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(Bloomberg) -- A 10 percent reduction in prices at Adrian Bissegger’s local Zurich supermarket hasn’t persuaded him to give up three hours of sitting in the car to collect groceries in Germany.
The banking consultant says he saves as much as 300 francs ($326) a month by buying diapers, meats and clothing across the border, an amount that increased after the Swiss National Bank ended a cap linking its currency to the euro.
“Switzerland can’t keep up with the euro prices,” Bissegger, 38, said of the discounts being offered. “The reductions are ridiculous,” as they don’t come close to making up the price difference with shopping abroad.
Since January’s SNB decision, the franc has strengthened more than 10 percent against the euro. In response, grocers including Migros and Coop have promoted discounts on imported goods in a bid to keep shoppers like Bissegger at home. That’s increasing the pressure on profit for an industry where a tenth of retail spending went abroad in 2013, and threatens to create an opportunity for discounters to erode the oligopolistic market.
The situation is uniquely Swiss -- in most countries, regularly shopping for groceries abroad is unpractical at best. In Switzerland, consumers are never more than a couple of hours from another country. Shoppers are also more incentivized as consumer goods in the country are among the world’s most expensive.
The nation’s retail industry faces the most price pressure in decades, as the KOF economic research institute forecasts a 1.5 percent consumer-price decline in 2015. That’s unusual for a market dominated by two companies -- Migros and Coop -- which together control almost 70 percent of grocery spending.
“Swiss retailers face a lot of pressure,” said Pauliina Sandqvist, a private consumption analyst at KOF. “It’s good they reacted so quickly with price cuts, but it doesn’t look so rosy.”
The situation for Migros and Coop is exacerbated by the likes of German discounters Aldi and Lidl who are armed with lower-cost euro-zone goods and ready to offer lower prices at shops in Switzerland. Aldi has built up a 3.6 percent market share. Its sales grew at a pace nearly nine times faster than the market in the years between 2010 and last year, Euromonitor data show.
“The current situation offers big opportunities for smaller retailers, in particular German discounters Aldi and Lidl,” said Daniel Latev, head of retail research at Euromonitor.
Migros expects the end of the currency cap to cut as much as 50 million francs from earnings this year, Chief Executive Officer Herbert Bolliger said in a Feb. 1 interview with newspaper SonntagsZeitung. That represents a tenth of the retailer’s operating profit in 2013, the most recent year for which figures are available.
To keep shoppers at home, the general secretary of the Consumer Federation of Swiss Romande suggests shops can reduce prices by as much as 20 percent without endangering their businesses.
“We have to find solutions to keep money here,” said Mathieu Fleury. “We tell shops to be honest and to respect consumers, and they’ll stay in Switzerland.”
Still, though the consumers who do shop abroad will pocket better deals, Migros and Coop will limit their discounts, betting that most well-heeled Swiss will pay more rather than waste time getting to a supermarket outside the country, according to Latev.
For Bissegger, that bet is off. Most of the price cuts are on smaller items, and the largest reductions are on products that were already over-priced, said the Zurich-based cross- border shopper. He’ll keep shopping in Germany until he sees discounts on big-ticket items exceeding 20 percent, despite the growing crowds.
There may be one winner for Switzerland of the cross-border shopping: parking fees. Finding a spot is such a pain, Bissegger is reconsidering where to leave his car:
“It’s still worth it to go shopping there,” he said. “But I think I may start parking in Switzerland and walk across the border.”
--With assistance from Jan Schwalbe and Catherine Bosley in Zurich.
To contact the reporter on this story: Corinne Gretler in Zurich at firstname.lastname@example.org To contact the editors responsible for this story: Celeste Perri at email@example.com Thomas Mulier