The local retailing market is characterized by low profitability and increasing competition, mainly due to the enter of internationals chains into the market in a variety of sectors, such as apparel and beauty and personal care. In addition, the shift towards internet retailing has also caused a drop in prices and thus in profitability as well.
The commercial square meter bubble
As new malls and shopping centers open all the time, many brands opened outlets in them and expanded at fast rates. The fast expansion caused a decrease in company's profitability and, ultimately, caused many brands to close stores and to significantly limit their expansions. Companies are more cautious about opening new stores in every new mall, therefore limiting new store openings to locations that they believe will be profitable.
Rent prices led to store consolidation
Due to the high cost of rent in shopping malls, retailers have a hard time remaining profitable. Therefore, many brands have started launching store-in-stores. For example, Fox Home can be found in many Fox apparel outlets. Some of the companies cope with the high rental rates by closing outlets in malls; for example, in July 2017, Castro announced that it plans to leave several malls. Similarly, many electric and appliance stores have left malls as well, and have opened stand-alone stores as the rent is significantly lower. It is likely that other brands will do the same.
Internet retailing has a strong impact on the retailing market. This is largely due to new regulation from recent years, cancelling customs taxes on purchases of up to $500, as well asthe convenience of the channel and the competitive prices it offers. Consumers are increasingly interested in shopping from the comforts of their home as it is faster than going to brick and mortar outlets. Consumers are also aware of the price difference between local retailers and international internet retailers, and therefore often prefer to purchase from international retailers, such as AliExpress and Next. In recent years, a number of local retailers have entered the internet retailing market by launching websites, such as Tiv Ta'am, Super Pharm, and Shekem Electric, thus joining many other companies that already operate in this channel.
Physical stores and malls have been affected by internet retailing and are forced to cope with the changes in the market in various ways; thus, even Azrieli Group launched a website selling products from different stores in their malls. Similarly, existing retailers have expanded their internet portfolios. For example, Shufersal Online offers furniture and appliances and Yellow Click and Pick sells electric bikes, camping equipment and more.
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