Online overseas purchases by Israelis soar

Internet purchases
Internet purchases

PayPal estimates that Israelis spend NIS 6 billion on international websites each year. "Globes" examines what is worth buying.

Some 20 million packages containing items ordered online by Israelis from international websites make their way to Israel each year. Israel Postal Company data indicate that the number of incoming packages has increased fourfold in two years. In 2014 alone, the number of packages of goods ordered by Israelis from websites abroad handled by Israel Post has doubled, and there was a similar trend in 2013, relative to the previous year.

According to PayPal estimates, transactions carried out by Israelis on international websites total NIS 6 billion each year. And this is not a negligible group of consumers: a survey conducted by TNS for PayPal in July discovered that 90% of Israeli Internet users made at least one purchase in the past 12 months. The percentage of serious buyers, who make at least one purchase per week, is 23%, compared with 10% in 2013.

This wave is expected to grow significantly in coming weeks, during November and December, due to the sale season, beginning with Black Friday and Cyber Monday, and continuing through the Christmas and end-of-year sales.

There is a good reason for the sharp rise in the number of orders from abroad: “Globes” compared prices of a few items sold in Israel and abroad, and discovered that in some categories of products, ordering online from abroad costs significantly less that buying in Israel.

For example, beautiful girls’ costumes sell on eBay for NIS 50, including shipping. A similar dress would cost NIS 150 in Israel. In our survey, we discovered large price discrepancies on Legos, running shoes, and a Columbia jacket that we checked (60%).

It is not, however, worthwhile to import a Samsung Note 4. The reason for this is the NIS 1,400 surcharge for purchase tax, VAT, and shipping, such that the price for a personal import comes to NIS 4,460, compared with NIS 3,800 in Israel (NIS 3,070 in the US).

In essence, the survey reveals an important fact: the initial price gap, prior to tax and shipping surcharges, is much greater. The taxes added by Israel add a significant amount to the prices, and without them, the purchases really are worthwhile.

In other words, the tax exemptions on textiles, for example, prove to be worthwhile, but the absence of significant exemption on electronic imports undermines their cost-effectiveness.

That said, importing a MacBook Air to Israel will save NIS 550, including shipping expenses, this is due to the pricing policies of iDigital, which sells this product for a significantly higher price than it is sold for in other places around the world.

The regulatory authorities are aware of the burden of personal import surcharges, and just recently, it was announced that the Minister of Finance is raising the duty-free personal import threshold.

In August, 2013, a committee was established to examine the gaps in cost of living between Israel and other OECD countries. The committee was headed by Ministry of the Economy Director General Amit Lang and Budget Department Deputy Director Yonatan Regev. Among the committee’s decisions was to lift import barriers on various channels, including personal imports. However, the committee did not cancel duty on mobile devices, for example.

Recently, the tax-exempt threshold on personal imports was raised from $325 to $500. Sounds great, however, it appears that, in reality, this is little more than a fringe benefit for those who order expensive packages.

It would have been far more useful for most shoppers were the VAT exemption threshold, which is currently $75, to be raised instead, particularly in light of the fact that only 10% of personal imports from overseas websites are for $200 or more. More than 70% imports are up to $100, and it is safe to assume that most shoppers stop at $75 in order to enjoy full tax exemptions.

Introducing new websites

Alongside the large, well known websites, such as eBay, Amazon, Ali Express, Next, and Asos, purchases are rising on sites such as Borderfree, which offers products from websites abroad, China’s LightInTheBox, French fashion website La Redoute, and more.

“The Liverpool Football Club website had 100% growth in Israeli sales, this perhaps indicates something about the widespread nature of the phenomenon,” says DHL Express Israel Managing Director Yair Bitton.

The Chinese rule the web

Many of the sellers on eBay are Chinese merchants, the majority of whom receive excellent feedback, which, combined with cheap prices, encourage purchases. The Israel Postal Company also says that the number of packages arriving from Ali Express is on the rise, and the dozens of posts each day on Facebook Pages such e-ma-bey, where mothers share reviews and successful purchases with photos and links corroborate this.

Other websites mentioned on the Facebook Page include BuyinCoins, which sells countless gadgets for the home, fashion items, and electronics, iHerb, which sells vitamins and baby products, and more.

When buying from Chinese websites, when it’s a matter of small items that cost only a few dollars, it seems expectations are different. “I bought an iPhone 6 the day it went on sale in Israel, and I immediately ordered 5 cases from a Chinese website for a ridiculously low price. A month later, the cases still hadn’t arrived, and the truth is, I’m not surprised,” said a regular online shopper.

Another shopper said, “I spent $10 on a dress, and it’s a gamble. If, ultimately, it arrives and it’s poor quality, or it’s the wrong size, I won’t be disappointed, it’s like a trial fee for ordering from China.”

