Israel flag Israel: Buying and Selling

E-commerce in Israel

E-commerce

Internet access
Israel, with its nearly 8.5 million inhabitants, has an average population compared to other countries in the Middle East (8th largest among 14 countries). Israel had the highest share of connected people in the Middle East at the dawn of the internet (internet users accounting for 20.2% of total population in 2000). However it now lags behind Bahrain, United Arab Emirates and Qatar in internet penetration rate (78.6% - Internet World Stats). Nonetheless, this rate is still considerably higher than the regional average (57.8%) and close to the European average (80.2%). With 6.64 million Internet users, Israel accounts for 4.5% of total internet user population in the Middle East. Internet penetration has reached near maturity and now grows only by 1% on average (Ecommerce Foundation). Israel has a high smartphone penetration rate at 74%, second only to the United Arab Emirates in the region (78%). As far as search engines are concerned, Google dominates the industry with 97.22% market share (Statcounter 2018), followed by Bing at 1.21%.
E-commerce market
The Israeli e-commerce market has been growing steadily in recent years. In 2017, there was a 15% growth by volume, according to the Israeli Postal Services, and the market is forecast to reach US$ 2.99 billion in 2018. The Israeli e-commerce market is rather small in size, with 4.36 million e-shoppers, or 68% of total Internet users. However, that number is expected to reach 5.38 million users by 2022. Still, even though growth is expected, it will be at a slower rate than the global average, at 6.8%, as opposed to 24.8% worldwide. Currently, e-commerce sales account for 6% of total retail spending, according to TASC Consulting Services. Cross-border e-commerce is the driving force in online shopping, as most Israeli consumer goods are considered inferior in quality and more expensive than international products. Consequently, foreign-owned websites such as Amazon, eBay and Alibaba, which are subject to less strict VAT regulations than online retailers with physical presence in Israel, dominate the market. Nonetheless, several Israeli websites, such as Zap, Yad2, Castro and Zabilo  also have considerable market shares. While Israel has a relatively high smartphone penetration (74%), only 8% of shoppers use mobile for their purchases, while computers account for 86% of total sales.
E-commerce sales and customers
Nearly 70% of Israeli Internet users shop online, and that number is expected to grow at an average rate of 5.2%, according to the E-commerce Foundation. Average online spending is rising steadily, and stood at US$ 617.28 in 2017, as opposed to US$ 602.11 in 2016, an amount considerably higher than the average in the Middle East and Africa (US$ 285), but also significantly lower than in Europe (US$ 1,868) and in North America (US$ 1,786). Electronics and media are the most popular product category within the Israeli e-commerce market, accounting for a US$ 970.2 million market share in 2017. This category is followed by fashion, which accounted for US$ 822.7 million in sales. Fashion is expected to outpace electronics and media by 2022, with an estimated value of US$ 1.22 billion. On the other hand, electronics and media are expected to be worth US$ 1.13 billion that same year. Male users currently dominate the 25-to-34 and 35-to-44 age groups of online shoppers, while female users are heavily present in the 16-to-24 age group. Cross-border sales account for more than half of total e-commerce revenue, and 75% of users shop mainly from foreign websites. AliExpress alone delivered over half of all orders in 2017, according to the Israeli Postal Services. While foreign companies are subject to less strict VAT regulations than their local counterparts, since 2016 they are required to collect VAT on digital services. This applies to all companies that have an online presence targeting Israeli products and their non-physical products such as applications, software, music, TV shows, films and online gambling. On the other hand, physical goods up to US$ 75 and purchases up to US$ 500 can still be shipped to Israel with no additional tax or duty. Credit card is by far the most popular payment method (with Visa, Master, IsraCard and American Express accounting for 80% of sales), while PayPal is used for 16% of online purchases, and cash on delivery is almost non-existent.
Social media
Israelis are one of the most active populations on social media in the world. Approximately 94% of Israeli internet users are on social media networks, making almost 6.3 million people in the country social media users. Israel had the highest rate of adults who used social networking websites in the world back in 2012 (53%) and continues to have one of the highest shares (76%, among top 20), according to Pew Research. According to a report published by comScore, Israelis spend an average of eleven hours daily on social networks, almost double the world average of six hours. While Facebook dominates the social media network industry, with 5.8 million users, Instagram benefits from one of the highest penetration rates in the world in Israel, at 39% (tenth highest worldwide). The usage of social media platforms on mobile devices has been increasing considerably, with mobile share of web traffic increasing by 32% in 2017, and active mobile social media users accounting for 62% of total population, according to Hootsuite. As of August 2018, the biggest social media platforms by market share in Israel were Facebook (83%), YouTube (7.72%), Pinterest (5.18%), Twitter (1.97%), Instagram (1.35%) and Tumblr (0.33%).

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Latest Update: November 2022

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