Dead Sea beauty kiosks are turning over millions of dollars - despite continual complaints about aggressive and deceptive sales tactics. Tony Wall reveals who is behind the kiosks, and why the malls won't clamp down on them.
The money flowing through Dead Sea beauty kiosks is staggering, according to insiders. Sources familiar with the Israeli-run operation here and overseas have told the Sunday Star-Times it's a licence to print money.
"They're literally doing 10 to 12 grand a day per stall, and that's a bad day," an informed source claimed of the New Zealand business.
A source involved with Dead Sea companies in the United States at corporate level - who has seen accounts for a single kiosk at a mall in Las Vegas - said it was making profits of up to US$250,000 a month, or US$3 million a year.
"The real money is made at Christmas, it's crazy," he said. "I was blown away by how much these guys were generating, it just got bigger and bigger every year."
The source claimed the US operations avoided tax by sending profits back to Israel and paying staff their commissions from there.
Dead Sea kiosks began in the US about a decade ago but expanded around the world, reaching New Zealand and Australia around 2010 when the market in the US became saturated.
The US source said he was speaking out because he felt the businesses there were unethical, charging customers who were perceived as wealthy hundreds or even thousands of dollars for beauty products that cost only a few dollars to produce. Customers perceived as "poor" would be charged a fraction of that, he claimed.
"They are predators, it's just an ugly business."
In this country, malls are themselves making huge money from renting space to Dead Sea kiosks, which is why they won't move against the kiosks even though there are complaints from shoppers, insiders say.
The Star-Times arranged for someone to call a Westfield leasing manager to inquire about rental prices for a 9sqm site in the thoroughfare of a mall. He was quoted $90,000-$124,000 a year, depending on whether it was a "prime" location.
"You actually pay more for a prime spot [in a mall] than you do for a shop," a source said. "It's walking space, there's no extra lighting or amenities or anything, it's almost like a gross profit to the shopping centre."
Several people told the Star- Times they had complained to mall management about Dead Sea sellers but had been told "we're just the landlord".
Jessica Wilson, a researcher for Consumer NZ, said the malls needed to take any complaints of harassment seriously.
"We've had reports from consumers where the mall has helped to resolve a problem with a kiosk, however, this hasn't always been the case. In our view, the mall management has a responsibility as the landlord to respond to complaints about the behaviour of kiosk staff."
Westfield spokeswoman Linda Trainer insisted the company took customer complaints seriously, but would not say if a Dead Sea kiosk had ever had a lease terminated.
She said all operators had to comply with legislation such as the Fair Trading Act and Consumer Guarantees Act and Westfield had the right to revoke a licence should an operator fail to comply.
She wouldn't discuss Westfield's commercial arrangement with the Dead Sea kiosks, but said "all negotiations for space are market- led, and a number of factors determine the value, for example location within the centre".
The US source said malls there started off charging as little as US$1500 a month in rental, but now charged around US$25,000.
Bidding wars had broken out in places like Las Vegas, with malls awarding rental space to the highest bidder, and there had even been shootings as operators fought for control of the Dead Sea carts.
"The shopping centres know what's happening, they are even worse in my opinion - every year they keep putting the rent up. I wrote to a president of a mall saying 'this is criminal what you're allowing here'," the source said.
Napier Grandmother Debbie Dagg said she felt she had been "scammed" by a Dead Sea seller at a mall in Palmerston North. She thought she was getting four nail kits for $99 but got home and found her card had been debited $200.
She felt the saleswoman had deliberately distracted her.
"I paid by eftpos and she kept me busy with her chatter, asking my name and complimenting me, telling me she was from Israel, that she had done two years' military training and on it went.
"I feel sick to think I gave them $200 of my hard-earned money, I'm a solo grandmother raising a grandchild and working for a living."
Dagg eventually got hold of the kiosk manager and got a partial refund.
An Auckland grandmother in her 70s, who asked not to be named, said she too fell for the saleswoman's repartee at a mall in Albany, north of Auckland. She said the seller demonstrated a number of products and she agreed to buy some, but lost track of the prices. When she later got her bank statement, it showed she had spent $470.
"I feel foolish. I don't know what was wrong with me, really. I didn't realise the second lot [of products] was so expensive."
She complained to mall management. "They said 'we're only the landlord here'. They gave me a number for the [kiosk] head office and said 'good luck'."
The woman said she eventually had $70 refunded. In a shocking case last year, a man with Asperger's syndrome had his credit card and bank account debited $6232 by a Dead Sea operator at The Plaza in Palmerston North in 17 separate transactions in one day.
The Manawatu Standard reported the man was left broke and suicidal. His money was eventually refunded.
LVS Retail and Dead Sea Beauty (2006), the related companies behind most of the Dead Sea kiosks in New Zealand, issued a statement through their lawyers saying customers were "not forced or intimidated in any way". If a customer wanted to return goods, the companies would abide with the law at all times.
The statement said the companies had "letters of thanks and customer appreciation which show a high level of satisfaction".
The kiosks employed workers from a number of different countries, not just Israel, and they were all legal, the statement said. The New Zealand businesses were in no way connected with operations in the US.
The Israeli embassy says it knew of cases of Israeli citizens being apprehended for "illegal commercial activities" and had informed Jerusalem. A note warning travellers to abide by New Zealand laws had been placed on the website of Israel's Ministry of Foreign Affairs. Immigration New Zealand said its compliance officers had regularly visited malls in Auckland, Palmerston North, Wellington and Christchurch since becoming aware in 2011 that foreign nationals without authority to work in New Zealand were selling Dead Sea cosmetics.
Dozens of illegal workers were rounded up in raids and many deported, but Immigration NZ says all now seem to be legal.
This follows the introduction, in November 2011, of an Israeli Working Holiday Scheme, under which 200 Israelis each year receive visas that allow them to work here temporarily.
Tony Kan, president of Friends of Israel, said he was concerned that the aggressive sales tactics of the Dead Sea sellers could contribute to "negative stereotyping" of Israelis and Jews.
"Some of it can be due to a cultural misunderstanding. Having travelled in the Middle East and also in Asia I have encountered enthusiastic salespeople which seems normal in their context but would be seen as aggressive in ours.
"It may be that they haven't realised that what is normal there, may not be culturally acceptable here.
"In our experience, once disinterest is clearly expressed the [sales] pitch ends pretty quickly."
THE STORY SO FAR
April 2011: The Star-Times reveals Immigration officers raided Sylvia Park shopping centre in Auckland, where they found young Israelis working illegally selling Dead Sea beauty products. Others fled before officials could catch up with them. Some of the workers said they were "volunteers" doing it "for Israel".
August 2011: A previously secret diplomatic cable by US ambassador to Israel James Cunningham , released by WikiLeaks, alleges the Dead Sea industry involves immigration fraud, illegal labour, money laundering and worker exploitation, and is worth $1 billion.
May 2012: The Star-Times reports Israelis working for a Dead Sea beauty product company trashed a rental property in Cambridge, using it as a warehouse and causing $24,000 damage.
- Sunday Star Times
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