The following research report contains market research, analysis, statistics and business intelligence relating to research on Apparel Industry In Israel.

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ABSTRACT
This report covers the apparel market as defined in Harmonized
System Code chapters 61 and 62: Woven and knitted apparel for
men, women, kids and babies, including underwear, sleepwear,
socks, sportswear and swimwear.

According to the Statistical Abstract of Israel the total size of
Israel=s apparel market in 1998 was $1.3 billion. A moderate 3-4
percent annual growth is expected in 1999 and 2000.

A favorable dollar exchange rate till mid 1998 resulted in a 15%
increase of apparel imports in 1998 to $380 million. Recent
devaluation of the local currency and the economic slowdown are
expected to slow imports= growth for 1999.
Israeli businessmen are accustomed to the European marketing
infrastructure, which they claim is focused on exports. According
to the same sources, the U.S. apparel industry is less accessible
and less export oriented. In fact, U.S. made apparel products
make only 8% of the total Israeli apparel import market while
E.U.=s share is 70%. Post=s opinion is that a change in U.S.
export strategies will result in a larger market share.

Currently, over 90% of apparel imports from the U.S. are made
through Ajobbers@ who specialize in locating and shipping
low-priced, first grade liquidation and surplus items. Items
imported through these random transactions are being distributed
through small retail stores around the country. Less than 10% of
imported apparel is bought directly from U.S. manufacturers.

Third countries import share is relatively small due to a high,
24% customs duty imposed on apparel goods from the Far East.
Sportswear and casual wear are considered best prospects. Women=s
fashion is considered a sophisticated segment, featuring greater
competition by European manufacturers. Europe is strongly
positioned in the Israeli market, nevertheless, U.S. women=s
sportswear, casual suits and dresses are also considered best
prospects if promoted as better-priced top labels.

Nine months a year of warm climate and an active, informal life
style in Israel call for a casual, yet trendy dress code.
Teenagers and young women and men make the largest consumer
group, characterized by a frequent seasonal complete change of
wardrobe.

Unlike in the U.S., 50% of Israel=s apparel products are sold in
small boutiques. 40% are sold in department stores and 10% are
sold in open markets and bazaars.
Large Department stores distribute private labels and high-end
foreign labels such as Levi=s, Nike, N.B.A., The Gap, Banana
Republic, Guess, DonaKaran, and Timberland. These American labels
are often manufactured in Israel, Europe or third countries.
New discount chain stores have emerged recently, serving the mid
and low-end apparel market segments. AHamashbir Fashion
Warehouses Ltd@ and ABonMart@ are major discount chain stores,
offering local and imported Italian fashion for lower prices.
The peace process and free trade area agreements created new
opportunities for the Israeli apparel manufacturers. At least 20
major textile manufacturers moved their production facilities to
Qualified Industrial Zones (QIZ) in Jordan, to Egypt, and soon to
the Gaza Industrial Estate (GIE) in the Palestinian Authority.
Bilateral and trilateral joint ventures consist of cheap labor by
local workforce, and by an advanced management, quality control
and technology by the Israeli part. This area of the Middle East
is claiming to become the world=s greatest factory for apparel
products, targeted exclusively at exports.
A. MARKET HIGHLIGHTS &BEST PROSPECTS

Market Profile:

Israel=s total apparel market size in 1998 was $1.3 billion.
Growth rate for 1999 and 2000 is expected to remain low, in the
range of 3%-4%. Gross domestic product in 1999 should grow
between 2 percent and 2.5 percent. Private consumption is
expected to increase by only 3-4 percent annually in the next 2
years.

Market receptivity for U.S. products is high. U.S. fashion is
associated with international labels such as: N.B.A. Nike, Levi=s
and The Gap, covering the casual and sportswear segments.
Super-Sol Ltd is a supermarket chain and one of Israel=s largest
public companies. Super-Sol employs 7 thousand workers and its
annual turnover exceeds $1 billion. Following 40 years of
leadership, mainly in the food market, the Super Sol decided to
upgrade its non-food division into the apparel market. Their
concept is similar to the American Wall-Mart and K-Mart stores,
adding apparel departments to their existing food chain stores.

