Are Americans Better Off Shopping Luxury Retail in Europe?

03-09-23

Vogue Business recently reported that many Americans this summer have visited Europe and done most of their luxury retail shopping abroad for European luxury goods and designer brand-name products. Since Europe has generally lower prices and a plethora of summer sales, there seem to be fewer reasons to buy high-fashion products in America.

Additionally, shoppers can benefit from the ability to claim value-added tax (VAT) back after shopping in France and Italy. This added value tax is equal to 20% of the item purchased. According to the European Commission, “You will receive an invoice for the goods. You must show the invoice, the refund form, the goods and any other necessary documents to the customs officers of the last EU country you leave.”

Meanwhile, the UK no longer offers this refund to tourists. The Evening Standard in the UK reported that “the VAT refund scheme ended in 2021 after the UK left the EU, as part of a post-Brexit consultation about taxing items transported across borders for personal use.” In the aftermath, many businesses are calling for the UK to reinstate tax-free shopping for tourists to help generate more revenue and bolster the economy.

As a result, American shoppers are flooding Paris and Milan to shop for luxury retail brand-name goods. According to the Robb Report, many Americans shop in Europe and the UK to “take advantage of the sinking value of the euro and pound against the US Dollar.”

The WSJ covered how many savvy Americans did their 2022 holiday shopping in Europe as well. According to the report, “Spending by American tourists in the region rose more than 40% during the week of Black Friday compared with the same period in 2019, before the pandemic, according to value-added-tax refund data from payments company Planet.” Part of this recent surge is due to the strong value of the U.S. dollar, which is at its highest level in two decades.

With the 2023 holiday season fast approaching, this luxury retail shopping trend seems poised to continue as long as the dollar doesn’t weaken too much and inflation doesn’t worsen.

But not everything is cheaper in Europe. A good approach is to focus on European brands rather than American or Asian brands, which are generally better priced in the U.S. Shopping blogger Alyssa Prado explained how “the key is to focus on fashion and beauty, especially high-end and luxury items, and you’re bound to find some treasures.”

Of course, one of the most important things you need to consider when luxury retail shopping during your travels is how you’ll be transporting all of the things you buy back home — but that’s a whole other story.

Author: Dennis Limmer Retail Wire