In a conversation with eight of the owners and CEOs of the largest retail chains in Israel, they talk about their attitude to online shopping, the most sought-after products - and the difficulty in recruiting employees
Shopping at the supermarket in Ashdod, in September
Photography:
Liron Moldovan
The history of revolutions shows that they were not born as such, but were defined as such in retrospect.
Journalists, commentators, and historians have pointed to processes that were defined, often years after they took place, as revolutionary.
When we convened the eight major food retailers to the Zoom panel on the "situation", we were sure they would tell us about the consumer revolution in the field - the rapid transition to online food shopping.
But they still do not see it that way.
For them, this is a marginal transition of buyers from supermarkets to the chain - far from being a revolution.
It was a productive and creative brainstorming.
In-depth consumer and retail discussion.
No cash registers and no club member.
Online profitability is low
Michael Luboszic is the CEO of Bitan Wines, which in the previous consumer supplements of "Israel Today" has not boasted of pursuing technologies and coupons on the site. Accordingly, he says: "I do not think the online market will grow very much in the near future.
The transition to online sales requires huge investments, and who will fund it?
The profit of the food chains is 3% -2%, so they can not finance this transition without incurring costs on the consumer.
It's hard to be cheap and make money online. "
David Laron, VP of Operations and Supply Chain at Shufersal, agrees with Luboshitz regarding the investment - but the large food chain in Israel has been reaping the benefits for a long time. "We have increased our market share mainly thanks to the online.
We invest huge sums in orders from automated centers - investments of more than half a billion shekels.
The first center will open during 2021 in Kadima.
Our market share is growing and a significant part of it is online activity. "
Eyal Ravid, the director and owner of the Victory chain, is also not convinced of the viability of these investments.
This is despite the fact that it continues to record unprecedented jumps in sales and profits over the past year.
"Looking at the Shufersal reports, I do not see that it has increased the number of its customers in total," he explains. "It seems that its customers from the supermarkets have just migrated online."
Despite this, Ravid admits the drastic increase in food purchases online: "Last year the online market was 3.5% and during the crisis it jumped twice to 7%. But still the market remains overwhelmingly in supermarkets."
According to him, the food market has not moved online anywhere in the world, but only on the margins.
"In the UK, online shopping accounts for 7.3% of the market, and in the US less than 10% even at the peak of its boom.
That's not the point, "he insists." The corona has accelerated the process, we have all jumped three years forward, but still the real retail market is on the floor (production floor; UFO). "
Victory did not make hysterical investments in online shopping, and still managed to double its online sales.
"We have doubled the online and it accounts for only 4% of our turnover compared to about 20% in Shufersal," says Ravid, and in fact implies that a larger investment, such as Shufersal's, is still not commercially justified.
"Solutions need to be given to shorten the buying time, such as a smart cart and pick-up," says Elad Harazi, vice president of trade and marketing at Yochananoff. A2Z, which controls Cust2Mate's smart carts. Yohannoff reserves the right to reach a 10% fully diluted holding in the company. This seems like an intermediate stage of the transition to online shopping.
There was one consensus among the eight owners-CEOs in the conversation: the purchase should be simplified, the customers' time spent in the physical store should be reduced.
Yossi Shalev, Tiv Ta'am's VP of marketing, sees the transition to online shopping as necessary, but he also acknowledges the problematic nature of the matter. "Online was a necessity but now it has become part of the strategy.
The problem is that profitability is lower and expenses are greater - collecting goods and shipping.
This fact creates a problem of profitability, "explains Shalev." The high costs of selling online are covered by the increase in the shopping basket in general. "
In doing so he points to the big problem of this transition, not just in food retail.
The online sale did not really turn it into a digital sale.
There are digital sales on Amazon, for example.
There are orders that are fed directly into the computerized warehouse, so the whole process does not depend on manpower.
This is a digital sale.
An intermediate stage can be the transfer of the order from the network to the logistics center (Marlog) of the network, but the transfer of an order to the branch and the collection of the products by the network employee are not really a digital sale.
