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Swiss shoppers bombarded by discount offers after currency shock
[GENEVA] Retailers are rushing to offer bargains to Swiss shoppers after a shock surge in the franc, taking advantage of lower import costs but also fearful of losing custom to cheaper rivals over the border in France and Germany.
Until last Thursday, the Swiss National Bank had capped the value of the franc at 1.20 per euro. The surprise decision to remove that limit has left the currencies virtually at parity, with one euro buying 1.01 francs on Tuesday.
The rise in the franc is expected to whack Swiss exports and tourism, but it is a boon for Swiss citizens buying imported goods or tempted to shop over the border in eurozone countries, and Swiss retailers are scrambling for their custom.
"You must have heard it already: the euro is for sale at the moment! This results in lower costs for us that we'll obviously pass on to you," said a newsletter introducing a new discount scheme at Kaufleuten, a club and concert venue in Zurich.
Two blocks away, near the headquarters of banks Credit Suisse and UBS, chi-chi clothing store Grieder has knocked a fifth off its prices. Watchmaker Roger Dubuis is lowering prices by 4-6 per cent, while rival Audemars Piguet may follow.
Bankers looking to offload a chunk of their bonus could splurge on a new Mercedes car, now discounted by 18 per cent in Switzerland. Rival Audi is also considering an "adjustment" for its Swiss customers.
Swiss media say furniture stores, travel agents, supermarkets and petrol stations have all cut prices too.
But rather than expecting a sales boom, many retailers may simply be worried about Switzerland haemorrhaging retail demand to the eurozone, where prices have long been cheaper - and just got cheaper still.
Even at 1.20, the franc was highly valued compared with before the 2008 economic crisis, when one euro would buy around 1.55 francs.
A survey by Deloitte found about 80 per cent of chief financial officers regarded a rate around parity as a disadvantage for their firm, while 1.20 was neutral and 1.30 would help them.
At IKEA in Switzerland, a "Frostig" refrigerator costs 1,299 francs. The same model costs 599 euros across the border in Germany or France.
A McDonalds Big Mac burger costs 6.50 francs in Switzerland, roughly 50 per cent more than in France. For residents of Geneva or Basel, it is little more than a drive across town to take advantage of such discounts.
"Companies are barely out of crisis mode, yet now they will need to focus on coming to terms with the appreciation of the franc," said Michael Grampp, chief economist at Deloitte in Switzerland.