Local Retail, Global Trends

Recent trends in the EU point to changes in several areas affecting retail SMEs, as shown by indicators on economic performance, business dynamics, international trade and digitalisation. These developments reflect shifts in market structure, technology adoption and the policy landscape, which together are transforming the competitive environment and the day-to-day operations of retailers of all sizes. Despite potential benefits, recent data show that SMEs are losing ground relative to large firms, underscoring their heightened vulnerability to structural shifts.

SMEs currently account for 50% of turnover, 52% of value added and 60% of employment in EU retail. Although their output has risen steadily in absolute terms, their share in all three areas declined by approximately 6 to 7 percentage points (p.p.) between 2012-2013 and 2022-2023. This reflects a structural trend already underway before the pandemic and is consistent with increasing market concentration. Over the past decade, SMEs have increased their sales in absolute terms, even when adjusted for post-COVID inflation. However, larger retailers appear to have captured a growing share of the sector expansion, benefiting more from recent shifts. Retail SMEs typically show lower labour productivity than large firms, with the gap remaining broadly unchanged over the last ten years. While the sector remains an entry point for entrepreneurs, business dynamism has slowed since 2011, with declining entry and exit rates and a drop in the share of high-growth firms in both retail and wholesale.

Retail SMEs have increased both their presence and performance in international trade. Between 2012 and 2022, the number of exporting and importing firms rose by 57% and 49%, respectively, while trade value grew by 126% for exports and 56% for imports. However, their share of total trade value declined – slightly for exports (−0.7 p.p.) and more sharply for imports (−8 p.p.) – as large firms captured a growing share of these expanding markets.

Digitalisation has accelerated within the retail SME sector, particularly in e-commerce. Between 2013 and 2023, e-commerce adoption has nearly doubled, from 23% to 43%, with website ownership (67%) and social media use (66%) now widespread among retailers with 10 or more employees. Adoption of more advanced tools, however, remains uneven: cloud computing and artificial intelligence (AI) usage have increased significantly, whereas Customer Relationship Management (CRM) uptake remains limited. Original analysis of 27 000 retail firms across five EU countries shows that uptake of Internet technologies beyond a basic website is generally associated with higher productivity, although adoption rates vary substantially by country, firm size and business model.

In terms of environmental sustainability, the EU retail sector has achieved notable emission cuts. Between 2008 and 2023, CO₂ emissions fell by 36% and broader GHG emissions by 43%. However, progress remains uneven across countries, and data gaps continue to limit effective monitoring by firm size.

Policymakers at both EU and national levels are responding with ambitious frameworks, major investments and targeted initiatives. A mapping of more than 100 national policies among EU Member States shows a mix of instruments to support SME digitalisation, sustainability or both. While most programmes are cross-sectoral, some include retail-specific provisions to tackle challenges particularly relevant to the sector, such as support for e-commerce adoption, targeted digital training or energy efficiency in stores. The main instruments in place include grants, loans, guarantees and advisory services.

Retail is a major employer, accounting for over 11% of EU business economy jobs in 2023. In some large countries, such as France, Spain and Italy, regional retail employment rates vary from less than 15% to more than 25%. In most EU countries, the retail employment share ranges between 10% and 15% across regions. Compared to the wider economy, the sector employs a higher share of women and young people, offering accessible entry-level opportunities. However, employment growth has been minimal since 2015, and outcomes are highly place-dependent, with substantial variation across regions and cities.

Local labour markets face several pressures as the nature of retail work evolves. Front-end roles involving direct customer interaction are declining, while back-end roles requiring digital capabilities are rising. At the same time, interpersonal and customer-service skills are increasingly valued among the front-end workers, alongside in-depth product knowledge. This reflects consumer demand for personalised service and creates an opportunity for staff to advise consumers on environmentally sustainable purchases.

Persistent challenges in recruitment, retention and skills development reflect deeper issues related to job quality and career progression. Retail lags behind other sectors in the use of online recruitment tools. Structural factors, such as relatively low pay, a heavy reliance on part-time and temporary contracts, and low demand for advanced ICT skills, undermine its ability to compete for talent in the labour market. While the sector offers flexible and accessible entry points for young and less-educated workers, career progression pathways are often less structured in SME retail.

