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.

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%).