Relative to driving up to Costco and carrying away a truckload of groceries and gadgets, shopping in Israel is hard. It is very dependent upon when you go and where you go. If you are shopping on Shabbat, you are most likely in an Arab souk where prices are not posted and haggling is expected. If you are shopping on Friday, you are most likely in a crowded Jewish store where prices are non-negotiable. Don't get the two confused!
Daily shopping:
Jewish stores are closed on Shabbat and they start closing at ~2:00 p.m. on Friday so they can get ready for the Shabbat dinner. If you need something from a mall on the weekend you have to fight with everyone else. If you don't like fighting for space, go early (before 11). Remember: security guards check all cars going into parking garages. Stop politely and open the trunk. The guard will look in your backseat and your trunk and then pass you through. Don't try to talk with him in English--it just makes him suspicious. Guys will be wanded at the entrance to the mall. Women will have their purses inspected. Mall parking gets creative and dangerous on Friday. If you want to avoid the crowds, shop on Sunday evening after work.
For groceries, if you shop at Sufersal (red and white logo), register your address for a saver card. This is like a Safeway Club Card in the states and it is very good to have. We saved a bundle on 2 for 1 deals.
For a fun and cheap lunch, go to the malls or a market on Friday. Malls host smaller stalls with farm-fresh groceries or special breads or cheeses. The cheese stall in the Haifa mall near Matam is especially good.
If you're looking for a special souvenier:
Craft stores:
A very special find is Foad Halbe's Druze Crafts in Daliyat Ha Carmel. On the main street he is just across the way from several restaurants, on the northern end of town. Go there! He sells Druze Glass and hand-weaving wholesale. This has been the highlight of many shopping trips. The restaurant next door is very good as well.
Magdal in Ein Hod. Magdal works with ceramics in this artist village, just east of the cafe. Look for the brightly colored pottery. She's amazing.
St. Patrick's, Milk Grotto Street in Bethlehem. This store run by Louis has some of the best reasonably priced olive-wood souveniers in Bethlehem. It may not be high art, but it's nice enough to display on the shelf. Best olive wood souveniers in all of Israel! We love the angel we got there.
Arab Markets:
My favorite market for driving hard bargains is Daliyat Ha Carmel on Fridays. On Shabbat the place is incredibly crowded, but on Fridays you can get some great deals.
Jerusalem has the biggest market with the best selection. If you want something that looks Middle Eastern, this is the place to shop. Prices are steep and negotiations aggressive but the variety is excellent. It is also the best place to people watch if you aren't being crushed by the crowds on Via Dolorosa.
Akko is my favorite souk to wander. It has a fair selection (we really like the shop just south of the Knights Hall) but the fish market, the spices, and the old city make it a fun place for pictures and general ambience.
Nazareth is ok if you want olive wood carvings but aren't going to Jerusalem or Bethlehem. Prices are better in the off-season when Christian tourists are few and far between.
Jordan:
If you have time to go farther afield, the markets in Aqaba, Jordan beat anything in Israel. My favorite place there is Hilawi on the Jeweler's street. He makes custom beautiful beaded jewelry out of local stones. Great prices, great place. It's also a good place to by dallahs. We got ours at a store on the road to Petra (which might have been a tourist trap) but never saw anything so nice in Israel.
Tel Aviv:
Shopping is excellent if you want a piece of the hip, trendy vibe in the city. It seemed to specialize in designer clothing. The store at the Bauhaus Center on Dizengoff had some very cool decorative art. The craft fair on Friday morning was interesting but slightly overwhelming. If you like hamsas, that's the place to find one. Just don't try to shop on Shabbat. You will be sadly disappointed.
Shopping is more personal in Israel so have fun with it, meet people, and enjoy! It's not Amazon.com, and that's the joy and challenge of it.
Pal, Bethleem is not "in Israel", it's in the state of Palestine.
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