Upskilling is essential to the resilience of the sector and its workforce. Sectoral and public programmes across the EU are expanding access to training in digital and sustainability skills, while also supporting inclusiveness and workforce transitions. Continuous training, modular learning and sector-wide strategies can help improve job quality, enable career advancement and make retail work more attractive.

Retail SMEs contribute substantially to the vibrancy of city centres and high streets. These locations are at the heart of everyday life and serve as important social infrastructure where local residents as well as tourists gather. Retail SMEs play a critical role in these locations. In addition to providing needed goods and services, they generate daily footfall, animate public space, and support nearby activities. In small town centres, independent retailers may serve as anchors of the local community.

Digitalisation is reshaping how retail SMEs contribute to city-centre vitality, altering both demand patterns and business models. The spread of e-commerce has accelerated the adoption of multi-channel approaches such as click-and-collect, while hybrid and remote work are shifting shopping patterns and redirecting demand from office districts to residential areas. The expansion of teleworking in EU cities since the COVID-19 pandemic has coincided with rising retail vacancy rates, a trend also observed in several major cities worldwide.

To remain competitive and visible, retail SMEs need support to adopt digital tools and skills that complement physical presence. While smaller retailers in towns and city centres struggle to compete with large online platforms on purely digital business models, their physical presence provides wider benefits to local communities. Thus, national and local policymakers can assist through targeted financial instruments to help adopt digital technologies to increase their productivity, such as digital payment systems, shared e-commerce or booking platforms and social media marketing tools, as well as advisory services and digital upskilling. Public investment in enabling infrastructure, including free city-centre Wi-Fi, 5G coverage and shared digital platforms that showcase local retailers and amenities, can help digitalisation strengthen rather than displace the role of retail in city centres.

Sustainability demands from consumers, environmental regulations and high energy costs are prompting small retailers to adopt more sustainable logistics and operations in the EU. City-centre SMEs, accessible by public and active transport, are well placed to benefit from climate-conscious shopping, green consumerism and the proximity economy. Progress on sustainability may involve targeted financial incentives for energy-efficient building retrofits, support for circular business models, and the promotion of more sustainable urban logistics. In some contexts, with due consideration for the impact on business activity, regulatory measures can also play a role; for instance, by integrating sustainability criteria and circular business practices into public procurement to encourage greener retail practices.

Demographic change adds further pressure on retail SMEs across the EU. Europe’s share of the population aged over 65 is set to rise to 130 million by 2050. These shifts are already affecting the size of local customer bases, as well as consumer needs and preferences, making it harder for small businesses to maintain economic viability. Demographic dynamics differ markedly between large urban centres and smaller towns: while cities and larger urban areas have grown over the past decade, many small towns and rural regions have experienced stagnation or population decline.

Revitalising city centres is essential to maintaining vibrant local economies, enhancing quality of life, and creating attractive urban spaces where retail can thrive. This can involve investments in walkability, public transport, and mixed-use urban regeneration projects. Economic measures can help reduce retail vacancy – provided they account for local market constraints that may limit the ability to sell or lease premises – while temporary use policies and support for pop-up shops can encourage business experimentation. Beyond physical renewal, effective revitalisation strategies also involve actively nurturing local entrepreneurship ecosystems and social interaction. This can include neighbourhood improvement initiatives, joint storefront upgrades, shared branding and events, and support for collective action among retailers such as business improvement districts. Policymakers can also leverage cultural and social assets, for example by restoring historic buildings or hosting cultural events, to attract pedestrians, enrich the retail experience and strengthen community identity.

Effective strategies depend on structured local governance across many public and private actors and clear systems for monitoring progress. Place managers, district managers or revitalisation officers within local authorities can act as intermediaries between retailers, property owners, community groups and municipal departments, providing a one-stop-shop for business support, permits, funding and collaboration. Business-led partnerships such as business improvement districts, chambers of commerce or informal retailer coalitions can complement public action by pooling resources, supporting local entrepreneurs, organising events and investing collectively in the attractiveness and functioning of the centre. National governments can play a role by funding programmes for high streets, fostering the creation of knowledge-sharing platforms that aggregate data on retail trends, providing training to local administrations (e.g. on town centre management or monitoring and evaluation), and engaging existing local expertise and institutions (e.g. chambers of commerce, universities, research institutes, NGOs and private consultancies). Systemic monitoring and evaluation (M&E) frameworks that link retail to the wider local economy can help cities align retail development with broader economic and social goals.