Local Retail, Global Trends

1. Overview

Retail ecosystems are undergoing profound structural transformation. Global trends, including the rapid growth of e-commerce and increased environmental awareness, are disrupting traditional business models and accelerating the shift towards digital and sustainable practices. Widespread teleworking is reducing foot traffic in city centres, while cost-of-living pressures constrain consumer spending and compress businesses’ margins. These dynamics are reshaping market conditions, presenting both challenges and opportunities for retailers, their employees and the local communities they serve. The ability of small and medium-sized enterprises (SMEs) to adjust will be critical for their future competitiveness and resilience, as well as for the vitality of urban and rural areas alike.

In the EU, these changes are not only reshaping firm performance and market structures, but also redefining the role of retail in the economic and social fabric of cities and towns. New business models, ranging from direct-to-consumer and subscription-based formats to e-commerce platforms and hybrid store concepts, are altering how firms operate and how consumers shop. While retail continues to offer flexible opportunities and accessible entry-level jobs, rising skill requirements – particularly in digital and sustainability-related areas – are transforming employment patterns. At the local level, these shifts are changing the character of cities through the growth of proximity commerce and more complex logistics, while also challenging the viability of retail in small towns, including those in rural areas. In this more volatile context, retail stands at the intersection of economic competitiveness, technological change, environmental responsibility and social inclusion.

Policymakers at EU, national and local levels are responding with targeted measures and resources for SMEs, with particular relevance for the retail sector. From funding digital adoption and energy efficiency to promoting skills training and urban regeneration, these initiatives aim to turn the twin transition into a driver of renewal rather than decline. However, progress remains uneven across SME retail segments, with micro-enterprises often lagging, underscoring the need for simpler, more targeted and better-coordinated support. This will be key to determining whether retail SMEs can not only survive, but also help revitalise town and city centres, strengthen social cohesion and advance the EU’s competitiveness and resilience goals.

This report, structured in three chapters, analyses the twin transition of retail SMEs by examining distinct yet interrelated dimensions of the retail ecosystem’s transformation and the related policy responses across multiple levels of governance. While the focus is on developments within the EU, the findings aim to inform policy discussions across OECD countries facing similar structural shifts.

• Chapter 2 examines structural changes in the EU retail ecosystem, focusing on economic performance, business dynamics, international trade, digitalisation and environmental sustainability, along with related policy responses at both EU and national levels.

• Chapter 3 explores labour and skills challenges at national, regional and local levels, highlighting employment trends, recruitment gaps, training needs and workforce diversity, with particular attention to the digital and green transitions.

• Chapter 4 addresses the transformation of urban retail, analysing how digitalisation, sustainability and demographic shifts are reshaping town and city centres, and how local authorities can help retail SMEs adapt.

The following sections present the key findings and policy messages from each chapter, emphasising the interconnected challenges and opportunities facing retail SMEs across the EU.

The twin transition of retail SMEs

Retailers and wholesalers face growing pressures from digitalisation, rising sustainability demands and shifting customer expectations. Emerging technologies such as e-commerce platforms, data analytics and artificial intelligence (AI) are reshaping operations across the value chain and accelerating the integration of physical and digital channels. While these tools offer opportunities to expand market reach and improve efficiency, the growth of e-commerce is also intensifying competition, including from cross-border and non-EU players operating via online platforms. This can be particularly problematic, as some non-EU platforms may sell goods produced and marketed without complying with EU standards and regulations. For many SMEs, limited finance, skills and managerial capacity also constrain the speed and effectiveness of their response. At the same time, their local embeddedness can support flexible, place-based adaptation to environmental challenges, although structural barriers often limit their ability to implement more capital and skill-intensive sustainability measures.

Chapter 2 provides an overview of how the competitive landscape for retail and wholesale SMEs in the EU27 has evolved over the past decade. Drawing on national-level data, it examines key trends across five domains: economic performance, business dynamics, international trade, digitalisation and environmental sustainability. The chapter then explores web technology adoption among retailers in five EU countries, using firm-level data to analyse differences by country, region, firm size, and business characteristics. Finally, it reviews policy responses at EU and national levels, identifying instruments that support retail SMEs in navigating the digital and green transitions.

Retailers and wholesalers are facing structural shifts

SMEs remain at the core of the retail and wholesale sectors across the EU, accounting for 50% of turnover, 52% of value added and 60% of employment in retail. While their output has grown in absolute terms, even when adjusted for post-COVID inflation, their share of turnover, value added, and employment declined by around 6–7 percentage points between 2012-2013 and 2022-2023. This suggests that while SMEs have benefited from recent shifts such as the rise of e-commerce to increase their sales, larger businesses have gained even more, increasing their relative share over the same period. At the same time, productivity among retail SMEs remains relatively low and stagnant, with output per worker continuing to trail behind that of larger firms. This gap has seen little change over the past decade.

SME growth in retail and wholesale has been modest in an increasingly consolidated market. The distributive trades sector remains an important entry point for entrepreneurs, accounting for about one-fifth of all new firms in the EU. However, overall business dynamism has slowed since 2011, with combined entry and exit rates declining, especially among micro-enterprises. While retail still shows higher turnover than wholesale, the share of high-growth firms has edged down in both sectors.

