Israel - Country Commercial Guide

Describes what a company needs to know to take advantage of e-commerce in the local market and covers prominent B2B websites.

Last published date: 2022-08-12

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.

Israel presents an excellent opportunity for foreign online sellers of consumer goods; while internet penetration in Israel is 87%, eCommerce penetration is 47% which represent 4 million consumers out of the 9 million citizens in Israel. With that, the number of eCommerce users is expected to grow by 25% to 5 million users in Israel by 2025 (in the United States: 11%). Historically, the market volume of the top 100 Israeli online stores has increased by 78% since 2018, which highlights the forecasted increase in eCommerce activity. According to research conducted by the firm Statista, an international comparison of online shares shows that there is the potential for a higher online penetration in all eCommerce categories

The majority of eCommerce transactions is Israel are B2C and mostly consist of consumer goods. Clothing, shoes, and consumer electronics are the top 3 interests of online shoppers in Israel. According to research firm Statista, 2022 eCommerce revenues in Israel are expected to reach $8.11 billion and rise to $12.03 billion by 2025, with a compound annual growth rate of 14.05%.

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.

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

35% of online shoppers in Israel have a high household income; lower- and middle-income consumers represent a similar demographic segment of online shoppers; 52% of Israeli online shoppers are female; 71% are between the ages of 18-44.

Israeli shoppers are quality and price-sensitive and 65% of online shoppers in Israel research online when planning a major purchase: consumer electronics and household appliances are the mainly searched for goods online. The preferred method of payment is credit cards, 80% of credit card payments are by Visa or MasterCard. Given that preference, most of the online stores support these payment options.

As smartphone penetration share in Israel is growing, many Israeli shoppers use their smartphone for online shoppers. Therefore, there is a significant preference for online stores that offer both a website and a mobile-adapted stores (and/or mobile apps).

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

Marketing and promoting online shopping on social media platforms are common in Israel, and the vast majority of online stores utilize that strategy. Of the Israeli stores that use social media networks, 98% market their products on Facebook and 41% use Twitter. The share of Israeli online stores with Amazon or eBay profile, in addition to their own website, is insignificant (9% on average).

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).