attempted to enter this niche themselves - Isracard and Max (formerly Leumi Card) - in order to obtain a similar agreement.
Amazon operates its own credit clearance mechanism, called Amazon Pay, so as a rule, it prefers to do the clearance by itself. "It is rare for them to connect with other companies for creating a discount coupon with an external credit company," a source in the sector said today.
Next week on July 15-16, Amazon will hold its annual Prime Day shopping holiday. On this day, it grants huge bargains and discounts to paying customers of its club. This year, Amazon announced that its shopping holiday would last for 48 hours, compared with 36 hours last year and less than that in previous years. Bank Leumi's benefit in July, which will reach a peak of purchases in the framework of Prime Day, is likely to encourage many consumers in Israel to buy through the platform, which also involves exposure to the brand ahead of the official launch.
In addition to this consumer benefit, Bank Leumi is also getting ready by making preparing and providing tools to its business customers ahead of Amazon's launch. Next Thursday, the bank will begin a series of lectures and training for its customers, and this is probably only the beginning.
Bank Leumi's interest in creating an affiliation among consumers with a new and powerful customers club is clear and similar to that of Bank Hapoalim. The two big banks have strong financial capabilities, and are trying to generate for themselves an independent connection with customers holding their credit cards. Israel Discount Bank and First International Bank still own their own credit card company - ICC-Cal, while Mizrahi Tefahot Bank never owned its own credit card company - it worked with all of them.
Bank Hapoalim and Bank Leumi, however, "lost" their credit card companies earlier this year - Isracard and Leumi Card (now Max), respectively, as a result of the reform aimed at increasing competition in the banking sector, under which they were forced to relinquish the credit card companies. They must now find a backdoor to the customers club they formerly held through their credit card companies.
Tension in the retail sector
Tension in the retail sector has reached a peak in preparation for the official launch of Amazon's local activity in Israel, which is expected in the next few weeks in order to take advantage of the shopping spree characteristic of the beginning of the new school year and the period before the Jewish holidays.
Suppliers and retail chains in spheres such as electrical appliances, gadgets, clothing, toys, cosmetics, and others are already getting ready with special stores. Amazon wants to concentrate as many suppliers as possible on the official launch date with active stores, depth bargains, and attractive promotions through banners and benefits.
In recent weeks, Amazon has been holding meetings and talks with a broad range of retailers and suppliers in Israel. Informed sources say that Amazon's representatives are teaching them to prepare for the official launch of the local website within weeks.
The company is also continuing the recruitment efforts that it began two and half months ago in the framework of its local delivery plan, which lets Israeli sellers use Amazon at their own expense to sell and supply orders directly to consumers in Israel. Amazon's goal is to create as extensive a portfolio of stores as possible by the launch date.
Max said in response, "We do not disclose details of our contacts with specific companies before an agreement is reached with them."
No response was available from Amazon.
Published by Globes, Israel business news - en.globes.co.il - on July 9, 2019
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