Peter Herrmann stirs his coffee, calmly ignoring the frantic activity all around him. Hordes of shoppers are filling the Lago shopping center in Konstanz, a city on Lake Constance in the southwest corner of Germany. But the shoppers aren’t local – the Swiss German dialect resounds through the mall.
Mr. Herrmann is happy to hear the voices as he manages the mall, which was opened ten years ago and targets Swiss tourists as the border is only a few miles away. Its 70 stores are the big winners of the surprise decision last week by the Swiss National Bank to let the Swiss franc exchange rate float freely.
Cross-border shopping had already been worthwhile for the Swiss when the exchange rate stood at 1.20 francs to the euro. But now that the euro is worth less than a franc, the hunt for bargains has truly begun.
When he heard about the central bank’s decision on Thursday, Mr. Herrmann advised his leaseholders to stock up on goods and personnel at the weekend. “We had about eight percent more customers than on a normal weekend,” he said.
“We had about eight percent more customers than on a normal weekend.”
Inside the Tommy Hilfiger store, Micheal from central Switzerland is buying €277.50 ($323) of new clothes. “At this exchange rate, the purchase is naturally really worth it,” says the 41-year-old mechanical engineer.
Yet he harbors misgivings, even though he considers the controversial decision by the bank to be correct. “This exchange rate is a real problem, particularly for the Swiss mechanical engineering industry and tourism. Good thing we’re not in the E.U.,” he says.
The Swiss shoppers save in three ways. For example, in the Swiss online shop of the fashion retailer Esprit, the cost of a jacket is CHF269 (€264). In Germany, the same jacket is sold for €169.99.
Additionally, shoppers receive an export certificate, which means they can claim back German VAT (value added tax) at the border. And any goods worth less than CHF300 are not subject to Swiss VAT when they re-enter the country.
Many businesses in Lago offer to reimburse the German VAT when customers return to make another purchase. Mr. Herrmann says with a chuckle, “There isn’t a better customer loyalty program.”
Opposite the Humanic shoe store, a line forms at an ATM. Euro notes are getting harder to come by in Switzerland so the Swiss stock up while they can.
Last year, Swiss citizens spent around €9.81 billion (CHF10 billion, $11.4 billion) on shopping outside the country with about half going to German retailers.
“We’re selling goods today that we normally have a hard time selling,” a Humanic saleswoman says. “The Swiss want to spend their money quickly.”
Swiss retailers are suffering as a result. Last year, Swiss citizens spent around €9.81 billion (CHF10 billion, $11.4 billion) on shopping outside the country with about half going to German retailers. This year, industry experts estimate Switzerland’s loss will rise to €10.79 billion.
Yet the Swiss remain pragmatic. For example, to deal with the expected rush of shoppers, the Swiss railway added an extra car to each train headed in the direction of Konstanz.
Michael Hufenüßler, a pharmacist who runs the Lago Apotheke, is also ready for the crowds. “We’re sure to have 15 percent more customers than usual,” he says, “So, twelve employees are working this Saturday instead of eight.”
While Swiss women tend to buy cosmetics and medications, Swiss men take advantage of the cheaper price of prescription drugs, Mr. Hufenüßler says. Viagra is especially popular. “Our price is €50,” he says. “In Switzerland, it’s around CHF350 (€398). You can only get it with a prescription.”
German retailers are no doubt grateful for the boost.
The author is Handelsblatt’s correspondent in Switzerland. To contact the author: Alich@handelsblatt.com