Why Shufersal's haredi discount website pushed Israelis' buttons

The Shufersal scandal reflects not a political power struggle, but an economic one.

 Shufersal Deal branch in Jerusalem, May 16, 2012 (photo credit: URI LENZ/FLASH 90)
Shufersal Deal branch in Jerusalem, May 16, 2012
(photo credit: URI LENZ/FLASH 90)

The revelation last week that Israel’s largest supermarket chain, Shufersal, was offering a website with discounted prices for haredi (ultra-Orthodox) shoppers, touched a nerve in Israeli society. With high consumer prices among the country’s most contentious social issues, the idea that one segment of society would receive preferential treatment from one of the nation’s most powerful corporations begs new questions about some of Israel’s oldest challenges.

N12’s “Tochnit Chisachon” (Saving Plan) program revealed that Yashir L’Mehadrin, a site run by Shufersal targeted at the ultra-Orthodox community, was offering products for cheaper than the chain’s main website. Prices for as many as 2,000 identical products were found to be 10%-20% cheaper on Yashir L’Mehadrin, and in some cases, the difference was even greater. The price of frozen salmon went from NIS 64.90 on the mainstream site to NIS 34.90 on the mehadrin site, and the price of a jelly donut for Hanukkah fell from NIS 5.90 to NIS 2.90.

Shufersal responded to the outcry by noting that while Yashir L’Mehadrin was marketed very quietly within haredi circles, it was available to be used by anyone. However, it was too late. Following the investigation, consumer organizations have called for boycotts of Shufersal and filed class-action suits against it, charging that the site was in violation of anti-discrimination and consumer protection laws. By the weekend, Shufersal gave in to the public pressure and suspended the site.

The scandal came out at an extremely sensitive time for Israel’s economy. A new national budget was approved last week for the first time in 3.5 years, with a wide-ranging list of reforms promising to bring down the cost of living by making it cheaper and easier to import goods from abroad. However, skeptical shoppers are doubtful as to whether the savings for importers will translate into lower prices in the stores.

Meanwhile, supply chain delays and other pandemic-related factors have led food prices to start creeping up significantly for the first time in a decade. Ever since a rise in cottage cheese prices spiraled into the 2011 social-justice protests that brought hundreds of thousands of angry Israelis to the streets, grocery chains have been fearful that the social cost of raising prices would not be worth it.

A WOMAN pushes children in a shopping cart in front of a Shufersal ‘Sheli’ in Ma’aleh Adumim (credit: AMMAR AWAD/REUTERS)A WOMAN pushes children in a shopping cart in front of a Shufersal ‘Sheli’ in Ma’aleh Adumim (credit: AMMAR AWAD/REUTERS)

Shortly before the Yashir L’Mehadrin story broke, Shufersal CEO Itzhak Aberkohen said in an interview in Hebrew that in light of global shortages, there was no way to avoid raising prices. Now that it is clear that most goods can be sold for significantly cheaper when needed, many Israelis feel like they have been treated like friars (suckers).

The case could be made that Shufersal was wise to target haredi shoppers with their own grocery site. The haredi population has been among the hardest hit by the coronavirus pandemic, and it has been slow to adopt shopping for groceries online. Israel already has a number of discount grocery chains focused on ultra-Orthodox neighborhoods, including Shufersal’s own Yesh Chessed chain.

But preferential treatment for the haredi community has been a sore topic for secular – and many religious – Israelis for ages. Secular organizations took to calling the higher prices on Shufersal’s main site a “tax” on the secular, while some on the other side complained that taking the discounted site down was akin to “punishing” the religious and hindering the development of further haredi stores online.

While issues like exemptions for the general Ultra-Orthodox population from serving in the IDF and participating in the workforce have been on the political agenda since the state was founded, what is interesting about the Yashir L’Mehadrin episode is that it reflects not a political power struggle, but an economic one.

“This example just highlights the large and fast-growing – demographically – market and political power of the haredim,” said Prof. Dan Ben-David, president of the Shoresh Institution for Socioeconomic Research and an economist at Tel Aviv University. “It’s not new, it’s just increasing at an exponential pace.”

“The Israeli airline El Al used to fly on Shabbat until the 1970s,” Ben-David said. Today, not only are they closed on Shabbat, but even Arkia is now considering shutting down on that day as well. These companies are more fearful of haredi market power than they are of being closed one-seventh of the time in a cutthroat airline industry that takes no prisoners.”

“The Shufersal issue is one of cross-subsidization,” Ben-David continued. “Specifically, the chain enables the haredim to buy at substantially lower prices, while all their other customers pay more to cover these expenses. If non-haredim wake up and realize that they are still the majority, with that kind of market power, then (a) their prices will fall, and (b) the discounts given to haredim will have to decline as well.”

“With the haredi share in the total Israeli population doubling in every subsequent generation, the Shufersal story is only a preview of things to come,” Ben-David concluded.