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Swiss Seeking Bargains Abroad Shrink Supermarket Sales

Swiss retailers are struggling this holiday season to curb cross-border shopping after patriotic appeals have failed to stem a growing flow of bargain hunters to supermarkets and shops in neighboring France and Germany.

“Other than soap, everything is cheaper,” said Yannick Majors, a 79-year-old language teacher, who makes a 20 minute drive every Saturday from her Geneva suburb to buy groceries in a Carrefour store in the French border town of Divonne-les- Bains. “I’ve yet to meet a Swiss person who wouldn’t go over the border if they felt they could save money.”

While Switzerland has Europe’s highest concentration of millionaire households, almost half the country’s shoppers will make some purchases in euros this Christmas, a Dec. 3 survey by Deloitte LLP showed. That is depressing Swiss retail sales as the franc’s 24 percent gain against the euro over the past three years spurs residents to pour through hundreds of often unmonitored border crossings with France, Germany, Italy and Austria in search of discounts.

The Swiss currency’s strength, along with pressure from higher rents and health insurance, will help push cross-border shopping up by about 60 percent to as much as 8 billion francs ($8.8 billion) this year from 2011, according to the Swiss Retail Interest Group.

Job Drain

The cross-border appeal threatens the jobs of some of Switzerland’s 370,000 retail workers as sales in the 100 billion-franc industry fell 1.7 percent in 2011, the steepest drop in 15 years, according to Economiesuisse, a pro-business lobbying group in Zurich.

Revenue lost to cross-border shopping would support as many as 21,500 Swiss retail jobs, according to Migros, the country’s second-biggest retailer, behind Coop.

Both Migros and Coop say cross-border shopping depressed profit in 2011 as they cut prices to lure back customers. Net income at Coop dropped 8.1 percent to 432 million francs, while Migros reported a 26 percent decline to 662 million francs.

“Consumers have discovered shopping abroad,” said Claude Maurer, an economist at Credit Suisse Group AG in Zurich. With the franc’s appreciation, “goods abroad suddenly became a lot cheaper.”

Reversing the trend became more difficult last month when a Swiss consumer website, part funded by the government, publicized price differentials for more than 700 products at stores in Switzerland and neighboring countries. Swiss retailers called for the site to be shut down, saying it was encouraging shoppers to cross the border.

Cheap Heineken

“It’s less expensive for most things, especially meat, and I probably save about 50 percent,” said Mireille Raphael, a 60- year-old retiree from Geneva who does about half her shopping in France.

The price-comparison website, barometredesprix.ch, showed 100 grams of Lindt chocolate could be bought for the equivalent of 1.53 francs at Casino in France, 40 percent less than Coop charges in Switzerland. Gillette Fusion razors cost the equivalent of 14.44 francs at Kaufland in Germany, versus 24.90 francs at Swiss store Manor. Three liters of Heineken beer costs 12.90 francs in Coop stores, while Austria’s Billa charges the equivalent of 8.55 francs, according to the website.

While the retailers say they passed on lower costs of imported products to customers -- Coop cut prices by 2.4 percent in 2011 and Migros by an average 3.9 percent -- that isn’t enough, according to Mathieu Fleury, head of the Consumer Federation of French-Speaking Switzerland.

“The situation is unsatisfactory, to say the least, with two giants that dominate the market,” he said. “People are voting with their feet.”

Patriotic Appeal

The trend has been a boon for France’s Carrefour (CA), which has seen profit shrink amid a slump in revenue in its domestic market. Third-quarter sales at the world’s second-largest retailer rose 2.1 percent to 22.6 billion euros ($29.9 billion).

The Swiss Trade Association, a grouping of small and mid- sized companies, has appealed to patriotism by handing out 600,000 shopping bags emblazoned with the Swiss cross.

“By shopping in Switzerland, they’re doing something for the Swiss economy,” said Henrique Schneider, chief economist at the trade association. “It’s about saying yes to a whole economic system that makes you better.”

Higher prices partly reflect labor costs. Cashier salaries start at about 3,850 francs monthly, more than double the wage for a similar job in France, said Guy Vibourel, head of Geneva operations for Migros.

No Ferraris

More stringent restrictions on opening hours and stricter Swiss environmental and hygienic regulations also boost prices, said Vibourel, adding that foreign suppliers routinely charge more than they would in Germany, Italy or France.

Swiss lawmakers have proposed asking Germany to scrap tax refunds on purchases made across the border. Coop has suggested making it easier for Swiss retailers to buy from sources other than authorized distributors in the country -- in effect trying to do a bit of cross-border shopping itself.

“Coop and Migros are under big pressure,” said Damian Kuenzi, an analyst at Credit Suisse in Zurich, adding that Swiss retailers are limited in the price cuts they can make.

Geneva and Zurich ranked as two of the three most expensive cities in the world for food with a typical shopping basket costing almost a third more than in New York, according to UBS AG. That makes cross-border shopping particularly appealing to poorer Swiss residents.

“The people who come here have limited incomes,” said Thierry Job, manager of Carrefour in Ferney-Voltaire, France, where half the cars outside have Swiss license plates.

“You won’t see any Ferraris in the parking lot,” Job said. “Wealthy people don’t need to go shopping over the border.”

To contact the reporter on this story: James Kraus in Geneva at jkraus2@bloomberg.net

To contact the editor responsible for this story: Mariajose Vera at mvera1@bloomberg.net

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