Self-collection instead of delivery
Rami Levy is one of the people most identified with the direct contact with the customer.
He built himself on low prices and actually brought the client of the open markets into the air-conditioned super.
In his opinion, the networks were caught unprepared to attack the online.
"It is impossible to respond to a tenfold jump in sales, which was with the outbreak of the crisis. Nor to a four- or fivefold jump that characterized its continuation," he concludes.
When will it be possible?
"Once robotics enters the field, food sales on Internet marketing network sites will account for a quarter of each's overall share."
Meanwhile, he reports, "we've doubled online sales, and that's a much higher growth than we imagined."
Aviram Ganot is the CEO of Quick, a home shopping services company that was established as an online ordering company. Its first orders began to flow as early as 2017, but after the main company (Coca-Cola Israel) and Super Pharm invested in it, it launched its first campaign in 2019. With the Jewish band and gained about 100,000 customers.
Naturally, Ganot disagrees with all his panel members from the food chains.
"When we get back to routine we will find that the online has grown and the sales basket from the floor will not return to what it was."
He explains that the national average of online shopping does not indicate what is happening in bubbly Tel Aviv, for example.
"Online orders in Tel Aviv are approaching 50% of supermarket purchases," he updated.
Ganot points to other significant changes in our consumption habits, which may mark the solution to the problem of the economic viability of the chains in the transition to online shopping.
“In the U.S. the cost of preparing a meal at home is similar to the cost of buying fast food outside the home.
In Israel, this ratio is 1 to 4: ready-to-eat food is four times more expensive than a home-cooked meal. "He understands, he understands, a trend of change that will increase the price of the shopping basket, mainly due to shopping for prepared and semi-prepared food. Consumers spend a lot more money on ready-made food and online shopping.
We recruited 80,000 customers in a month and a half.
These are huge numbers.
Customers who came are those who would normally take another two years to get online. "
But Ganot also admits to the high costs of selling online.
"Quick has chosen to work with retailers, such as Eyal Ravid from Victory. We are both a technological and operational company. There are 30 stores that we operate in content, in fact hosted in content. We do not invest in stock. "Even in the periphery," Ganot declares.
And back to the matter of definition: we still do not distinguish between an online sale and an online order.
In fact, even 20 years ago Mrs. Cohen called the grocery store and ordered her shopping basket.
Sometimes she came to pick it up herself and sometimes the neighborhood grocery store owner brought the groceries home to her.
Ganot points to another major difficulty, which all panel members agreed on: the availability of manpower for shipments.
Beyond the high shipping cost, the problem is that many have a hard time finding couriers.
And this time in the corner of the justified
We asked the chain owners to address the complaints of the non-essential store owners who remained closed, about the food chains taking advantage of their situation and offering toys, stationery and other products that are not within their core areas, thus biting into their livelihoods.
"We did not expand or diversify our product range, we sold in crisis the same products we sold before it," Levy says.
"I understand their claims and they are right, but they should not be directed at us but at the government - it really should compensate them for this period."
Harazi justifies and in fact confirms the small retailers' claims against them: "The state should compensate them. We are committed to offering customers what they want."
Ice cream, cheese and alcohol
How else did the corona affect our shopping cart?
Luboszic: "Our shopping basket has grown by 30% -10%."
To Ron, Shufersal: "In fact, our caloric intake probably did not increase, but it went from restaurants, banquet halls and institutions - to the house. On the order of 2 billion shekels went from food outside the house to purchases in supermarkets, and another billion shekels went from shopping abroad to shopping In Israel. "
Our basket components have also changed.
Panelists can clearly point to the radical change seen towards the first closure.
"People snatched from everything nearby. We emptied the shelves," Rami Levy recalled.
Some of the changes in our shopping cart continued beyond the panic that surrounded the first closure.
It turns out that we eat more ice cream, consume more alcohol in supermarkets, as well as basic necessities that characterize an increase in home cooking.
