Bloomberg Business ran an article yesterday on the dilemna many residents of Israel face when ordering items online. Namely, expensive shipping fees and relatively long wait times reduce much of the incentive to order locally. Instead, the article asserts that many Israelis turn to foreign sellers – Amazon, eBay, and Alibaba chief among them – whose prices are lower and selection greater:
To many tech savvy Israelis looking to beat the country’s high cost of living, it’s a simple decision: look to foreign e-commerce sites that have more variety and lower prices from the outset. That’s great for Amazon.com Inc. and EBay Inc. but not so great for Israel, where local store sales are falling, and the failure rate for small businesses is high.
It’s true that prices on everday items – clothing, phones, sports equipment – are drastically cheaper in the US than they are in Israel. And that’s extraordinariily frustrating. However, the article doesn’t mention a few key points:
- The shipping time from the US, or from European distributors, is still counted in weeks, not days. The five-day delivery time quoted by the article seems the fringe exception, not the rule.
- The country’s onerous customs charges (on shipments valued above $75) reduce much of the savings customers would otherwise reap.
- The mail service doesn’t offer the same robust parcel tracking as the USPS, and delivery has, in previous years, been hobbled by strikes and arbitrary delays. According to a recent Harvard study, Israel’s mail service was ranked 35th of 159 countries. Not terrible, but still below expectations for its Startup Nation status.
And it’s that last point I’d like to focus on for a moment. In the United States, which was ranked #1 in the Harvard study, six day-a-week mail is taken as a dependable given, (and two-day delivery an expanding, attainable luxury). It took this excellent Op-Ed by Zeynep Tufekci in January’s New York Times to help me realize that:
Dependable infrastructure is magical not simply because it works, but also because it allows innovation to thrive, including much of the Internet-based economy that has grown in the past decade. You can’t have Amazon or eBay without a reliable way to get things to people’s homes…mail gets picked up from your house, six days a week, free of charge.
The Bloomberg article concludes by recommending that the Israeli government encourage solutions to make delivery faster, and pressure monopolies to lower prices on goods. A reseacher is quoted as suggesting that “Israel is a country that builds lots of e-commerce platforms for others…It is about time we built platforms for ourselves.”
When I visited Venice several months ago, I saw dozens of Amazon packages stacked upon courier mailboats that plied the city’s many canals. My feeling was that if a city as complicated by water can manage it, so can Israel. (That said, Italy did place lower Harvard’s rankings. But at least there was consitent delivery of Amazon goods, thanks to the retailer’s presence in the country, as well as less onerous import duties).
In order to do so, I think that there should be a rollback of customs charges (to allow more foreign goods to enter the country, and thus pressure local monopolies to lower prices), and that the government should make greater investments in a more connected, more consistent mail service. The reliance on couriers, private delivery, and startups is wonderful, but there needs to be a better infrastructual baseline. Innovation should breed as a result of governmental encouragement, and not in spite of its over-regulation.
Silicon Spatula 