Super-Sol=s new concept characterizes Israel=s general market
trend to locate sources for cheaper products and further lower
the costs by ordering larger quantities while utilizing existing
marketing and distribution channels.
Mail order service has not taken-off in Israel due primarily to
the poor quality of products offered through this service.
Statistical Data:

Market size table in million U.S. dollars:
1997 1998 1999(est) Projected avg. Annual Growth Rate for following
2 years

Import Market $330 $380 $418 10%

Local Production $1537 $1583 $1630 3%

Exports $597 $650 $715 10%

Total Market $1270 $1313 $1333 4%

Imports from US $30 $31 $33 4% Exchange Rates $1=NIS 3.6 $1=NIS 4.1 $1=4.3(est)

Estimated Future Inflation Rate: 8%
1997 Import Market Share (Percent for US and major Competitors):
US-8%; Italy-30%; France-18%; U.K.-12%; Hong Kong & China-4.5%
These statistics were completed using HS Tariff Code Chapters 61
and 62. Sources: State of Israel Central Bureau of Statistics, Israel
Customs Authorities, and the Israeli Ministry of Trade and
Industry.

Best Sales Prospects

According to the Israeli Central Bureau of Statistics, the
average monthly household expenditure on footwear and clothing in
1997 was between NIS 383-530 ($100-$140).
Teenagers and young adults (ages 15-29) make 25% of the Israeli
population (1.5 million) and the largest consumer group for the
sportswear and casual apparel market.
The Big and tall market, and Women=s plus size market are not fully developed in Israel and therefore considered as best
prospect.
B. COMPETITIVE SITUATION

Domestic Production

According to the Statistical Abstract of Israel, in 1997, there
were over 1,500 established apparel manufacturers with more than
20,000 employees in the industry. Revenues for the apparel
industry in 1997 were $1.5 billion, a decrease of 6% from 1996.
Domestic production accounts for about 70% of the apparel market. The increase in minimum wage, high interest rates, and erosion of
the dollar exchange rate had a major impact on the Israeli
apparel industry in the past 3 years. Anticipated continued
structural changes and cooperation between countries in the
region are anticipated over the next several years.

The Israeli Apparel industry is changing. Traditionally a minimum
wage industry located in developing towns where large government
financial incentives were available, it is now relocating its
manufacturing facilities to neighboring countries.
In March 1998, the U.S. Trade Representation (USTR) designated
the Irbid duty free zone in Jordan as a qualifying Industrial
Zone (QIZ). The designation allows goods processed in the zone to
be eligible for duty free entry into the United States if
production involves substantial economic cooperation between
Israel and Jordan. Following this action, Israel and Jordan
ratified a bilateral agreement between them to create the Irbid
Zone and to establish a joint committee to identify businesses,
which meet the test of Israeli-Jordanian private sector
cooperation within the zone. Apparel industry is considered
number one for this zone.

To qualify for the free trade, U.S. law requires that at least 35
percent of the appraised value of the product will consist of the
value of materials produced and/or the cost of processing
operations performed in the QIZ, Israel, the West Bank, or Gaza.
Following the designation of the QIZ and the extension of duty
free privileges, major Israeli apparel manufacturers moved their
production to the QIZ. One hour of labor in Jordan costs $1,
compared to $8 in Israel. Joint ventures between Israel and
Jordan are based on products being cut in Israel, sewed in
Jordan, finished in Israel and shipped to the U.S. QIZ do not
have similar agreement with the E.U. and therefore, almost 100%
of their production is shipped to the U.S. In 1998 total exports
from the joint production zones were $100 million. Industry
experts forecast a 7% increase in revenues for the next 2 years,
resulting from regional cooperation and trilateral agreements.
A new industrial zone has been developed in the Gaza Strip,
called the Gaza Industrial Estate (GIE), providing production
facilities and related services. GIE is also a recognized free
trade zone with the U.S.
The Israeli Buying office AShira International@ has recently
announced two major joint ventures in the GIE. Both joint
ventures include a Palestinian partner, an Egyptian partner, and
financing by the World Bank. Israeli buying offices serve major
U.S. department stores and mail catalogues by receiving orders
and supervising production, mainly in Egypt, Jordan and the PA.
Consumer spending is a major factor in the industry=s outlook.
The moderate growth of the economy in 1998 has resulted in modest
income growth, leading to a standstill in apparel sales. Many
consumers wait for seasonal sales rather than buy at a full
price, a habit that led to early end-of-season sales and price
reductions.
3rd-Country Imports:

