General Overview
The International Trade Administration has established the eCommerce Innovation Lab (EIL) with the aim to position the U.S. Commercial Service as a pacesetting resource for U.S. businesses through empowering client-facing staff with a baseline understanding of digital trade, enabling quicker response to client needs by providing value add digital client counseling.
EIL has created a U.S. field-based client digital strategy counseling process that focuses on these key concepts such as a digital strategy that addresses the basic needs of a business required to succeed in cross-border ecommerce sales channels; eCommerce is a sales channel, that crosses all industries that sell or promote brand awareness online; eCommerce Key Performance Indicators allows businesses to understand where their digital efforts are paying off and lastly, eCommerce Business Service Provider Directory (BSP) provides the much-needed follow-up to our digital strategy recommendations that will help the US companies to succeed in overseas markets.
The eCommerce industry in Israel keeps growing. According to a survey on eCommerce activities conducted in Israel in 2022, over 48% of the respondents purchased a product or service online weekly. Estimates show that the revenue of the eCommerce industry will increase from $7.55 billion in 2023 to $11.83 billion in 2027. eCommerce comprehends various segments such as electronics, tourism, food and beverages, and fashion.
In 2021, the online expenditure on fashion in Israel amounted to $1.82 billion. The spending on this type of product was the highest of all the commodities. Nowadays, many physical stores in Israel offer complete eCommerce services for purchasing apparel items, shoes, and accessories. The online fashion shopping industry is thriving. According to estimates, the revenue of the fashion eCommerce industry will increase to over $2.75 billion in 2027 compared to $1.89 billion in 2023.Being a tech driven market, Israel has a growing number of companies and startups that specialize in eCommerce activity and infrastructure; from secured payments to shipping logistics. The increase of eCommerce focused companies, along with the growth in volume of online shopping, advances the development and improvement in the eCommerce supply chain.
In 2022, 74% of online purchase transactions in Israel were paid for by credit card. Paying with a credit card is common for online payments and payments in physical stores. As of January 2023, 79.1% of the people aged 15 and older in Israel owned a credit card. In Israel, there are different types of credit cards issued by global and local companies, and most eCommerce websites accept them as payment methods. In 2022, Israel’s most common card scheme was Visa, at 37% of the market.
Legal & Regulatory environment
In 2017, the Israeli government changed its rules to make foreign companies subject to Value Added Tax (VAT) collection on digital services. A company must collect VAT if it has an online presence targeting Israeli consumers or has representatives seeking to find Israeli customers. Downloaded apps, software, music, games, television programs, films, and online gambling are all subject to the country’s 17% VAT.
Physical goods worth up to $75 are exempt from all taxes and purchases of up to $500 are exempt from duties but still subject to VAT. For example, Amazon must charge VAT on delivery of digital products like eBooks, but not on physical books costing less than $75.
Consumer Behavior
Purchasing products or services online is widely common in Israel. According to a survey conducted in the country, nearly 50% of the respondents using the internet purchased a product or service online weekly, as of the third quarter of 2022. In addition, around 37% of the surveyed population reported that they used an online price comparison service, while some 21% ordered groceries through an online store. Estimates showed that the e-commerce market revenue in Israel will reach over $12 million in 2025.
Free order delivery is an important driver for online purchases in Israel. A survey considered that most people in the country found it most encouraging to obtain free delivery services when buying online. Other incentives for online purchases were the availability of coupons and discounts as well as next-day deliveries. Generally, online shopping is common among people of all ages in Israel, especially among individuals aged 35-44. According to a survey conducted in the country, as of the 3rd quarter of 2020, the share of internet users who had purchased an online product in the month prior to the survey was between 35 and 44 years.
Intellectual Property Rights
The Israeli Intellectual Property (IP) law is written pursuant to the WTO TRIPS agreement; therefore, Israel’s Custom Authority is authorized to follow up on any IP, trademarks, and copyrights violations caused by imported products.
Digital Marketing & Social Media
The social media advertising industry in Israel is thriving and is a crucial segment of the digital advertising market. Social networks attract large numbers of internet users, especially younger audiences, that see social media as an essential tool for identifying market trends. Therefore, advertisers invest in advertising activities on social networks such as Instagram, TikTok, and Facebook. In 2022, the social media advertising spending in Israel accumulated a value of $358.7 million, and forecasts suggest it will rise drastically to nearly $800 million in the next five years. In addition, influencers – actors, models, musicians, or people without expertise – advertise products or promote content on social media. Projections showed that Israel’s influencer advertising market revenue would reach over $97 million by 2027, a growth of nearly 45% compared to 2022.The high season of online shopping in Israel is Black Friday, Cyber Monday, and around the Jewish holidays when sales are offered (usually September and April). The largest eCommerce conference in Israel is Go eCommerce, which showcases the latest trends & forecasts, innovative solutions, and breaking-through technologies in the eCommerce industry. eCommerce focused companies also participate in broader focused conferences, such as Cybertech Global TLV and International Conference on E-Commerce, E-Payments and Entrepreneurship (ICECEPE).