Understanding our operating environment
SPAR Switzerland is a relatively small player in the Swiss market and currently holds a 2.5% market share. The grocery market is dominated by Migros and Coop.
Interest rates and core deflation remained neutral and stable in 2018. Despite a slight devaluation of the Swiss franc (CHF) against the euro, this has not been sufficient to negate the attraction of cross-border shopping prevalent across Switzerland. Many potential customers continue shopping across the Swiss border where they have greater buying power and where goods can be bought at significantly reduced prices – and free of value-added tax. Swiss import tariffs and trade protection further drive up prices significantly with the result that Switzerland is more than 50% more expensive for an average shopping basket than our neighbouring EU countries. This gives further momentum to the cross-border shopping trend. Estimates are that in excess of CHF 14.2 billion of retail spend bleeds across the border every year given the substantial price differentials that exist.
In an effort to mitigate this, we have started benchmarking with SPAR Austria to identify opportunities to reduce the net landed costs into our distribution centre. This is an extremely complex process given the legislation and tariff structures in place, but early signs are promising. Further to this we are also exploring collaboration with global suppliers to open more cost-effective supply into Switzerland through their international sourcing capacity with a big focus on our house brand categories.
Expansionary growth in German-speaking Switzerland has been limited due to local rules in site approvals resulting in delays. Organic growth relies on SPAR driving the convenience differentiation in all elements of our business with a focus on advertising, range expansion in Fresh, store design and in-store execution.