"The entertainment became homey. The consumption of minced meat, baking aids and disposable products soared. The sale of alcoholic beverages also grew insanely - the pubs moved into the house," notes Elad Harazi Yochananoff.
Shalev, Tiv Ta'am: "Most of the categories have grown significantly. The sale of hygiene products has grown drastically. In contrast, the delicacies in bulk have been damaged - the cheeses, sausages, nuts and pickles have been damaged by 20%, because we stopped selling them in bulk. "As well as the cheeses. The problem is with spices, pickles and nuts, which cannot yet be offered in bulk."
Ravid reports an increase of tens and possibly even hundreds of percent in the sale of specialty cheeses.
Apparently hospitality has also increased the demand for premium products.
"Application" - a threat to the networks "
Ron Shufersley takes the opportunity to pat himself on the back, as well as his colleagues.
"All the food chains have shown responsibility in both the sanitary and economic aspects. Store Next's data indicate that prices have not risen. This is a factual figure that cannot be debated. This is despite the crisis and the jump in demand."
Another point that Ron praises the industry is the employment of workers: "The labor market has changed dramatically - more than any other market. There are very many people who have found a job of economic security in food chains. We have become an important employment factor. During the period we recruited 5,000 workers. Normal, but some of them are real growth. "
He said the food chains had increased their workforce by 2,000-1,000 new employees.
But in this context, most, if not all, of the panel members have harsh claims to the Knesset model.
"The application process has affected the ability to obtain employees.
If there were no whole industries, they could have functioned better, "says Shalom Naaman, owner of" Market Warehouses. "
"We pay a salary of 13 and a salary with additions that are not available in other industries."
Ganot: "At the wage levels we offer employees, it does not pay to return to work. The possibility that employees had the opportunity to receive compensation for sick leave for many months does not encourage them to return to work.
Today this is one of the biggest challenges facing networks - getting manpower.
We do not pay the minimum wage, much more than that, but we still have difficulty finding workers. "
Ravid: "In March-April it was still possible to recruit workers, but when they realized that they would be able to enjoy grants until September 2021, they began to prefer to be at home with unemployment benefits. From May we started to feel the problem."
Shalev: “There is a problem recruiting workers because of the Nahalat model, and it has become a kind of strategic threat to the networks.
Why should a person go to work when he has an income guarantee until the middle of next year?
The workers are currently interviewing us, we are not interviewing them. "
"Unhappy recycling law"
More than the Knesset, the red sheet that really jumps the big retailers in Israel is the expansion of the deposit law, which was approved last week on their noses and in their rage. This means that even on a liter and a half bottles of soft drinks, consumers can get a refund of 30 cents. Networks on the side of sanitation challenges.
Ravid shoots: "The Ministry of Environmental Protection was supposed to report to the beverage companies on the recycling rates of their bottles, but they did not submit any such report. It is interesting that the Asupta recycling corporation also has a business interest in connecting to the recycling machines. Beyond that, this law raises a serious legal issue regarding the fundamental right to property. In fact, we are required to expropriate our land in favor of huge machines. The law was approved on December 1;
To all this, it is worth adding that in countries where there is no deposit law, the recycling rate is not smaller than our recycling rate. "
Luboszic added that "it should be remembered that this is a high cost and it is clear that the consumer will finance it."
Ron: "The proposed law is not good for the environment either. Moving all existing collection points, with all the sanitary implications of the matter, is not necessarily good for the environment and consumers. All aspects need to be examined. The proposal as it is today is not necessarily good for the environment." .
Shalev described the Ministry of Environmental Protection's decision as an "unfortunate decision by the regulator."
He also explained that it raises a health problem, with thousands of used bottles entering food depots, or even being close to them.
There are other problems, such as the takeover of the domain by dubious factors.
"Promoting such a law without being able to understand the limitations of food chains is neither appropriate nor serious," Shalev concluded.
