The author is the CEO of the economic-marketing consulting firm Chamansky Ben Shahar & Co.
Opposing trends are occurring in the food market and the supermarket in Israel. On the one hand, the cost of living and price increases, and now also the national uncertainty and fear that “push” households back to the price shops. On the other hand, the tendency left over from the Corona period to purchase “close to home”, which leaves the impression that the standard of living of many households has increased, when they made expensive purchases at the expense of savings.
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This period accelerated the development of convenience store offerings everywhere – many went, and are still going, in that direction. As a result, hundreds of convenience stores, specialty stores and delicatessens were opened and are being opened even outside of greater Tel Aviv (Tel Aviv, Givatayim, Ramat Gan and Herzliya).
This month, for example, the AM:PM network reported on the opening of two stores in Hadera, a city that does not have high socioeconomic characteristics. There are also three stores of the chain operating in Haifa – in the lower city, in the Moriah area and in the Dania neighborhood. This is as evidence of the phenomenon that in recent years convenience stores have opened almost everywhere.
This raises the question of whether the high price levels in these stores will continue to meet demand even at this time, when the cost of living and the “national situation” are weighing heavily on households in general, and outside the greater Tel Aviv area in particular.
In this column we will describe the picture of the food market andThe supermarket in general, and the convenience stores in particular, and we will see the picture tomorrow.
The price differences
When examining the layout of the convenience stores of the various chains, divided into stores located in greater Tel Aviv and outside this area, it can be seen that two-thirds of the Shoppersal Express branches are outside the area, in AM:PM it is about a fifth, for the rest a few branches, and Victory in City has not yet deployed the Its stores are outside the area.
Soon we will see the layout of Saban Ilvan and other actresses who entered and will enter the market. This raises the question of whether the chain stores will increase the competitive offer, or just replace the local grocery stores and mini markets.
It is important to note that there is a high price gap of tens of percent between the price stores and the convenience stores. In the price shops the gross profit is estimated at 25-18%, and in the convenience stores 40-30%. Against this, the demand must be examined – the annual purchasing power of the retail market, based on 2.83 million households in Israel, amounted to approximately NIS 158 billion in 2022.
Of this, approximately NIS 88 billion is directed to food and supermarket purchases (an average household in Israel spends approximately NIS 2,600 per month on food and supermarket products), approximately NIS 56 billion to non-food purchases, and approximately NIS 14.4 billion is directed to the catering market and cafes.
We will now refer to the changes in consumption habits and behaviors that have sharpened up to the fourth quarter of 2022. Several factors stood out in this context: an increase in the standard of living, the lack of time that manifests itself in order of priority in favor of other activities, sensitivity to a small price (among growing parts of the population), the problem of road congestion and consumption habits that have changed during The corona crisis.
All these together have increased the demand for the close-to-home supply of convenience stores, delicatessens and many specialized stores (delis, butchers, new jades, wine shops, breads, etc.), for online purchases and for making orders and deliveries.
Market of edges
What is expected to happen next? The price increases will oblige the households to direct a larger part of their spending to the purchase of food and supermarket products, with the aim of preserving the size of the family basket and changing their consumption habits and behavior. All this, in a scenario in which extreme changes in macroeconomic parameters will continue to apply, such as continued increases in interest rates, inflation and unemployment.
In terms of supply, the supermarkets in Israel are spread over an area of approximately 2.9 million square meters (according to measurements by Chemansky Ben Shahar). Of these, approximately 57% are in a price format, and approximately 43% are in a convenience format. In terms of money, the market has already turned a decade ago and now turns sharply into two distinct extremes.
On the one hand, it adapted and adapts itself to the changing and frenetic Israeli consumer. The discount stores occupy a 60% share of the market – the consumer wants and is required to save money, and is willing to invest his time and buy in stores that are usually located far from his home.
Tamir Ben Shahar / Photo: Erez Ben Shahar
On the other hand, 40% are willing to pay more in convenience stores, specialty stores and on the road to save time. In the convenience format, the most significant market share is “close to home” (urban or neighborhood, containers and mini markets) – about 25%. And some, on the road (gas stations and explosions) and specialized stores. The online market’s share of the market is about 8% – an increase of about 25% compared to 2020.
Habits of generation Z
So what are the expected consumption habits? Smaller, urban, time-poor families, and who are more willing to give up the low price – because they can afford to pay a high premium for consumption with a high buying experience and service – will continue to embrace the health trend and small baskets, and go to ready-made and convenience stores, delicatessens and specialty stores.
Among the members of Generation Z who own and/or live in central Tel Aviv, the period of ownership is over (they rent, borrow and use what others have purchased). They live in small apartments, and as a result “live outside”: they buy less household items, eat out, cook less and have less need for supermarket products in general and for making “big” purchases, and there are no discount stores in their immediate vicinity.
Also, they consume more sports and leisure products, and strive to increase the consumption of the experience at the expense of the objects. They will continue to buy in the convenient and specialized stores, on the streets and under the house. Those who are from Moshgat and live in other cities, such as Ramat Gan, Givatayim, Herzliya or Haifa, behave in a similar way.
In a business-as-usual scenario, we will witness the continued opening of convenience and specialty stores in locations adapted to the target audiences around them – in many cities and localities where consumer populations from the higher deciles live in general, and in neighborhood centers in particular.