Interview – Israel Post targets huge increase in cross-border e-commerce market

Israel Post is entering a new era as the key enabler of international e-commerce to and from Israel. In an exclusive interview with CEP-Research, Chief Commercial Officer, Eran Krystal, outlines the postal operator’s strategy, commercial focus and operational investments designed to profit from a rapidly growing e-commerce market.

He was speaking at the recent Leaders In Logistics Summit in Barcelona where a company delegation met with a wide range of international executives to develop business opportunities.

 

CEP-Research: What is Israel Post’s strategy?

Krystal: “We have a very specific strategy because Israel is a very e-commerce-focused country and e-commerce is growing very fast. When Israeli customers start believing in brands, they buy a lot. The e-commerce market is growing around 12% every year, and most of it is cross-border. Most of the cross-border volumes are going through Israel Post.

“One important part of our strategy is to be a one-stop shop for everything. For example, we do the airport handling and customs clearance. We have a very large sorting centre close to Tel Aviv International Airport that we opened a few years ago, and then we do distribution across the whole country. And I must stress that we are working throughout the country. When the war started in October, a few areas were forbidden but Israel Post remained almost fully operational and continues to serve everywhere.”

CEP-Research: Let’s look about the e-commerce market. What are the main trends regarding Israeli consumers? Are they buying everything, or for example more fashion or more luxury?

Krystal: “About 93% of the population of 10 million people are buying online. They buy a lot of fashion and electronics. But as soon as online shoppers become more confident and see that deliveries work well, then they try out new brands and platforms, and also buy higher value products. In general, Israeli consumers love shopping, international brands, and the feeling of getting a "good deal."

“Moreover, Israel has a significant tier of consumers with relatively high disposable income, allowing for more extensive and frequent purchases. This tier is more significant in light of the low unemployment rate.   Adding to this, the relatively young Israeli population, a large hi-tech sector, and a broad layer of consumers with an early adopter mindset, brings up a wide field for accelerated development in the e-commerce world.

“Finally, another point is that there is no tax on e-commerce imports under $75. So, it makes sense for people to buy online cross-border, it's much cheaper than to buy in the shopping malls.”

CEP-Research: Against this background, how many parcels did you handle in 2023?

Krystal: “The Israeli market is now around 60 to 70 million items a year and we handle most of them.”

CEP-Research: Do you deliver most e-commerce parcels to homes or to alternative collection points?

Krystal: “People in Israel like to pick up parcels from PUDO points. Around 80% of our parcels are collected from PUDOs or post offices. We have about 1,400 PUDO points, including about 500 post offices. In relation to Israel’s size, the number of Israel Post PUDO points is very high and enables us to have a full geographic spread.”

CEP-Research: What is the situation regarding parcel lockers?

Krystal: “Lockers are not a big phenomenon in Israel because PUDOs are open all day with long opening hours into the evening and have a lot of storage space. And land for lockers is very expensive, especially in the cities and malls. So lockers are not really necessary. We have a delivery workforce of 1,000 people and make deliveries six days a week.”

CEP-Research: What investments are you making?

Krystal: “We are working with the biggest e-tailers in the world and they have a very strict SLA. When goods get to Israel, we have only a few days to deliver them. So we had to invest a lot in sorting machines and last mile technologies in the last few years and we will continue next year with another large machine.”

CEP-Research: What the situation with the Chinese marketplaces? Apart from Alibaba and JD.com, Temu and Shein are growing massively in Europe and in America at the moment. Are you seeing them selling more to Israel as well?

Krystal: “AliExpress is the strongest player in Israel. But Shein is very strong because people like their products, while Temu is a newcomer.”

CEP-Research: Finally, are export parcels an important business for you?

Krystal: “Most of our exports are B2C and C2C. Israeli people who have shops on Amazon and Ebay sell a lot, so we distribute their products all over the world. But imports account for about 80% of our international parcels.”

 

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E-commerce in Israel

According to studies and data analysis, the Israeli e-commerce market has grown steadily over the past decade, with an expected annual growth of about 12%. Accordingly, the expected turnover of online purchases in Israel is estimated to reach approximately $12 billion by 2027.

Key facts about the Israeli e-commerce market:

            - 93% have made at least one online purchase this year

            - 50% buy once a week

            - 51% prefer to purchase from international sites

            - 77% believe that online shopping is smarter and more sophisticated

            - 67% believe that online shopping saves them money

(Sources: Statista, Deloitte, Google & Isracard research 2023)

 

Operational investments

Israel Post has recently invested to expand its sorting and shipping capabilities ahead of the spring holiday season, when online shopping increases significantly. The company introduced a new parcel sorting machine, manufactured by Interoll Germany, with sorting capacity of up to 12,000 packages per hour, reaching up to 250,000 packages per day. This additional sorting line will handle the import of small packages, joining a previous machine purchased and operational since mid-2021.

The new state-of-the-art machine incorporates photo and barcode recognition capabilities on the label, and features a unique bottom-package printing system. The machine enables barcode reading on the package label, printing of the sorting label and the delivery centre to which the package is destined, and performs an initial sorting of the packages by city level, with both visual and computerized quality control of the sorting process.

 

Israel Post is handling rising volumes of e-commerce parcels.

 

About Israel Post

Israel Post employs 4,000 workers and has the largest distribution network in Israel, alongside high logistic capabilities. The distribution network consists of 1,400 collection and delivery points, courier mail, customer service post offices, and the postal bank, giving the company a full geographic spread.

Additionally, Israel Post is the only logistics system in the country offering a full 360-degree service to international e-commerce retailers, including an advanced returns service and a specialized in-house customs and security arrangement.