People line up outside a Walmart store.
(photo credit: CARLO ALLEGRI/REUTERS)
First Ikea. Then Amazon. Now Walmart?
Prime Minister Benjamin Netanyahu met with a senior Walmart executive at the World Economic Forum in Davos, Switzerland, last week and talked about the possibility of the low-cost retail giant opening a branch in Israel.
Netanyahu and Walmart’s John Furner discussed whether Walmart – the world’s largest retailer – would invest in or acquire different Israeli technologies, and the prime minister said he wanted to help the company set up shop.
“We made it clear that we are ready to ease regulatory burdens wherever possible to make the market more accessible to them,” said Avi Simhon, an economic adviser to Netanyahu, as quoted by the Prime Minister’s Office. “The door to Netanyahu’s office is open.”
A spokesman for Walmart, Kevin Gardner, acknowledged the news to The Jerusalem Post but declined to specify what transpired in the meeting. “At the World Economic Forum, we meet with many global leaders to discuss a variety of topics, but we don’t comment on the substance of those discussions,” he said.
If Walmart were to open up a megastore in Israel, the company would have two options – either purchasing an existing retailer and grocer or setting up a completely new store. The first scenario would only take a few weeks for the store to open; the second would take several months.
A number of retail industry analysts sounded skeptical about the likelihood of the American giant opening in Israel, saying Walmart could succeed only if another big retailer went bankrupt.
“I don’t believe that Walmart will eventually enter the Israeli market,” said Dorin Palas, an analyst from I.B.I. Investment House. “The Israeli market is a very competitive one, with lots of competitors. There is no space for another player and the profit margins are very low, around two percent.”
Even if Netanyahu were able to grant regulatory exemptions to Walmart, local players would legally be entitled to them too, Palas added. Another stumbling block for the company could be the need to obtain kosher certification.
While Walmart’s competitive prices could provide savings for ordinary consumers, the big-box store could force wages down in the retail industry. And Walmart’s anti-union policies could pose a challenge to the Histadrut labor federation.
“I think the impact of Walmart should be significant,” said Alex Zabezhinsky, chief economist at Meitav Dash. “Mostly in general retail, the prices in Israel compared to the prices in Amazon US – a comparison gauge – are much higher. So Walmart’s entrance would [be] big competition [for] local retailers. And I think some of them will struggle to continue... to work.”
The government has encouraged foreign firms to set up shop here, and some 300 multinational corporations maintain local operations.
In November, reports emerged that Amazon is preparing to rent a 25,000 sq. m. warehouse near central Modi’in for shipping goods in Israel. Other firms such as Booking.com and Alibaba recently opened operations here.
With Amazon and now Walmart looking at the local market, the clamor for multinational corporations and chain stores to come to Israel could strike fear in small shopkeepers.
Aside from talking to the Walmart executive, Netanyahu also reportedly met with the CEOs of a number of east Asian companies, including Mitsubishi, at Davos.
Other issues facing multinational corporations when they enter the Israeli market include both the lingering Arab League boycott and pressure from the Boycott, Divestment and Sanctions movement.
Based in Bentonville, Arkansas, Walmart is trying to shift more to e-commerce and away from its brick-and-mortar roots. That’s where Israeli technologies can help the gigantic retailer.
The company operates some 11,700 stores in 28 countries, employing some 2.3 million people. There are no current operations in Israel.
“If Walmart would have wanted to enter the Israeli market, it had years and years to have done it,” Palas said, “so I can’t see why it would do it now.”