Amazon Invades Israel

December 9, 2019

4 min read

Amazon may succeed doing something in mere months that Israel’s Arab neighbors have not done in decades; invading the entire country. Free shipping and no taxes are their weapons. Unlike decades of war and terror to which Israel has been subjected, and which most Israelis do military service to defend the country against, in this case it’s the same Israelis who are opening the door to this takeover.

Then again, what’s bad about free shipping and no tax? Its not like its driving Israel into the sea amid a bloodbath that the Arabs have threatened since the 1940s. Heck, even Israel’s tax authorities are part of it.

The confluence of opportunities may be too good to be true. Or is it? Amazon is offering free shipping on orders over $49 which is not hard to do given the vast quantity of products that they are known for. Unlike the old days when packages being shipped to Israel, even birthday and wedding gifts, had to have a customs form and still could have taxes assessed, today the tax authorities are waiving tax on orders under $75. No tax in Israel is no little thing. Virtually every good or service has a 17% VAT (value) added. Saving 17% alone on such mundane products as coffee beans, garbage bags, diapers, pillows, contact lens solution, granola bars and more will add up quickly.

So, Israelis are lining up virtually to find the sweet spot between $49 and $75. If we could order everything that way, we probably would. However, while I am not an economist, there are things that don’t add up.

In not charging tax, Israel loses tax revenue on a growing volume of basic consumer items sold in grocery stores, malls, and mom and pop markets that are still prevalent. If that happens, look to Israel to consider reversing the no tax deal, or any jobs that might be added with Amazon testing the waters to open in Israel will be lost in businesses that are forced to lay off staff, or close.

It’s understood that Amazon is just luring us in with free shipping for now to test the market and see what we want, and to get us hooked on the ease of their model. When free shipping ends, will Amazon fade into the graveyard of American imports that didn’t make it like Starbucks, and Dunkin Donuts?

Then again, most people don’t ask “is it good for me” or “what will be the consequence” or “how much will this really cost me” when they are getting addicted to any substance or habit? Daniel (not his real name) confessed to an Amazon addiction but justified it and projected it will get worse. “When (Americans) move to Israel they are forced to give up some creature comforts that they were accustomed to in the old country. The trade-off is well worth it, but items that we once took for granted were magically transformed into luxury items . . . and oppressively priced. Amazon’s free shipping has essentially erased this downside of moving to Israel.”

An overriding question is whether it is really easier. Of course, shopping online is easier than going to a mall or store and finding parking, or needing a 5- or 10-shekel coin to use a grocery cart. Israel has a unique challenge compared to the US where Amazon packages are not delivered to one’s front door directly, but to the post office. Post offices in Israel are the unique place where you can buy stamps, and toys and phone plans. You can send a package while paying your car registration or a parking ticket. There’s very little you can’t do in a post office.

As lines extend out the door in smaller branches, some are asking if this is worth it. Post offices are challenged to keep up with the volume and if that continues, may find themselves in a situation that the answer is no. Service will drop. Customers will become more frustrated. Boxes will pile up in spaces that were intended for letters. To keep up just with the volume, some may have to hire extra staff, an expense not calculated into the Amazon invasion.

Returns are also complicated and expensive. My wife ordered the wrong phone case by mistake. Amazon is happy to take it back, score a point for customer service which is defiantly lacking, and which you can’t order in a box with a smiley face. But in order to return it we were told we had to bring it to Airport City, an hour away. Just the cost of gas (which Amazon does not sell for less) makes it not worth it.

Another American import is Black Friday which used to be American Week. Stores would import American products as a special to get people in the door for things they couldn’t get elsewhere. Now, its All American, all the time. That’s certainly a good thing for Israel in that not only is Amazon not boycotting Israel, but they are bringing in products from countless companies that now access the Israeli market.

Another potential economic impact is in air travel. What? Yes, even air travel can be impacted because many Israelis plan trips overseas around shopping for clothes and other items found elsewhere in greater variety, better quality and for less money, there will be less incentive to travel to places where shopping is an attraction, if at all. Israelis will rationalize that its cheaper to bring the kids and shop like crazy because the savings overseas will compensate for the savings on not shopping, and paying 17% tax, at home.

I’m not losing sleep for the airlines which make huge profits in overcrowded planes riding the wave of record tourism. But for an average traveler, there’s a limit how much you can fit into a 50lb bag. Now, we can stay at home because we can shop from home.

Time will tell what this does for taxes, competition, convenience, and more. Now, its time to make a sandwich with my new Skippy creamy natural peanut butter and Smuckers concord grape jelly. Oh, and I think we are running low on ziplock bags. A-M-A-Z…….

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