I know I told people that I was on hiatus for the summer, but I just could not resist writing another blog, so I am back! My last post was about Isrealfest and Israel’s contribution to the global market, but what I didn’t mention was that I would indeed be there for the entire summer on an internship with the program Birthright Excel. I will not be talking about what I do at work today for two reasons: 1. It is only week two on the job and 2. It is confidential. On a totally unrelated note, I have no affiliation with the Mossad, Israel’s secret service that leaves the CIA in the dust. What I will be discussing here are my observations about Israeli pricing as well how to attempt to save money here.
The aspect of the economy that I feel most distinguishes itself from America’s is the ubiquity of the outdoor marketplace, known as the Shook. Granted, America has its fair share of flea markets, but I would venture to argue that most Americans do not go there more than once in a blue moon, as merely a random Sunday morning activity. There are many reasons as to why marketplaces thrive here, ranging from the sunny whether to the more relaxed culture.
The Shook, while ostensibly obsolete in nature due to the soaring popularity and usage of technology, is an interesting space when analyzed from an economic lens. There are many vendors with goods such as produce, spices, and pastries. The merchants are essentially selling identical goods and are therefore price takers -a real life example of perfect competition. With nearly uniform prices throughout, the customers are rational in making decisions, as they are aware of the going rate and the true value. In order to distinguish themselves, the merchants yell at ungodly decibels in order to get customers’ attention. For me, that actually backfires, as I run away in fear. (It doesn’t help that the merchants often yell after me to come back.)
I must include an important caveat to my previous assertion, though: “The customers are rational in making decisions , with the exception of American tourists”. As with any person who can detect a naïve non-native, Israelis will attempt to exploit any American they detect. Americans often times get caught up in the new environment and end up paying far more than they should. It is nearly impossible to return items to a vendor in the Shook, so buyer beware!
There is an exception to the pricing system at the marketplace. Foods have fixed prices, but for many other goods, there is incredible flexibility and ultimately room for tremendous savings. For items like accessories and clothing, merchants will name an astronomical price-if you are American, even higher. Never ever accept that price! Even merchants do not expect to receive that amount; they are simply using that figure as a starting point. It is imperative that you put the item down and begin to walk away, saying that you do not like it that much. The less desperate you appear, the more that the merchant will reduce the price. Arguing is a natural part of the process; do not relent until the merchant acquiesces to the price you want. Remember, you hold the power of the purse in this transaction, so you have the upper hand. Pretending to leave multiple times is often necessary. Just remember, do not crack, as that is the ultimate sign of weakness, and you will lose the bargaining. Since I was twelve years old, I have been perfecting this process, as well as the accompanying disgusted look. Unfortunately, I am not able to mask the fact that I am American. Nonetheless, I use this trait to my advantage. As a foreigner who is able to speak Hebrew, I have many a time received various free samples, though I must admit that doing so is only possible because I am female.
Of course, Israel is a developed country, and has many brick and mortar stores, too. Pacing the aisles, I was intrigued by one item in particular: sunscreen. While packing for this trip, I made sure to write this down as the number one thing on my list. Using manufacturers coupons and Catalina’s while sunscreen was already on sale, I cleared the shelves and bought enough to last the normal person an entire year (for someone as fair skinned as I: barely 2 months) for less than $10. Here in Israel, sunscreen is incredibly expensive, and they can get away with charging that because of the concept of elasticity. No matter the price, people will still demand it because it is always sunny; in economics, we say that their demand is inelastic. That, combined with the fact that many of the sunscreens are imported from America, allow for stores to charge a lot and have an impressive profit margin.
The summer is still young, and I will hopefully have time to be posting more updates. Just like the business world is globalized in nature, it is important that I make this blog go global, too. Greetings from the Middle East!