Department store Hamashbir 365 Holdings Ltd. (TASE:MSAH) is teaming with e-commerce giant eBay Inc. (Nasdaq: EBAY), in its first collaboration with an Israeli retailer. Hamashbir will set up a website by the end of the year with eBay, for the sale of Hamashbir products, from perfumes and cosmetics through household goods, to online shoppers worldwide. This is Hamashbir's first online venture.
Hamashbir CEO Assaf Ben-Dov told "Globes" that the company was also planning to collaborate with a leading Israeli e-commerce site to sell goods to Israeli consumers. "We studied the market for almost two years to see which model suited us. I was asked why I hadn’t entered the market, and with all honesty, I said that I wasn’t ready. The entry barrier isn't high. It's easy to build a site, and the logistics can rely on outsourcing. The real challenge is to understand your edge and where you want to be online. It's obvious to me that we must be there; it's an important growth engine."
"Globes": Do you intend to be an important market player?
Ben-Dov: "To be online as a slogan isn't the objective. The objective is for the online store to generate 5-7% of turnover, at a minimum. Not in the first year, but maybe in the first years."
How do you see the current domestic market?
"The market is very small and undeveloped, despite all the talk about growth. There are only two key markets: electrical goods and tourism. They have a common denominator: low gross profits, and easy and reliable comparison at the players' level. There are also retail chains, as well as Castro Model Ltd. (TASE: CAST), Delta Galil Industries Ltd. (Pink Sheet: DELTY; TASE: DELT), and S.wear (the Hanes franchisee), but, bottom line, the domestic market is small."
Will online sales hurt store sales?
"In general, yes, because the domestic market is small. It may not be saturated, but it's quite full. There are no new clienteles who have to go the pharmacy. In our case, I believe that there will be less cannibalization because e-commerce can bring a clientele that did not generally shop at Hamashbir, such as young people. Hamashbir has 2.5 million visitors a month, including repeat visitors, so there is room to grow."
What will the role of price play in e-commerce?
"One of the criticisms of contemporary websites, including those of retail chains, is the lack of price differentiation, and that it isn't cheaper to shop online. People once talked about the Internet as an experience, a service, no need to leave home. But what drives people online is price. The consumer isn't very excited about sitting at the computer at home and placing orders. He wants a cheaper price than at the store. That is why our platform will have competitive prices."
The price factor is the tie between Hamashbir and eBay. "They approached us and chose us as a partner, because we have a price advantage. Perfume prices at Hamashbir are cheaper than overseas. That is why there is potential to sell outside Israel," said Ben-Dov.
Ben-Dov nonetheless ended on a down note, saying, "The online market has not yet found the right platform to make money. In my opinion, retailers are not yet profiting there. We hope this picture will change."
Published by Globes [online], Israel business news - www.globes-online.com - on July 10, 2013
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