Market-place economics

Beit Shemesh residents save on groceries as supermarkets compete for customers.

By SAM SOKOL
Price wars (photo credit: sam sokol)
Price wars
(photo credit: sam sokol)
Grocery shopping has been, for the most part, a sore point for Western immigrants living in Beit Shemesh. Israeli chains such as Yesh and Zol B’Shefa have provided what many Americans, Canadians, British and South African Israelis considered to be sub-par service and excessive prices. Meanwhile, supermarkets created to cater to the “Anglo” crowd, such as Best Market, have given customers a positive overall experience, but at the cost of hundreds of shekels added to monthly food bills.
However, the arrival in Beit Shemesh of a store belonging to the Osher Ad franchise has signaled the beginning of a price war and, with the promise of a new Rami Levi market opening within the next six months, local residents are finally seeing a drop in food prices.
The two main supermarkets in the largely Anglo suburb of Ramat Beit Shemesh Alef are the aforementioned Yesh and Zol B’Shefa. Both mostly cater to an ultra-Orthodox crowd and carry items bearing the ultra-strict kosher certification of the anti-Zionist Eda Haredit.
Prices have largely remained stagnant at the two shops, and the level of customer service has caused resentment among many of the new immigrants who gravitate toward the neighborhood.
In Israeli supermarkets, there is often outrage aimed at cashiers who allow their friends to enter the express lane with full carts and at the frequent occurrence of employees delaying customers from completing their purchases while they chat with whoever is currently at the head of the line.
On one occasion at Zol B’Shefa, a customer recounts, several locals had to physically restrain the store’s security guard as he tried to assault someone with a beer bottle. Despite customer complaints, the guard continues to be employed at the store.
Seeking to provide an alternative to the dismal customer service of the Israeli chains, local Anglo entrepreneurs established Best Market, but while the new supermarket provided a clean, well-lit and pleasant experience, the store’s high prices have kept many away. Despite providing amenities such as imported American products and baggers, the store now stands nearly empty on any given Friday, generally the busiest shopping day of the week.
According to University of Haifa economist and free-market evangelist Steven Plaut, Israel’s high food prices can be attributed more to “the lack of competition at the production level for various supermarket products” than to any lack of competition on the retail level. “It is a bit like gasoline – there is a lot of competition among gas stations but none at all in producing and refining gasoline,” he says.
However, despite this, the opening of Osher Ad has lowered prices immensely, say local residents, with some claiming savings of as much as several hundred shekels a week. The lower price tags, shaving already thin profit margins, have forced shops like Yesh to lower their prices as well, although customer service does not seem to have improved.
“I think competition is great for the consumer,” says local resident and blogger Rafi Goldmeier. “It forces the supermarkets to compete by providing better service, better pricing and a better shopping experience in other forms as well.”
“I am saving money and I attribute it to the competitive pricing in place,” he says. “The supermarkets had little competition before and prices were high.
With Osher Ad joining the local marketplace, they have changed the game. Even if their prices are not lower across the board, they have still had a major effect on the market – they provide a variety not previously seen in a local supermarket, wide aisles and high ceilings, clean floors, numerous checkout lanes that move at reasonable speeds, and of course many of the items are priced lower.”
There has been something of a religious angle to this story as well, naturally.
Everything in Beit Shemesh seems to come down to religion at some point.
When Osher Ad first opened in the predominantly secular neighborhood of Migdal Hamayim, the management placed a rack of garments and a sign outside the entrance, calling on patrons to cover themselves before entering the store so as not to offend haredi sensibilities.
Local residents were aghast that they should be made to comply with ultra- Orthodox modesty standards in their own non-religious neighborhood, and Osher Ad eventually relented. This led to several local rabbis placing a “herem,” or religious ban, on the store.
Herem notwithstanding, the store is jam-packed on Fridays and many customers can be seen wearing blacks hats and coats, their sidelocks flapping in the breeze from the industrial air-conditioning.
Other local stores have begun lowering their prices as well. A source at Shufersal, which services the residents of Beit Shemesh proper, told Globes that “We won’t let ourselves become uncompetitive.
Whatever they do, we will do too.
We have a working mechanism. There is no way that we will be caught dearer. On the contrary, we can only be caught being cheaper.”
Yishai, another local, says that the price wars have benefited him immensely, with savings of up to NIS 1,500 monthly now that he has begun shopping at Shufersal rather than at Best Market.
“When Osher Ad opened up, Shufersal dropped all its prices even further – we started saving a couple hundred shekels more. I estimate that with my family of five, I save about NIS 1,000 to NIS 1,500 a month shopping at Shufersal versus Best Market; even more in the new price war.
“I have heard that we have two Rami Levis coming soon,” Yishai says. “That should make for even more competition.”
Not all of his neighbors are happy about the price wars and competition that the new supermarkets are bringing, however.
“There is a general feeling that some small businesses are ripping us off,” he explains. “It is a sensitive subject. After posting lower prices on the Beit Shemesh community list I got angry emails from people who said that I should pay the extra NIS 1,500 a month to shop at a small business and not a chain. I don’t see why; chains employ lots of local people as well.”
The savings are real and the increasing competition between supermarkets is very good for the consumer, but with low profit margins there is a limit to how low prices can drop and be sustained. At the end of the day, economist Plaut believes, Israelis will have to demand an end to the government’s policy, which he claims has been “to suppress competition in food production to as great an extent as possible, to prohibit imports of competing products in most food markets and to endeavor to make food prices as high as possible.” Israel must stop pandering to the “farm lobby,” he says.
While that may be the long-term fix, in the short term, many Beit Shemesh residents are at least happy that they can save a few hundred shekels a month, especially in this economy.