The European retail market has undergone one of the most interesting transformations in the last decade. While in the past it seemed that e-commerce would gradually swallow up traditional brick-and-mortar stores, the most recent data from Colliers suggests that the future of retail lies in connecting both worlds.
“Retailers are no longer choosing between online sales and brick-and-mortar stores; smooth multichannel strategies that reach customers right where they are located have begun to gain traction,” explains Katarína Brydone, director of Colliers in the Czech Republic. “The latest data shows that retailers who focus on innovation and integration of both approaches have the best chance of success.”
European consumers are saving, and luxury is losing steam
2025 represents another challenging period for European consumers and retailers. Geopolitical uncertainty, persistent inflationary pressures, and stagnant real household income growth are significantly affecting shopping behaviour. The estimate for real consumer spending growth in Europe this year has fallen to 1.6 percent, while retail spending is expected to grow by two percent.
It is interesting to observe how European consumers are coping with inflation. More than half of them now carefully compare prices before making a purchase, and 45 percent are switching to cheaper or private labels. This trend is pushing retailers into ever fiercer price competition.
The luxury goods segment has also seen some interesting developments. The change in consumer sentiment is evidenced by the fact that brands such as Kering, Chanel, LVMH and Burberry recorded a decline in sales in 2024. The main reason is fatigue from high prices—after several years of significant price increases, many customers have reached the limit of what they are willing and able to accept. Almost a third (31 percent) of European consumers therefore admit that they have cut back on certain purchases precisely because of high prices.
Online versus brick-and-mortar stores
The share of sales outside physical stores reached an average of 14 percent in selected European markets in 2024, representing a slight increase after a decline following the pandemic. The rate of online sales is generally higher in Western Europe and the Nordic countries, where it is supported by robust digital infrastructure. Central and Eastern Europe, including the Czech Republic, is still lagging in this area.
By comparison, the United States leads the world with a 33.7 percent share of online sales, followed by China with 31.2 percent. The United Kingdom stands at 23.2 percent and South Korea at 22 percent. In contrast, large continental economies such as Germany (14.6 percent), France (13.4 percent), and Spain (13.3 percent) remain in the middle range, well below the global average of 17.3 percent.
Purely online players are losing ground. Companies such as ASOS and Debenhams Group reported declines in sales of 14 and 17 percent, respectively, in their latest results. In contrast, multichannel retailers such as H&M and Inditex (best known for its Zara brand), which have optimized their store networks and invested in online in recent years, are better equipped to withstand current pressures.
Chinese competition is changing the rules of the game
The influx of cheap goods from China has had a growing impact on European retail. In 2024 alone, an estimated 4.6 billion packages arrived in the European Union, with nine out of ten originating in China. Platforms such as Shein and Temu deliver goods directly to consumers by purchasing from manufacturers and taking advantage of minimum tax exemptions, which allow them to enter Europe without customs duties.
This model gives Chinese platforms a significant competitive advantage over European retailers and foreign sellers who are not eligible for this exemption. The minimum tax rule, which no longer applies in the US, is now under review in both the EU and the UK. Its abolition would increase the cost of importing cheap packages and ease competitive pressure on European retailers, but it could also increase prices for consumers.
Tourists with smaller wallets
American tourists accounted for 40 percent of total long-term tourist spending in Europe last year, while Chinese tourists accounted for 10 percent. Although these groups are not expected to spend less overall this year, European Commission tourism data for the second quarter of 2025 shows a decline in the number of tourists with high daily budgets of over €200: down by 11 percent for Americans and as much as 44 percent for the Chinese.
The slowdown in spending growth or change in high-budget tourists’ purchasing behaviours may thus have a further impact on the luxury retail segment in Europe. Companies such as Moncler, LVMH, Prada and Kering cited a decline in tourist spending as one of the factors affecting their results for the second and third quarters of 2025. Burberry and Mulberry also pointed to the loss of duty-free shopping for foreign visitors to the UK, which was abolished in 2021.
Rent stability as a bright spot
Despite all these pressures, rents remain stable in most EMEA markets: both on high streets and in traditional shopping centres. Rent stability is a particularly important factor for retailers facing rising energy, wage and logistics costs.
“The outlook for the coming years shows that retail spending in physical stores is expected to grow by 14 percent between 2024 and 2028, while non-store sales are expected to rise by 23 percent. This confirms the long-term growth trend of multichannel retail, where both forms of commerce coexist and complement each other,” explains Katarína Brydone, adding: “Retail real estate is undergoing a transformation that is more evolution than revolution. Physical stores are not disappearing, but their role is changing. They are becoming places for meeting, experiences and services, while online channels provide convenience and a wider selection of goods. Successful players will be those who can connect these two spaces into a smooth, seamless whole.”
