We Are Paying Too Much... NOT REALLY...

Real Estate marketing sketch of Neveh Sharet building project in Tel Aviv. Land being so expensive, only high cost project make it in desirable locations. Real Estate prices have been rising steady in Tel Aviv for over a decade.

Israelis have started to complain that life here is too expensive. We get all kind of comparison articles with the high cost of life in Tel Aviv, even more expensive than New York, London and Paris. There are ground-roots protests on Facebook against buying cottage cheese from Tnuva and electricity from the electric company. If you pay attention to this daily buzz, and focus even further on internet social media (Facebook, Twitter and You Tube) you may think that Israelis are going to stop shopping any day now. Well, this is just one side of reality here. It is also an exaggeration because of media headlines and Twitter viral buzzing more than real life. True, some things are expensive and there are good reasons for it. Mostly it's a simple economic quirk of supply and demand (maybe economic quirk is not the right term, maybe market situation is more appropriate.) Israel has been having a chronic housing shortage for a decade now. This shortage is more prominent in the central region, and in Tel Aviv it is absolutely a chronic disaster. Land in desired locations is built up so much, the only solutions are either using small spaces left open (very expensive) or taking down an old building to put up a new one (very complicated.) This makes only high ticket apartments worth building. Builders and land owners only want to invest their time in high return projects. This way, even if a project is expensive and complicated the return is worth the investment. This trend, over a decade long, which shows up in real estate prices increasing to ridiculous levels. The government has been talking about solutions for years. Not much has changed and the

In the consumer goods sector, we have a typical "small market -therefore- no competition" problem. Tnuva, Israel's largest dairy supplier, makes a wide range of basic products, in high quality, and buys out competitors when the opportunity arises. They also manufacture for foreign brands like Yoplait Yogurt. This makes dairy products, especially basic items like soft cheeses, very expensive here. In some surveys exact products cost 1/2 in the US and the UK in comparison to Israeli products. The same is true with large bakeries (Angel), cookies and crackers (Osem), cleaning supplies (Sano), frozen meats and vegetables and even in supermarkets, pharmacies and small neighborhood shops. Companies establishing a leadership position, then quickly take over a large share of the market. Finally, they pressure outlets to market their products in better locations and end up "owning the market". This is what happens in any market without fair competitive laws. In the US, the age of the conglomerates, the robber barons of the 1900s, was probably the same as life here in Israel today. Israelis, with access to information around the world and a big sense of fairness, don't like this state of affairs. But, as previously mentioned, Israelis are not united to change this situation. The large market leaders point out that 60% of market share is not 90%. Consumers always have one or two alternatives to choose from. This is true in every product on the shelf when it comes to dairy products. There are always three alternatives when the shelves are well stocked. If you shop at midnight in the middle of the week, you may not see all the possible alternatives, but that is your choice in shopping hours. This is where the new protesters using social media come in. By simply steering buyers from Tnuva cottage cheese, sales of the product dropped more than 20% and some say 50%. Tnuva simply made a few adjustments to their pricing offering "2 for 1" deals. Then announced a small, 5% to 10% reduction in prices in a few items. The standard Tnuva cottage cheese container, at 250 grams, cost between 6 and 8 shekels (about $1.50 to $2.10.) What disturbs people more than anything is the daily price changes. Not only it shows that the prices are not "real", are not based on the cost of producing and marketing the item, it also puts the shopper at a dilemma: "should I buy the cottage cheese today and spend more, or buy it tomorrow and hope there will be a 2 for 1 sale?" Needless to say, shoppers are not happy about this situation. To distract shoppers from this confusion, there are always items on sale. As you enter the store, at a small isle I call "the buy me gauntlet". You are practically assaulted with all kind of deals. At the local Mega, a large supermarket chain, there are 2 for 1 deals, deals to "club members", deals from manufacturers and just deals depending on the season or timing (before or after holidays, seasonal, etc.) As you can see, this story is becoming a little long and has lots of details. That's life here, details and all kind of confusion. In the shopping and spending money category, Israelis are definitely on the expansion side. The economy has not experienced the downturn of the west. Actually, it resembles more the expansion of the east, not as much as China, but certainly somewhere between a strong economy and steady flat no growth state. As I write this, its obvious how life here is different yet similar to other places. We protest like others, yet we desire and spend a little different. More articles to come, so spread the word... THANKS FOR READING !