How to Save Money by Shopping for Clothing on Vacation

It sounds crazy, but shopping for clothing while you are on vacation is one of the best ways to save money. Without a lot of effort, you can save at least 50% off retail-priced clothing for many brands. How does it work? By shopping while on vacation, you can take advantage of three types of discounts:

1. Lower retail prices in European stores (~20%)
2. VAT refund (20%)
3. Sales (25-35%)

Depending on your annual clothing budget, it's possible to stack up enough savings to offset a meaningful portion of your travel expenses. Let's break it down.

Lower retail prices in Europe

Clothing prices for a brand's European stores are lower than the identical item in their US stores. This is generally due to the exchange rate between the US dollar and the local currency.

The conversion rate from US dollars to euros or British pounds is at historic lows. As of July 2022, the USD-GBP exchange rate is the lowest it's been since 1985—except for a brief week at the beginning of the Covid pandemic. The USD-EUR exchange rate hasn't been this low for 20 years.

Here's two examples:

Example 1: This navy-striped t-shirt from COS's UK site costs £17, or $20.25. Their US store lists it for $27.50 after tax. You get 26% off this item by shopping in the UK.

Example 2: This Cuban collar shirt from Reiss retails for $161 on their US site, tax included. On their French site, the same item goes for $128 (€125), a savings of 21%.

VAT refunds

Sales tax in Europe—called Value Added Tax (VAT)—is automatically included in prices, but it is broken out on receipts. The VAT rate varies depending on the country and the items you're buying, but for clothing the rate is generally 20%.

As a visitor to an EU country, you are entitled to a VAT refund of any items that buy and take out of the country—so no opened food, museum tickets, or hotel accommodation. The reason behind this is that VAT is a tax that is used to support local government infrastructure and services. But as a non-citizen, you aren't entitled to use them, so why should you have to pay? It also has the side effect of incentivizing tourism by offering a discount on shopping.

Generally speaking, the process involves getting a paper receipt and tax form from the cashier when you buy your items. When you leave the country, you need to stop at the Customs desk to have your items inspected and your tax form stamped. Then you submit your paperwork to the local tax refund service provider like Global Blue—either at the airport or by mail—and you will (eventually) receive a check for the VAT you paid for your items.

If you plan on spending a lot of money, it's worth doing a deep dive on all the rules and exceptions on VAT refunds for the country you are visiting to confirm that you're eligible. For example, the UK only offers VAT refunds on items that are shipped back home to you by the retailer. You're limited to stores that will do that for you, and the added shipping costs could erase the benefit of getting the refund.

It's a bit involved, but if you think about how much you could gain, it's probably worth your time to understand the process.

Sales

The relatively unregulated commerical environment means that retailers are free to offer sales at any time of year. Not so in Europe. Many countries have official sales periods in winter and summer where retailers are allowed to put items on sale. For examples in France, les soldes in 2022 are from Jan 12-Feb 8, and June 22-July 19. In Italy, sales periods are longer and vary by region, but are generally January-March and July-mid August.

Now of course, the downside is that you have plan your vacation in Europe during these times to take advantage of the sales. But there's an upside. Because the opportunities to put items on sale are limited, almost every retailer takes advantage of these periods and runs sales. For weeks, the entire country is having a sale, and that's extremely convenient.

Putting it all together

At the beginning of this article, I promised that you can easily get 50% off retail prices by shopping in Europe while you're on vacation. So let's use the example of the Reiss Cuban collar shirt from above purchased from a store in Paris.

You could argue that clothing goes on sale in the US too, so we should compare a discounted US item with a discounted French item. In that case, the additional discount you've achieved by shopping in Europe is 36%.

Either way, you're saving quite a bit of money by shopping while on vacation. It seems like an indulgence, as if the reasoning behind it is, “We're on vacation! Let's let loose and splurge!” But in fact it's a very logical, money-saving way to buy clothing, especially if you are already going to Europe, whether for work or vacation.

Resale value

There are two ways of looking at these savings: spend less, or get more value. If your annual clothing budget is $1,500 and you typically shop at H&M and Zara, you could shop those sames stores in France and cut your budget in half.

The second approach is to spend your usual amount, but get double the value by shopping at higher priced stores like Reiss or Ted Baker. Unless your saving for something else, this could be the better approach. Higher quality items are look better for longer and are more enjoyable to wear. There are also unrealized savings concealed within the higher price: quality items need to be replaced less frequently because they last longer and can be repaired.

They are also easier to sell used. Here's a Reiss coach jacket on Poshmark for $120, original retail price of $195. Let's run the numbers assuming we bought this in Europe and get the total cost to own this item.

Let's calculate the cost after reselling the item on Postmark:

In this example, we bought a more expensive item at a steep discount and then resold it, bringing our long term cost to own to just $7.31, or 3.4% of the full US retail price. This is much lower than a similar item from a fast fashion retailer like H&M and Zara, even after discounts, because those brands typically don't have a lot of resale value.

Not every piece in your wardrobe has as much residual value as this jacket. But as this example demonstrates, you can often get more value from buying expensive items that can be resold.