Amazon in Israel: More an opportunity than threat

Amazon Photo: Shutterstock

The coming of the US retail giant will spur Israeli companies to go online says Webpals CEO Inbal Lavi.

As we follow Amazon Go, the world's first computerized store in Seattle, Amazon is also planning its entry into the Israeli market. The company is looking for huge warehouses in Israel for its operations, while also mulling stopping to work with the Israel Postal Company.

Amazon long ago expanded beyond the borders of the US. Through acquisitions and Amazon Prime, it has become a global player expanding into Asia and other markets. When Amazon opens its logistics center in Israel, it will be in addition to 11 other countries in which it is active, including the US, Germany, China, Japan, and India.

While the largest retailers were local companies up until a few years ago, Amazon is now taking over the market, among other things through acquisitions (last summer, Amazon acquired souq.com in order to penetrate the Middle East on the one hand and US supermarket chain Whole Foods on the other). Sometimes, Amazon even drives them out of the market.

Amazon's gains are one of the reasons why thousands of branches of large retail networks in the US, such as Kmart, Sears, Macy's, and others, are closing down, and entire shopping malls are closing down, too. Reports in Israel of Amazon's plans here are pushing down the value of Israeli shopping mall companies.

Beyond the effect on the Israeli labor market (some are accusing Amazon of raising the price of workers in the high-tech industry), Amazon's entry into the Israeli market can have important effects on Israeli businesses. Many companies are being forced to prepare for the Amazon tsunami and to get ready as best as they can for tough competition in the digital sphere. With all of the Israeli retailers' fears, it could be a huge opportunity.

For example, retail companies that have not yet undergone a digital transformation are getting an option to do it with Amazon, which provides all of the services, from inventory management to advertising to clearance. Companies must think about the process of switching to online marketing, which requires substantial planning, including the monitoring stage, building a marketing strategy, and different payment models.

Retail companies that get most of their revenue offline will become irrelevant, and will not survive. On the other hand, companies that invest now in enhancing their online presence and in an advanced digital strategy will have a big advantage. Companies should know how to meet users at many interface points on the Internet, and be able to present them with a relevant product bearing the right message.

As trivial as all of this sounds, it can happen only in companies backed with technology and based on sophisticated artificial intelligence and statistical models. To highlight the extent of the gap, most the large retail companies in Israel today are still investing most of their advertising budgets in old media and in a physical presence in shopping malls, and do not have websites or applications that can be used to shop. They are therefore unready for a competitor like Amazon that can bring goods selected with a click to your doorstep within two hours, and with an absolute commitment to returns, at a competitive price.

The author is CEO of the Webpals group, which among other things develops websites and tools for managing campaigns.

Published by Globes [online], Israel Business News - www.globes-online.com - on March 22, 2018

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

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Amazon Photo: Shutterstock
Amazon Photo: Shutterstock
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