Israel's Azrieli Group Announces Closure of Azrieli.com E-Commerce Platform, Exposing Challenges and Uncertainty in Israel's E-Commerce Marketplace

Recently, Azrieli Group, a leading Israeli conglomerate, announced an important decision: it will shut down its online retail platform, Azrieli.com, on December 22nd and dismiss 70 employees from the platform's team. The reasons behind this decision, as well as the implications for the Israeli e-commerce market, deserve to be explored in depth.

Azrieli Group had acquired the Buy2 e-commerce platform in 2016 for over NIS 60 million, and subsequently launched the Azrieli app, investing NIS 2 million in its development. At the time, Azrieli Group hoped to capitalize on the rise of the e-commerce market in Israel to become profitable.

However, Azrieli.com has not been able to turn a profit since its operation. It lost about NIS 44 million (about $12 million) in its first year of operation, and its losses have been increasing every year except 2020. By 2022, Azrieli.com's losses will reach NIS 60 million (about $16.4 million).

For the Azrieli Group, which has a market capitalization of NIS 27 billion (about $7.3 billion), these losses are not a huge amount, but the group has recognized that it will be difficult for Azrieli.com to achieve profitability under its current operating model. In a statement announcing the decision to close, Azrieli.com noted that the decision was based on a thorough assessment of the Israeli e-commerce market. The current level of underdevelopment and low penetration of the market, coupled with fierce competition from international e-commerce platforms, has severely constrained the growth of local businesses.Azrieli.com also blamed the regulator's policies, particularly the exemption from VAT for orders exceeding $75, for giving international e-commerce platforms an unfair competitive advantage.

Despite the uncertain future of Azrieli.com, the Azrieli Group says it will continue to invest in the digital and innovation sectors. Utilizing the technical and digital know-how accumulated by Azrieli.com, the group plans to launch new activities under the leadership of its current CEO, Daniel Koren.

In addition to Azrieli.com, other e-commerce platforms in Israel are facing similar challenges. For example, Fox Group's Terminal X has yet to turn a profit since its launch in the summer of 2021, and has already lost about NIS 1.8 million (about $481,000) in the first nine months of this year. In addition, retail giant Shufersal has downsized its online business and laid off about half of its workforce, including the CEO, to consolidate operations into other divisions. Similarly, One Project, a fashion website owned by MGS Group, is facing cash flow problems.

Industry experts believe that the closure of Azrieli.com could trigger the closure, merger or acquisition of other e-commerce sites, a trend that reflects the struggles of small businesses in a competitive marketplace.The downsizing of online operations by large retailers such as Shufersal and Azrieli seems to signal uncertainty and challenges for the industry as a whole.