Swiss shoppers head out on cross-border runs

Rheinfelden: The concrete road bridge that links the picturesque Swiss border town of Rheinfelden to its German twin across the Rhine has been unusually busy this year.

Weekend traffic jams have become commonplace, as price-conscious Swiss shoppers choke the crossing on their drive to the cheaper Eurozone to stock up on goods that are often a third more expensive on their side of the border. A phenomenon the Swiss press have dubbed “franken-schock” has become so big that many in Switzerland fear the impact on the economy.

“I understand a single mother with three children wanting to get through to the end of the month,” says Kevin Kunz, owner of the Pajarola Herrenmode clothing boutique on the Swiss side of the river. “But it’s not just people short of money that are making the trips. Swiss people are losing jobs and this has a negative impact on our social system.”

The flight by investors towards safer assets since the start of the global financial crisis has made the Swiss franc expensive. In an era of “currency wars” — where finance officials are keenly aware of the boost a cheap currency can provide to exports — Switzerland has found itself among the most bruised.

The rush for francs led the Swiss National Bank to introduce a controversial currency ceiling against the euro in 2011. But since the central bank scrapped the measure in January, the Swiss currency has surged 11 per cent against the single currency to 1.08 (Dh4.50).

This has exacerbated already sizeable price differences between Switzerland and the rest of Europe. At a mini-market in the Basel Bad station, a single Mars Bar costs Sfr1.40. But just 15 minutes away at a supermarket in Germany, a six-pack of the same chocolate bar can be bought for 1.59 (Sfr1.71).

While the comparison is not exact, research carried out by Preisbarometer, a price comparison company, found that Swiss supermarkets charged between 31-36 per cent more than French hypermarket Carrefour, and 33-39 per cent more than Kaufland, the German chain.

Swiss living close to the border have long gone grocery shopping in France or Germany, and taken advantage of lower prices for services such as dental care. This year, however, the strong franc has meant the Swiss are also shopping for bigger ticket items such as electrical goods and clothing abroad. The latest Swiss retail sales figures, for June, show a fall in turnover of 0.9 per cent compared with the same month last year.

Locals in Rheinfelden report that shoppers from cities such as Lucerne and Bern, about a 90-minute drive from the border, are increasingly journeying across the German border to shop.

Bakbasel, a consultancy, expects Swiss retail sales to fall 2.1 per cent in value this year compared with 2014 — the steepest decline in 35 years. Consumption makes up more than half of Swiss gross domestic product. Switzerland’s economy contracted 0.2 per cent in the first quarter of 2015, primarily due to a collapse in exports.

The bad news for Switzerland’s retailers is that analysts believe the franc could continue to appreciate further as the European Central Bank sticks with its plan to buy more than 60 billion in mostly government bonds per month under its 1.1 trillion quantitative easing programme. It was the expectation of ECB QE that pushed the SNB to abandon the currency ceiling in January.

The stronger franc does have some benefits, such as allowing Swiss retailers to profit from lower import prices. Inflation was minus 1.3 per cent in the year to July.

But higher fixed costs for wages and rent limit the degree to which shopkeepers can pass on those lower prices to customers while maintaining profit margins.

All this has left retailers such as Kunz seeking new ways to attract shoppers, including offering exclusive products and playing on Switzerland’s reputation for high-quality goods. “The only way you can survive is to be different. We have dealt with the strong franc by buying brands that no one else has,” he says. “In some ways that makes it easier for us than for chain stores.”

Financial Times