Reforms of customs duties on imported apparel began in 1991, when
Customs duties on U.S. and E.U. goods were canceled. Duties on
third countries= apparel imports were lowered and have been
reduced every year since. By September 2000, duties on apparel
originating from third countries will be set at 12% and Asian
current 15% market share is expected to increase substantially. According to the Israeli Manufacturer=s Association (IMA), $40
million worth of textile products from East Asia and East Europe
are being smuggled into Israel with a bogus E.C. or USA
certificate of origin. Customs enforcement is not considered
efficient and authorities are working towards a better
enforcement.
U.S. Market Position

U.S. share in Israel=s apparel import market in 1997 was 9.3% at
$30 million. E.U. import share was 70% and third countries share
was near 15%. According to industry sources, the main reason for
U.S. small share in this market are high prices of mid range U.S.
apparel products. Another significant barrier is the minimum
quantity per purchase required by U.S. manufacturers: To increase
U.S share, exporters must be prepared to ship smaller quantities
with larger color and model variations.
Machine wash items are preferred over dry clean items. Casual
wear that needs to be dry-cleaned is not generally acceptable to
Israeli consumers. C. END-USER ANALYSIS

Israel=s population on January 1999 is near 6 million. 30% are
under age 14, 25% are ages 15-29, 20% are ages 30-44 and 25% are
45 and older.

The Israeli Army buys almost 100% of its uniform supply through
local manufacturers. Most tenders are issued in local currency
and traditional suppliers participate. U.S. exporters may inquire
about current tenders through the Deputy Head of the Defense
Mission to the United States, 800 Second Avenue, New York, NY
10017. Phone: (212)551-0200 fax: (212)551-4124.
For local tenders and MOU (Memory of Understanding between the
Israeli and the U.S. governments regarding tenders), contact Ms.
Irit Wolff, Commercial Specialist, U.S. Embassy in Tel Aviv,
phone: 972-3-5197540 fax: 972-3-5107215.

Top of the market U.S. designers: Calvin Klein, DonaKaran, Polo-
Ralph Lauren etc. opened showrooms in Israel=s most expensive
shopping areas next to European designers. This segment caters
the top high-income bracket population.
D. MARKET ACCESS

Import Climate:

In 1985 the U.S. and Israel signed a free trade agreement which
canceled all import restrictions for US apparel products. No
import licensing is required. The few standard regulations, which
apply to sizing and working garments, can be obtained through the
Israel Standard Institute Internet site http://www.sii.org.il

Garments must bear a Hebrew language label. The label must be
made of a woven material and include name, address and telephone
number of importer, country of origin (material, and Aassembled
in@, if different), material composition in percentage, and care
instructions, written or in graphics.
Labels must be attached or sewn on the garment. It is now
admissible to attach the labels on in a bonded warehouse in
Israel where Customs employees perform the job prior to Customs
clearance for an average of 30 cents per piece.
U.S. and Israeli clothing size equivalents:

Men=s trousers:

U.S. 32 34 36 38 40 42 44

Israel 42 44 46 48 50 52 54
Women=s clothes:

U.S. 8 10 12 14 16 18 20

Israel 38 40 42 44 46 48 50
All imported goods are subject to a 17% Value Added Tax (VAT).

Random checks are performed by the Customs Authorities to control
the import of imperfect, second quality items, which are not
allowed by law.
According to the U.S.-Israel Free Trade Agreement, Certificate of
Origin is required and must be shipped along with goods. Forms
can be obtained at: The America-Israel Chamber of Commerce in NY
(212-661-4106) and Chicago (312-641-2937); export forms companies
such as Unz and Co. (1-800-631-3098) and the Apperson Company
(1-800-438-0162)

Distribution/Business Practices:

Chain store membership clubs offer an every day discount of 20-40
percent on goods storewide. Other stores offer a multi-chain card
that accumulates points on each purchase at participating stores.
Points can be traded for a selection of gifts.

