Amazon plans to return to Israel: Localization is the key, can it be achieved this time?

"Withdraw when it wants, enter when it wants"—the story of global e-commerce giant Amazon and the Israeli market has recently taken a new turn. According to foreign media reports, Amazon is quietly restarting its business layout in Israel, not only swiftly appointing a head for its Israeli branch and beginning to recruit staff, but also intensively meeting with local sellers to assess the market.

This is not Amazon's first entry into the Israeli market. Now, as Amazon makes a comeback, the market environment has changed, but challenges remain. This time, can Amazon succeed? Let's look at its previous lessons of failure and the new strategies it might adopt.

Image source: Ynetnews

Back in 2019, Amazon made a high-profile entry into Israel, launching a fully Hebrew website and opening its doors to local sellers. The rules were simple: sellers managed their own inventory and shipping (FBM model), and Amazon took an 8% commission. On the surface, this seemed like a win-win situation—Israeli small and medium businesses could benefit from Amazon's traffic, consumers gained another shopping channel, and Amazon tested the new market with a light-asset model.

Report on Amazon's 2019 entry into the Israeli market. Image source: haaretz

But reality quickly poured cold water on these hopes:

Price war led to "lying flat": Without local warehouses, all goods were shipped by sellers themselves, making logistics costs impossible to reduce. For the same product, Amazon's price was 20%-30% higher than local e-commerce platforms like Yango (formerly Yandex.Market) or Tradedoubler.

Express delivery became "slow delivery": Israeli consumers were used to "same-day delivery" from local platforms, while Amazon's delivery cycle often took 3-5 days, and could be delayed to over a week during holidays.

Pandemic made things worse: In 2020, global supply chains were disrupted, further weakening already fragile cross-border logistics. Amazon struggled to maintain even a "basic experience," and eventually shut down its local business in 2021.

Image source: Ynetnews

Despite shutting down its local business in Israel, Amazon maintained its influence through cross-border e-commerce. It launched a "direct shipping from the US to Israel" service, offering free shipping for orders over $65. This policy was welcomed by consumers, especially those seeking international brands.

However, while this model benefited consumers, it did not provide substantial help to local sellers, who still lacked an efficient platform to sell their products. Therefore, it is not surprising that Amazon is reconsidering restoring its business in Israel.

Image source: timesofisrael.com

Now, Amazon is once again trying to enter the Israeli market, but whether it will use the previous model or make adjustments more suited to the local market has become the focus of attention. Based on past experience, if Amazon wants to succeed in Israel, it must make changes in several key areas.

First, it may need to consider establishing local warehousing and distribution centers to improve logistics efficiency and reduce delivery costs for both merchants and consumers. After all, logistics competitiveness directly determines the shopping experience, and Israeli consumers are already used to the fast delivery services provided by local e-commerce. If Amazon still relies solely on sellers to ship goods themselves, it will be hard to win the market.

Second, Amazon needs to optimize its pricing strategy. The Israeli market is not short of competitors—local e-commerce platforms such as Shufersal, Azrieli, and P1000 have already established stable customer bases, while international platforms like AliExpress and Temu are also rapidly expanding in Israel.

Image source: Internet

If Amazon continues to maintain an 8% commission rate and lets sellers bear high logistics costs, its price advantage will still not be obvious, and consumers will still prefer cheaper competitors.

Therefore, if Amazon wants to return to the market, it may need to adjust its commission model, or even adopt more competitive promotional strategies to attract sellers and bring consumers back.

Of course, although the Israeli e-commerce market has developed rapidly in recent years, it is still relatively small compared to the markets in Europe and the United States, which is one reason why Amazon's past investment in Israel was limited.

Image source: Internet

Overall, Amazon's return to the Israeli market this time is undoubtedly based on the growth potential of Israeli e-commerce. After the pandemic, more and more Israeli consumers have become accustomed to online shopping, and Amazon still has strong brand influence and supply chain advantages. But whether it can succeed ultimately depends on whether it can truly adapt to the particularities of the Israeli market and make effective adjustments based on past failures. For local sellers and consumers, Amazon's return may bring more choices, and may also usher in a new wave of competition in the local e-commerce industry.