The Information Technology Landscape in Israel

Electronic-Commerce

  Although Israel’s high-tech industry is growing rapidly, "e-commerce is still in its infancy." (1)  Contrast to the developing high tech sector in Israel, e-commerce in the country has not yet seemed  to reach its full potential. (12)

"Although Israel has been slow to introduce Internet banking, it is still likely to become increasingly popular as more restrictions are lifted, providing opportunities for developers of Internet banking applications" (1). On-line banking has been permitted in Israel since March 200, although on-line bill payments are still prohibited. As of March 2000, there were 260,000 on-line banking service users in Israel. Bank Hapoalim, the largest bank in Israel, has a significant lead, with 157,000 on-line users.  Over 50% of Bank Hapolaim's Internet banking activities involve securities trading. Bank Leumi, has the next largest number of users with 57,000 on-line customers. Together, the two banks control 80% of all Israeli banks. (1)

·        Consumer purchases grew from $20 million in 1999 to $60 million in 2000. International Data Corporation (IDC) forecasts B2C e-commerce will reach $120 million by end 2001. (10)

·    36% of Internet users made on-line purchases in 2000. (10)

·        The Internet and e-commerce are used primarily by the top tenth income bracket. (10)

·        11% of Israeli companies use web to sell products. (1)

Of all e-commerce activity in Israel, 53% of consumers purchased books online, while 41% bought goods, and 25% ordered bought CDs online. Actual consumer purchases can be found in Exhibit 2. (4)

Source: (4)

 Barriers to buying online:

Of  Israelis who have not purchased on line, they were asked reasons for not purchasing.  The most frequently reported reason for not shopping online was that Israelis did not ant to give their credit card details over the internet and were worried about security issues. The second one was that they felt more secure buying goods in a store. Third, it was easier and more fun to buy goods in a store. Details outlined in Exhibit 3. (4)

       Source: (4)

A   Another barrier to purchasing on-line is that Israeli's have developed certain habits. "One of these [habits] is an insistence on hands-on contact with the merchandise. The desire to actually feel the product is not limited to fruit and vegetable shoppers; it extends to those attempting to judge the quality of fabrics, workmanship and raw materials. (15)

Business to Business (B2B) E-Commerce:

·        B2B market share in 2000 was $35 million, while transactions are expected to approach $100 million in 2001. (13)

B2B Challenge:

A   The business to business industry is expanding in Israel and companies are seeking new ways to attract and satisfy other business as their customer. Zvi Schreiber, founder of Tradeum, states "We were trying to solve the problems at the heart of B2B... Most existing B2B systems are inadequate since they are based on technology developed for the business-to-consumer sector. Selling CDs and books or running online auctions for consumers is very different from companies trading tons of commodities and raw materials." (41)

Since much of recent technology has a "B2C inheritance" they tend not to deal with "multiple parameters" in the same way and are too concerned with price. (41) "In B2B we are dealing with credit terms, credit and quality ratings of the supplier and buyer. And all are equally important." (41)
 

New Opportunities

Commerce One, Inc. was involved in the creation of the first global B2B e-marketplace with Bank Hapolaim, Compaq Israel, The Israel Corporation, Internet Gold and Ofek Newworld, in Septmeber 2000." (16) "The e-marketplace is expected to allow companies of all sizes to save time and money by moving their business commerce on-line.  The e-marketplace will be connected to the Commerce One Global Trading Web, the world's largest B2B trading community. The proposed service will encompass the purchase of indirect goods and services that are not related to the production cycle. On the buying side, companies will be able to optimize their purchasing function by automating their purchasing processes, in a secure manner. on the supply side, suppliers will have access to a new distribution channel." (16)

The following table is a list of major Israeli Internet portals.  Of the list, 3 are strictly English portals, 13 are strictly Hebrew portals, 1 is strictly Russian, 5 are both English and Hebrew and 1 is a portal in all three languages. (14)

Table 4: Israeli Portals

Source: (14)

Payments Technologies:

The Postal Authority, controlling 70% of the market for transporting goods obtained online, placed Internet terminals in post office branches on an experimental basis to determine demand for e-commerce service and invested $3.6 million in 2000 to encourage e-commerce. (1)

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