For instance, Shekem Gallery chain store has issued over 100
thousand membership cards. Annual membership fees are NIS 150
($36). The use of Diners Credit Card with the Gallery Card,
doubles the credit points given on each purchase and increases
card holders= chances to win free gifts and weekend trips. Shekem
Gallery=s annual spending on advertising is $1 million.
Hamashbir Warehouses has opened 15 stores since 1994. Targeted at
low-income populations, their membership card costs NIS 69 ($17)
for the first year. Card renewal costs NIS 49 ($12). Hamashbir
Warehouses issued over 120 thousand membership cards. Members
make about two thirds of this chain store=s total sales.

Discount and Outlet stores are considered to be the best distribution channels for the apparel market. Large shopping
centers are located outside major cities and remain open 7 days a
week. Providing food amenities and free parking, those centers
are most popular among weekend shoppers.

Financing:

Payment terms are negotiable. The most common financing is by
letter of credit, paid 30-90 days upon shipping. Payments to
domestic suppliers are within 90 days of shipping. Consumers are
given the choice to make 3-6 monthly payments with 0% interest
rate. Open accounts without LC are also acceptable but not
recommended for first time deals.

Trade Promotion Opportunities

Israeli buyers visit all major apparel shows in Europe. Post
recommends inviting Israeli buyers to U.S. companies exhibition
booths in Europe.

Buying offices in New York and other major cities in the U.S. are
encouraged to invite Israeli buyers to their shows. The
opportunity to consolidate orders with those of large U.S.
department stores gives the Israeli buyers the benefit of lower
wholesale prices and greater selection.

For more information and clarifications on this report, please
contact Ms. Yael Torres at the Tel Aviv Foreign Commercial
Service: phone: 972-3-5197611 fax: 972-3-5107215 e-mail:
ytorre@mail.doc.gov
Key Contacts:

Israeli Government:

Israel Ministry of Industry and Trade
Apparel Import Division - Regulations
Contact person: Mr. Shmuel Somech
phone: 972-2-6220238
fax: 972-2-6233369

Manufacturer=s Association
Textile Division
Contact person: Mr. Zvika Liebermann, General Manager
phone: 972-3-5198854
fax: 972-3-5198705

Israel Export Institute
Textile and Fashion Division
Contact person: Ms. Sorina Meiri, Manager
phone: 972-3-5142860
fax: 972-3-5142881
e-mail: sorina@export.gov.il
http://www.export.gov.il
Chambers of Commerce:

Federation of Israeli Chambers of Commerce
The Information Center
84 Hahashomonaim Street
Tel Aviv, Israel 67132
Contact person: Israel Forma, Director
Phone: 972-3-5631022
Fax: 972-3-5622274
http://www.tlv-chamber.org.il

Israel America Chamber of Commerce & Industry
America House, 35 Shaul Hamelech Blvd.
Tel Aviv, Israel 64927
Contact person: Mrs. Nina Admoni, General Manager
Phone: 972-3-6952341
Fax: 972-3-6951272
http://www.amcham.co.il
Chain Stores:

Hamashbir Fashion Warehouses Ltd
76 Igal Alon Street Tel Aviv, Israel 67067
contact person: Mr. Yossi Feit, General Manager
phone: 972-3-6233033 972-3-6233005
fax: 03-6233006
Importer and retail chain of warehouses for men=s, women=s and
children clothing and footwear.

Super-Sol Ltd
39 Hasivim Street
Petah Tikva, Israel 49517
Contact person: Mr. Rami Steinberg, Non-food division-Apparel Phone: 972-3-9481203
fax: 972-3-9243019
Supermarket chain, food and non-food.
http://www.supersol.co.il

Golf Kitan Fashion Stores Ltd
57 Pinhas Rosen Street
Hadar Yoseph, Tel Aviv Israel 69512
Contact person: Mrs. Elana Koufman, General Manager
Phone: 972-3-6451515
Fax: 972-3-6476822
Fashion chain stores for retailers.

