Israeli consumers take advantage of weak dollar

The benefit isn't as pronounced for local suppliers and chains, because they first must sell off old stock bought at a higher dollar rate.

October 12, 2006 09:02
3 minute read.


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Israelis are snapping up electronic goods priced in dollars at duty-free shops to take advantage of the weak currency but discounted prices on US import items are only very slowly, if at all, trickling down to the local end-consumer. "In recent weeks around the Jewish holidays, a lot of Israelis traveled to make up for lost summer holidays due to the war and to benefit from the weak US currency," Adi Ernst, deputy general manager of Sakal Duty-Free shops told The Jerusalem Post. "Many Israelis, who most likely didn't plan to buy bigger electrical items such as computers or laptops, are now buying as the discount they get when converting the dollar price of duty-free goods into shekels is imminent and convincing." The benefit isn't as pronounced for local suppliers and electronics chains, Ernst explained, because as the dollar moves down, it takes them at least a month before they can start lowering prices because they first must sell off old stock that was bought on a higher dollar rate. "We don't have this issue and, as a result of this situation, we saw an increase of 30 percent in our expected sales for the holiday season," he said. "Last Thursday, we experienced one of the busiest days in a long time, while the most popular items bought were digital cameras and laptops." Electronic suppliers in Israel import many of their appliances from abroad and these goods often are priced in dollars so they set prices for the public according to the price they paid - the lower the exchange rate of the foreign currency, the lower the price they set in shekel terms. This should mean the dollar's drop is good for consumers, which in turn should increase sales, but it doesn't always work out that way. "In most cases, the potential benefit in price from the drop in the dollar exchange rate does not end up in the pockets of the end-consumer but lands somewhere in the supplier's chain," said Attorney Yoram Levinson of the Consumer Protection Authority at the Histadrut. "However, when the US currency shoots up, importers and suppliers are quick to raise consumer prices, similar to the behavior of value-added tax changes either upwards or downwards." The Shekem Electric chain, which evaluates its prices weekly, said it had just started this week to lower prices of dollar imported goods by 5% to 6%. "White goods such as refrigerators, freezers and washing machines are being imported from Europe and thus the dollar rate will have no influence on the pricing," said Dudi Mantin, general manager of Shekem Electric. "[However,] prices of other electric appliances such as plasma and LCD screens, computers and digital cameras imported in dollar terms from China or Korea have now started to come down by 5%." Mantin added that the timing of the Succot holiday week and the drop in the dollar rate together helped balloon sales by 30% to 40%. Meanwhile, car dealerships, which are some of Israel's biggest importers, have not yet dropped their prices to adjust for the dive in the US currency. "At this time, importers are not cutting prices," said Levi Itzhak, editor of the Car Price-List. "Instead they are offering more convenient conditions such as a larger spread of installments, extended warranty periods, etc." Itzhak added though that if the dollar continued to slide, the prices of new cars would be poised to come down. In the car rental market, Israelis booking for travel abroad from Avis are getting an attractive deal as it is the only car rental agency that always quotes in US dollars, whether making a booking for Europe or the US.

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