For years, the French shopkeepers of Val Thoiry were making a killing selling to the Swiss. The tide may now be turning.
The Louis Pion watch boutique just across the border from Geneva at the foot of the Jura mountains was one of the merchants that saw business boom after the franc appreciated nearly 20 percent against the euro within just a few days back in 2015. In one case, a man just walked in and snapped up two Swiss-made, 1,000-franc Tissot T-Touch watches, for himself and a friend.
Not anymore, says Hermosinda Becerra, the saleswoman running the shop on a quiet Monday in April. With the franc dropping 9 percent over the past year, she estimates visitors from across the border have dropped by about a third.
“The showroom floor has been calm for a few months now,” said Becerra. Louis Pion is located inside Val Thoiry’s shopping mall, a magnet for Swiss shoppers just a 10-minute drive from the border. Sometimes, particularly on Saturdays, Swiss license plates outnumber French ones in the car park.
The franc’s rally versus the euro for much of the last decade meant the Swiss increasingly took advantage of prices in neighboring France, Italy, and Germany that were typically significantly lower. Credit Suisse estimates there were 24 million cross-border shopping trips in 2015 — three times Switzerland’s population.
Swiss retailers responded by cutting prices. Still, that wasn’t enough to stem a 25 percent revenue drop for domestic clothing retailers over the seven years starting in 2010, according to an estimate from BAK Economics AG, a Swiss economics consultancy.
Earlier this month, the franc fell to 1.20 per euro, the level the Swiss National Bank once defended via a currency cap, for the first time in three years. While that was welcome news for exporters and the tourism sector, for shoppers the incentive to cross the border just got a lot smaller.
Since Switzerland isn’t in the European Union, its residents can claim back sales tax on purchases exported to Switzerland. German customs office data indicate there have been fewer cross-border shoppers. In Loerrach, the German town bordering the city of Basel, tax refund applications dropped 1.3 percent last year. In Singen, which abuts Switzerland by Lake Constance, the pattern is similar, with receipts down 4 percent in 2017 versus 2016.
The same thing is happening in Annemasse, another town just over the border from Geneva. Applications for a tax refund are also down significantly, in part because of the currency, said Maica Desormiere, head of the local business association.
“Of course it’ll be a bit less of a deal for us but for the economy, it’s better,” said Ernst Stalder, a pensioner with cropped silver hair who likes to pop across the border to the German town of Waldshut-Tiengen to tap lower prices there. The franc is going “in the right direction,” he said, even if “holidays get more expensive.”
Better momentum in the euro area and the weaker currency are good news for export-reliant manufacturers, which should contribute to a pickup in overall economic growth this year. For 2018 it is forecast to expand at its fastest pace in four years, according to the central bank.
Yet the franc’s weakening will do little to erode Switzerland’s position as a country with eye-watering prices and wages. The same white Billy bookshelf cost 39 euros ($47.50) in Germany and 59.95 francs ($61) in Switzerland, a check of Ikea websites this week showed. A box of Persil detergent sells at 5.49 euros at a popular German drugstore, while it tallied 13.50 francs in Switzerland.
Back in France’s Val Thoiry, not all retailers have a drop in traffic to report. At the Histoire d’Or jewelers, business is still brisk, said manager Celine Auener. Anywhere from 30 percent to 50 percent of clients are Swiss on a given day, she said. “I haven’t seen a drop for now, but it may come.”
A few doors down at an outlet of French wine chain Nicolas, store manager Mickael Thiec fondly remembers the January 2015 boom. Sales were up by 20 percent that year as a result, he said. Revenue stayed high in 2016 and 2017 as Swiss shoppers, appreciative of their new-found purchasing clout, kept coming.
So far, Thiec says he hasn’t seen a noticeable decline but is bracing for it to come. “But over time,” he said. “The 1.20 mark was passed last week but shoppers haven’t really registered it yet.”
This article was written by Catherine Bosley and Hugo Miller from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to email@example.com.