Honigman & Sons Ltd.
58 Salame Rd., Tel Aviv, Israel 66074
Phone: 972-3-6811111 Fax: 972-3-5180575
Manufacture, Export, Wholesale, Retail: Women's and children's
outwear.
Legal Status: Private Company
Senior Management: Yaacov Honigman, Micha Honigman.

Polgat Chain Stores Ltd
7 Hasivim Street
Petah Tikva 49170
contact person: Rian Rozenthal, General Manager
phone: 972-3-9251515
fax: 972-3-9213568
activities: import and retail stores, men, women.
Manufacturers:

Tango Ltd.
10 Galgalei Haplada Street
Herzlia, Israel 46722
Phone: 972-9-9592001, 972-9-9592031
Fax: 972-9-9571326
Manufacture, Wholesale, Export of Textile goods, Jeans and
dungarees - Mfg.
Legal Status: Private Company
Parent Company: Kitan Consolidated Ltd
Senior Management: Ilana Carmeli

Delta Galil Industries Ltd.
2 Kaufman Street
Tel Aviv, Israel 68012
P.O.B. 137 Carmiel, Israel 21610
Phone: 972-3-5193636, 972-4-9903636
Fax: 972-3-5193705
Legal Status: Public Company
Classifications: Manufacture, Marketing, Export: Underwear, knit,
Hosiery, Knit outwear, Cotton yarn, spun, Underwear fabrics,
Brassieres. Manufacturer of international label underwear: JC
Penny, DKNY, ANF, Edie Bauer, Calvin Klein, Banana Republic,
Victoria Secrets, Gap, Hanes, and others.

Castro Model Ltd.
35 Ben Zvi Rd.
Tel Aviv, Israel 68103
Phone: 972-3-6814424 Fax: 972-3-6836276
Legal Status: Public Company
Classifications: Manufacture, Marketing, Export, Import Women's
and misses' outwear, nec, nec - Mfg. Women's clothing stores-Ret.
Senior Management: Aharon Castro, Lina Castro.

Gottex Models Ltd.
1 Yonathan Netanyahu Street
Or Yehuda, Israel 60200
P.O.B. 9233 Tel Aviv, Israel 61091
Phone: 972-3-5387777 Fax: 972-3-5333412
Legal Status: Private Company
Classifications: Manufacture, Marketing, Export: Bathing suits:
women's, misses', and juniors'-Mfg. Bathing suits and swimwear:
men's and boys' - Mfg. Beachwear: women's, misses', and juniors'
- Mfg. Women's and misses' outwear, nec - Mfg. Uniforms, athletic
- Mfg.
Subsidiary Companies: GOT-ELI LTD. GOTTEX EUROPE S.R.L.
Senior Management: Lea Gottlieb-President, Miriam Rozov-Director,
Yehudith Gottfried-Director.

Kitan Consolidated Ltd
57 Pinhas Rosen Street
Hadar Yoseph, Tel Aviv Israel 69512
Contact person: Gidi Lax, General Manager
phone: 972-3-6451515, 972-3-6451522
fax: 972-3-6498605
Manufacturer and exporter of top labels: Royal Sateen, Benetone,
Esprit and others: Home textile and apparel.
BUYING OFFICES:

SHIRA INTERNATIONAL Ltd
2 Kaufman Street
Tel Aviv, Israel 68012
Contact person: Dany Ruschin
phone: 972-3-3352870
fax: 972-3-3353309
Service: Speigel Catalog, New Port News etc.

NOMAR 1994
Textile and Fashion Center
2 Kaufman Street Tel Aviv, Israel 68012
Contact person: David Simha, Director
phone: 972-3-5162447
fax: 972-3-5161929
Service: Sears, Nordstrom and Lerner mail order Catalogues.

SESBY Ltd
5 Hilazon Street Ramat Gan, Israel 52522
Contact person: Yoram Radoshitzky
phone: 972-3-7522623
fax: 972-3-7510760
Service: Liz Claiborne, Tommy Hifiger, Levi=s, Gymboree, Casual
Corner and others.

DISCLAIMER
Information in this report relies on sources including Government Publications, Opinions of industry experts and other public sources. Infomat can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. All prices subject to change without notice.

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Published: 2006 August
Market: Mens Womens Childrens
Region: Israel
Industry: Apparel
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