Europe Retail goes multichannel with inflation

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. "The latest data shows that retailers who focus on innovation and integration of both approaches have the best chance of success.
Katarína Brydone, managing director of Colliers in the Czech Republic

European consumers are saving, and luxury is losing steam

This year has been another challenging period for European consumers and retailers. Geopolitical uncertainty, persistent inflationary pressures, and stagnant real household income growth have significantly impacted shopping behaviour. Estimates for real consumer spending growth in Europe this year has fallen to 1.6 pct, while retail spending is expected to grow by 2 pct.

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 pct 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 can be seen 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 pct) 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 pct 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 behind in this area.

By comparison, the United States leads the world with a 33.7 pct share of online sales, followed by China with 31.2 pct. The United Kingdom stands at 23.2 pct and South Korea at 22 pct. In contrast, large continental economies such as Germany (14.6 pct), France (13.4 pct), and Spain (13.3 pct) remain in the middle range, well below the global average of 17.3 pct.

Purely online players are losing ground. Companies such as ASOS and Debenhams Group reported declines in sales of 14 and 17 pct, respectively, in their latest results. In contrast, multichannel retailers such as H&M and Inditex (best known for its Zara brand), which have optimised 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 bln 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 pct of total long-term tourist spending in Europe last year, while Chinese tourists accounted for 10 pct. 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 EUR 200: down by 11 pct for Americans and as much as 44 pct 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 pct between 2024 and 2028, while non-store sales are expected to rise by 23 pct. This confirms the long-term growth trend of multichannel retail, where both forms of commerce coexist and complement each other. 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.
Katarína Brydone