Which is the Better Deal? Shopping in the UK or France? Here’s the Handbag Math
Considering a tourist shopping holiday abroad? Well, with the U.S. dollar historically strong, it’s a good time for Americans in Europe and, more recently, also in the United Kingdom.
This past summer hoards of Americans hit European hotspots with an extra boost in their wallets. Paris, for example, was jam packed with U.S. travelers looking for shopping bargains at the top luxury brands including, among others, Chanel.
Now, it looks like it’s the U.K.’s turn. With the current devaluation of the British Sterling against the U.S. dollar and the currencies approaching parity, the American dollar goes further in purchasing UK luxury goods than it has in decades. Although Chanel is a French brand, it operates boutiques in London, where locals and tourists alike can fill their craving for Chanel handbags.
So the question is – where can an American get the best pricing? Using the Chanel medium Classic Flap as our example, the answer is clear.
Right now it is less expensive to purchase it in the U.K rather than in the United States where the bag retails for $8800 (plus appropriate state sales tax).
The price in the U.K. is £7550. Using the (September 26, 2022) conversion rate of 1.07 US dollars to sterling, that amounts to roughly $8,052. Put another way, an American can save at least $750 by purchasing in London – less, of course, any assessed U.S. Customs duties upon return to the United States.
But what if you’re an American choosing whether to shop in the United Kingdom or the European continent; let’s say choosing between London and Paris. Where do you get the better deal?
Drum roll please . . . Paris (and the rest of the EU) wins the shopping contest. At present, the black leather medium Classic Flap goes for €8990, after the 9% summer hikes in Europe. Converted into US dollars that is $8639, which at first blush would suggest that London was the better option.
But, and it’s a big one, the EU allows non-EU residents to claim back the VAT paid as part of the sales price when returning home. For Chanel bags, that refund amounts to about 12% of the price. In this example, that is about €1079 bringing the price €7911. In US dollars, that is $7594, a savings of about $400 over the UK price. Of course, whether coming home from London or Paris, Americans remain responsible for U.S. duties, expected to be the same from either city.
From this example, it becomes clear why the UK intended to reinstate the VAT refund, which it eliminated in connection with the effective date of Brexit. To the extent that Americans are luxury goods shopping during their vacations, the U.K. is disadvantaged by this policy.
Of course, several things remain to be seen. We cannot predict whether the dollar will continue to show strength. COVID remains unpredictable as do its effects on travel and the economy, including the plans of Americans.
There is also the issue of if and how Chanel chooses to adjust its pricing to reflect the currency discrepancies. Recall, the luxury brand hews to a policy of global pricing harmonization. This summer’s euro price hikes are assumed to be a result of that system.
Updated: October 2nd, 2022