For a very long time now, fashion chains have been attacking the government for exempting VAT from the purchase of products on sites abroad up to the amount of $ 75, and threatening that in addition to the hundreds of thousands of Israelis returning to fly and shop abroad, this will cause small and medium-sized fashion chains to collapse.
Despite the allegations of a difficult situation, the Brill Group published its reports for 2021 yesterday (Wednesday), presenting an all-time record profit of NIS 49 million, which even includes the closure period of the beginning of 2021. The group manufactures, imports, purchases and markets footwear , Clothing and fashion accessories. It markets over 40 brands, including Lee Cooper, Nine West, Nautica, Timberland and more.
"People have a tendency to forget what happened," emphasizes Shachar Turgeman, chairman of the Association of Commercial and Fashion Chains and chairman of Brill. In 2021, the group did not receive a shekel of assistance from the state. I explain the good results of the year in that in 2021 there were almost no closures, and the fact that they could not travel abroad helped us achieve these results, because a third of consumption in fashion is outside Israel.
In addition, we did a lot of internal operations and the corona forced us to become more efficient.
"If the number of flights returns to the same level as in 2019, and it seems that this will be the case, it will have an effect, as stated, on the small and medium-sized networks."
Shahar Turgeman, chairman of the Brill Group, Photo: Ofer Hagiov
Turgeman adds: "I want to tell the government 'wake up.'
"Complaining about centralization in the food market - if the government does not address the regulatory distortion of the VAT exemption, it will find the fashion market more centralized in five to seven years."
Turgeman claims that the fashion market today is very competitive: "Proof of this is that according to the Central Bureau of Statistics, prices of clothing and footwear products fell by 23.7% in January 2022 compared to January 2016, while the consumer price index rose by 4.5%. It is a quarter cheaper than in 2016. This means that the market is competitive and there is fierce competition.In addition, there was a 12% cap abolition that helped lower the price.
"In recent years there are many fashion chains that have gone bankrupt, like Discreet, Honigman, Zebra and it suits me, these are medium chains. We are the big ones, and with us also Fox, Castro, and Delta, we have survived in every situation including Corona, and even more. Who can not cope when there are events Constituents? Small and medium-sized chains.They collapse and are bought by big players or disappear.
Nine West store in Dizengoff Center, Photo: Assaf Lev
"From 2018, we see the phenomenon of small and medium-sized chains that have fallen into terrible distress or are going bankrupt. It is difficult for them with the VAT exemption that makes them names.
"When you add internal events like a precarious security situation, open skies and people flying abroad to buy, it will worsen their situation. Every year we see some players coming out of the market, which will become less competitive."
You say the market is not centralized, but there are still a number of groups that dominate the market like Fox and Castro.
"It is true that there are three or four players, but the share of all of them together is 30% and that is still not control.
The regulation here is stupid. The State of Israel gives the Israeli citizen a 17% discount voucher, provided he exercises it abroad.
If you buy on a trade site in Israel, it must be subject to VAT, and the same item abroad is exempt.
The state encourages you to shop abroad.
And there are still large price differences in Israel.
"Everyone says there are gaps of 50% and that is not true, but if there is a big gap it should not be artificially increased. The only country in the OECD that is left with the VAT exemption is the State of Israel.
We got to talk to three finance ministers and also to the senior officials in the current Ministry of Finance and their predecessors.
There is a consensus among senior officials that this is a terrible distortion and an injustice done to business owners in Israel.
"Just because it is an unpopular act, it is difficult to carry it out."
New branch of Lee Cooper + Lee Cooper Kids, Photo: Assaf Levy
Against the background of price increases in the areas of consumption and import costs, will prices rise?
"My assessment is that in my group, the Brill Group, prices will not rise this year despite the terrible rise in transportation prices to the country, and despite the rise in raw materials and fuel."
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