We have what to learn

“The Israeli websites’ attempts to mimic the American and Chinese sales is nice, but the price difference is still large,” says BUY2USA CEO Yaron Ben Eli, “Most personal import sites miss the point: it’s not enough for a website to look good, and to market it on Google, and a competitive price is not enough. Most of the Israeli sites neglect matters of logistics and customer service.”

Ben Eli says, “I deliver a product within 2-3 days from the US, and in Israel, delivery takes at least a week. In Israel, customer service is not important enough. At Amazon, for example, they understood that in order for the website to be a huge success, emphasis must be placed on logistics, and less on marketing: It is a relatively simple website, without gimmicks, and the investment is in the supply chain. Not just price drives Israelis to order from abroad.”

And what about warranties for electronics?

“For the most part, you can return defective items, and most US suppliers will send a new product. Not long ago we brought a customer in Israel a 65 inch TV, and when he opened the box, he found that the screen was broken. We returned the item, and he got a new one.”

What you need to know:

1. What taxes are there?

The tax calculation is best done in advance. The tax exemption is graduated: up to $75 is fully exempt from taxes; orders $75-$500 are exempt from customs duty (meches), but are subject to VAT charges (18%), and a purchase tax which varies depending on the product (the complete chart may be found on the Minsitry of Finance website). Orders over $500 are subject to customs duty, VAT, and purchase tax.

It is worth remembering that shipping charges are not included in the calculation: the calculation for tax exemption is based only on the cost of the items, excluding shipping; therefore, it is important that the invoice list shipping fees separately.

The Israeli website Kenli offers some useful information (in Hebrew).

2. Surprise charges

“Three areas that are growing in personal imports are mobile devices, nutritional supplements, and auto parts,” explains Bitton. “In these cases, permits from relevant government ministries are sometimes required (communications, health, transport), which adds another step to the supply chain.

“The reason for checking such packages has to do with the legality of the items. In the case of a mobile phone from an unfamiliar brand or an unfamiliar sender, the goal is to check that it doesn’t harm the frequencies, for example.

“Most of the packages are not checked, but when there are delays, they can involve additional fees, starting at NIS 25, and ranging up to NIS 200. This is why, particularly when importing such items, it is important to check the total cost in advance, and it’s not difficult: you call the couriers and ask based on the type of product, its value, and its origin, and with precise instructions for making out the invoice, we can say exactly how much one can expect to pay, down to a fraction of a shekel.

“Bitton warns against the common practice of forging the invoice price in order to evade fees. “Thousands of mobile devices arrive in Israel each month. In many cases, a price under $75 is listed. Customs officials catch 99% of such instances - on top of the embarrassment and, of course, payment of the tax in full, there are liable to be fees as well.

3. Compare prices

Bitton advises against rushing to make purchases without first comparing prices on Google, and checking prices at smaller online shops as well. “In many cases, less popular websites have the most worthwhile opportunities. When conducting market research, you can find crazy price differences - between the websites and the prices in Israel.”

Those who don’t want to wait for the free delivery that most websites offer and which can take many weeks, can order paid delivery via a courier company. However, it is sometimes cheaper to buy in Israel, so it’s advisable to include local shops in the comparison when conducting market research. If the price difference is less than 10%, it might not be worthwhile to order from overseas.

4. Pickup

The lines at the post office are liable to dampen the shopping experience, but there is a light at the end of the tunnel: under the Israel Postal Company restructuring plan, beginning in a few months, packages will be delivered to the recipient’s home, post offices will be open until 8:00pm (three days a week), automated distribution centers will be set up, and package distribution channels will be opened though a marketing network.

When buying from Israeli websites, another option is Boxit: electronic lockers for package pickup and return, which are scattered across the country. The package is available for pickup for 24 hours.

The North Face is lowering prices 10% to compete with online purchases

When the sport and outerwear brand The North Face announced that it is lowering prices in its five branches, it broadcast a subliminal message to Israeli consumers: ‘Good job, you did it.’

The North Face Israel Manager Ofer Yaar-On did not hesitate to explain what caused the company to reduce its prices: “Many customers walk into the store, look at the product, and check their smartphones inside the store to see how much the product costs overseas, based on the product ID number.”

Yaar-On says that many consumers left the store angry when they discovered they could pay less if they ordered from abroad.

Now, he says, prices are similar in Israel to Europe: “There may still be discrepancies, but many items are cheaper here. In the US, the prices are 20% lower, but that’s the way it is for all the leading brands, also Adidas and Nike.”

The question that begs asking is why, if this is the case, did we pay so much for the company’s products until now. Yaar-On says that even before the prices we lowered, they were not much higher here than in Europe, and the difference was about 5%: “Now, we started to reduce our profitability. You must remember that there are import duties here, freight feed, and high rents in malls. There is no mall in Europe that charges rent as high as Israel.”

The Israeli consumer can now hope that this is the first of many leading brands to lower prices.

Published by Globes [online], Israel business news - www.globes-online.com - on December 1, 2014

©Copyright of Globes Publisher Itonut (1983) Ltd. 2014

Internet purchases
Internet purchases
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