'Coronavirus forced Israelis to adopt e-commerce faster'

The pandemic is said to have accelerated the global shift towards online shopping by about two years.

(L-R) Namogoo co-founders Chemi Katz and Ohad Greenshpan. (photo credit: YORAM RESHEF)
(L-R) Namogoo co-founders Chemi Katz and Ohad Greenshpan.
(photo credit: YORAM RESHEF)
Coronavirus forced Israel's e-commerce environment to mature at a much faster pace in the past year, and digital sales are poised for greater growth in 2021, Namogoo CEO Chemi Katz said in an interview Tuesday.
Israel was initially slow to adopt e-commerce in past years for two main reasons, Katz said. Firstly, Israelis like to go to stores and touch what they are buying, and there was a sense that Israel's small size made online shopping unnecessary. Secondly, and more importantly, the challenges of shipping and logistics were seen as insurmountable, in no small measure due to unreliable postal service.
But coronavirus changed all that. Shopping online was often the only way to buy groceries and products while under lockdown, and businesses were forced to rethink delivery systems and make them work. "Suddenly, a lot of businesses that hadn't invested in developing e-commerce understood that they have no choice," Katz said.
Ultimately, the pandemic accelerated the global shift towards online shopping by about two years, as sales figures reached levels last year that weren't expected until 2022, Namogoo said in an e-commerce report it produced in conjunction with Astound Commerce. Online sales will reach 14.4% of all US retail spending in 2021 and 19.2% by 2024, the report said.
For Israelis, finding new approaches to delivery has been key to the development of e-commerce. "The postal service hasn't been able to handle the volume of packages it receives. It was supposed to be reformed in 2019, either by privatizing it or by granting it more independence, but that was postponed," Katz said. "So most retailers work with private delivery companies. The pandemic helped the industry of private delivery companies grow a lot."
Amazon's entry into the Israeli market toward the end of 2019 was a turning point for e-commerce here. The online retail giant set off a sort of e-commerce revolution when it started offering free shipping to Israel for orders above $49 that November. Even Amazon was surprised how much volume was sold, as Israelis seemed to change their buying habits overnight. Amazon ultimately canceled that offer in March when the world started closing borders due to pandemic's spread.
"Besides the pandemic, there were three factors that were working against Amazon here," Katz said. "Israel's customs offices didn't know how to handle the huge volume of packages coming in, Amazon didn't have a local logistics center for storing and shipping products, and delivery was decent but inconsistent."
For the future, Amazon is reportedly interested in shipping products to Israel from Dubai, and there are efforts to improve the other bottlenecks, Katz noted.
Meanwhile, another interesting trend in Israel has been the rise of virtual delivery services in the US. "Let's say you want to order from a store abroad that doesn't offer deliveries to Israel. You can have your package sent to an American mailing address through a service like ushops, which will then ship it to Israel," Katz noted. There are also services like BorderFree that provide international transactions and shipping for many large retailers. "We are talking about a market that is much more mature and ready for e-commerce growth," he said.
Namogoo, based in Herzliya with offices in London and the US, offers solutions that help e-commerce sites generate more sales at higher margins. The company helped its 90 clients sell an additional $2 billion in products last year, Katz said.