2023-11-14 20:21:09
Why are prices so high in Switzerland?
Federal Councilor Keller-Sutter wants to ask shopping tourists to pay more. Our readership criticizes the plan and questions the price differences. We explain how they are created.
When the minimum euro exchange rate was abolished in 2015, there was a huge rush from Switzerland, as seen here at the Edeka market in Jestetten in the Waldshut district on the Swiss border.
Photo: Walter Bieri (Keystone)
Finance Minister Karin Keller-Sutter wants to ask shopping tourists to pay more. Previously the exemption limit was 300 francs. Goods purchased abroad should now be taxed at customs starting from half the amount. This is intended to better protect Swiss trade from competition from abroad. The plan causes lively debates in the comment columns of the Tamedia news portals.
As of Tuesday afternoon, almost 900 people commented on this, and many are of the opinion that the problem is not the prices abroad or stingy Swiss consumers, but rather the “high-price island” of Switzerland. The higher wages and higher cost of living in Switzerland would not justify the “extreme” price differences either. One reader writes that he is willing to pay a price premium of 10 percent compared to Germany, but certainly not more.
Shopping in Germany at half price
But is it really like that? At first glance, goods in Switzerland are still more expensive than in Germany. Without claiming to be complete, this editorial team has compared the prices of some branded items from the Edeka Group in Germany and the local retailer Coop that can be found on the Internet. All of them were cheaper in Germany, and in some cases significantly so.
For example, the detergent from Persil, which costs around 7.30 francs in Germany when converted into francs. In Switzerland there are almost 13. Or the pickled gherkins from Kühne, which are almost twice as expensive as in Germany. If you now have the VAT refunded, the price difference is even more striking:
The Swiss retail trade lost around 8.4 billion francs last year due to shopping tourism, as the latest edition of the long-term study “Shopping Tourism” by the Research Center for Retail Management at the University of St. Gallen shows. The average amount per purchase in stores abroad was 216 francs.
The corona pandemic had increased the appreciation of local products, and quality and sustainability became more important. However, inflation, which has also increased in Switzerland, has increased the price consciousness of many consumers again.
Around half of customers from Switzerland have their VAT refunded at the border. That makes a lot of difference: the rate for food in Germany is 7 percent and for normal goods it is 19 percent.
The Federal Statistical Office conducts an international comparison of price levels. According to the latest data from 2021, Switzerland is the most expensive country in Europe. Food and non-alcoholic drinks are 58 percent more expensive in this country than in Germany.
Where the differences come from
How can the difference be explained? According to studies, the most important causes lie in the procurement of goods. When it comes to food, the very high level of protection for agricultural goods, especially meat and vegetables, has a particular impact.
A team of researchers found that Prices for most vegetables increased by more than 20 percent during the main harvest seasonfor some even up to 90 percent higher than prices in neighboring countries.
An important reason for price differences for imported products in the non-food sector is the Swiss retailers’ size disadvantages. Thanks to their size, buyers from the large retail chains from Germany, France or Italy enjoy more favorable conditions than buyers from the small Swiss market.
The higher domestic procurement costs also play a role. Higher rental and land costs, cost-increasing building regulations, higher costs for , transport, consulting, banking services, building cleaning and other services increase prices in Switzerland. Added to this are multilingualism and special Swiss rules and standards.
The strong market position of Migros and Coop with their dense branch network does not promote competition.
The high wages, on the other hand, do not play a major role in the price differences. Because of its higher productivity and lower non-wage labor costs, Switzerland has no disadvantage here, as a study by the research institute BAK Economics shows.
The strong market position of Migros and Coop with their dense branch network does not promote competition. Unlike abroad, the discounters do not pursue a hard discount strategy with price wars, but rather undercut the market leaders relatively easily.
This is also because there are significantly fewer people in Switzerland compared to the surrounding countries who live on the subsistence level and have to turn over every franc several times. The high purchasing power leads to low price sensitivity among Swiss consumers. The demands on quality and service are high, as is brand loyalty.
Where the solutions lie
Price monitor Stefan Meierhans sees opportunities for action with the various price drivers: “Especially with the highly regulated import of agricultural goods, I see billions in savings potential.” The administrative effort involved in customs clearance, such as customs submission costs for online orders, should not be forgotten. Meierhans said he has been calling for the dismantling of customs barriers for a long time. Clarifications are also underway regarding the market power of the two large retailers.
Meierhans also points out that there has been a new means of combating the higher prices since the beginning of 2022. The Competition Commission can take action if Swiss retailers do not have the opportunity to purchase the goods at the usual market prices abroad – and Swiss customers are therefore charged higher prices.
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