SMEs are trading more overall, but larger firms are capturing a growing share of international flows. Between 2012 and 2022, retail SMEs increased their exports by 126% and imports by 56%, while wholesale SMEs recorded slower growth (42% and 45%, respectively). Despite this, wholesale SMEs slightly increased their share of total export value with respect to larger firms, whereas retail SMEs’ share fell as large retailers expanded faster. In both sectors, SMEs’ shares of import value declined.

Between 2013 and 2023, digital adoption grew among retail and wholesale SMEs. The share of firms receiving online orders nearly doubled in retail, from 23% to 43%, and rose steadily in wholesale, from 31% to 43%. Website ownership has become widespread, at 85% in wholesale and 67% in retail. Social media use is common in retail, at 66%, but growth has stalled over the decade. Uneven progress is observed for other digital tools: cloud computing and AI adoption have increased significantly, whereas Customer Relationship Management (CRM) uptake and ICT specialist employment have largely stagnated.

Retail has achieved sharper cuts in operational emissions than wholesale, when considering own activities. Between 2008 and 2023, greenhouse gas (GHG) emissions fell by 43% in retail, with CO₂ falling by 36%. In wholesale, GHG emissions declined by 14%, with CO₂ down by 9%. Economy-wide EU-27 emissions declined by roughly one quarter on a production basis and by about one third on a demand basis, so the retail decline appears steeper than the aggregate trend. SMEs are major contributors, but data gaps make accurate measurement challenging, underscoring the need for more robust monitoring frameworks.

Retail digitalisation is linked to higher productivity, but it is advancing unevenly across countries and firms

An original analysis of 27 000 retail firms across five pilot countries (Italy, Estonia, Hungary, Romania, and Spain) highlights uneven progress in digital adoption. About 60% of firms with 10 or more employees maintain a website, but fewer than one in four use additional tools such as e-commerce, electronic payments, multilingual pages or shipping services (e.g. integrated delivery and returns). Adoption tends to increase with firm size, and group-affiliated retailers outperform even the largest independents, reflecting the benefits of scale and shared resources. Estonia leads across most categories, while Romania and Hungary lag behind.

Social media is used by roughly half of firms with websites, especially large firms and franchises, but uptake drops sharply among small independents. Regional differences within countries are modest, though multilingual sites are more common in areas with strong minority languages, reflecting both local and cross-border demand. In contrast to patterns commonly reported in other OECD countries, rural–urban gaps in website adoption are small, except in Romania and, to a lesser degree, Spain.

Digital adoption is consistently linked with stronger performance. Firms with websites report 20–40% higher labour productivity than non-adopters, and those using additional technologies show further advantages, with productivity gains ranging from negligible in Spain to as high as 24% in Estonia. While the results indicate correlation rather than causation, they underscore a consistent association between digital adoption and stronger firm performance for SMEs competing in increasingly digital markets.

Policymakers at both EU and national levels are introducing targeted measures to support SMEs in the retail sector through the digital and green transitions

An analysis of more than 100 policy initiatives and regulations from the European Union and its 27 Member States, up to March 2025, reveals key trends in SME policy with relevance for retail, digitalisation, and sustainability. While most SME support schemes in Europe are cross-sectoral, the analysis identifies measures especially relevant to the retail sector’s twin transition.

The EU’s twin transition agenda – framed by the Green Deal, the 2030 Digital Compass, and the Competitiveness Compass – sets long-term goals such as climate neutrality by 2050 and widespread SME digitalisation by 2030, which have significant implications for the retail sector. Complementary frameworks and measures – including the SME Strategy, the Single Market Programme, and the SME Relief Package – aim to cut red tape, improve financing, and expand cross-border opportunities. At the same time, regulatory simplification is expected to translate into actual costs savings for businesses. For the retail sector, the Transition Pathway, launched in 2024, provides a collaborative roadmap to help businesses prepare for digital and green transformation.

Meanwhile, the regulatory landscape for retail has been evolving rapidly. Rules on the digital economy – such as the Digital Markets Act and the Digital Services Act – seek to level the playing field for SMEs, while the General Data Protection Regulation (GDPR) and the Data Act shape data practices. On the sustainability side, regulations on Ecodesign for Sustainable Products, Packaging and Packaging Waste, or the Waste Framework Directive tighten requirements on durability, recyclability, and waste. The Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) extend sustainability obligations across supply chains.

While leveraging EU-wide digital and green programmes, national governments have been designing and implementing tailored initiatives that reflect local needs, priorities and capacities. Although most measures are cross-sectoral, some include retail-specific elements, such as incentives for e-commerce adoption, energy efficiency upgrades in shops or targeted digital training, addressing challenges unique to the sector.

Support for digitalisation and sustainability is delivered through a mix of financial and technical instruments. Grants, loans, and vouchers reduce the upfront cost of adopting e-commerce, cybersecurity, and IT systems, while mentoring, training and advisory services help smaller retailers build capability. Integrated schemes pair funding with consultancy and ecosystem support to ensure technologies are effectively embedded into business models. On the side of sustainability, loans, guarantees, and grants finance renewable energy, efficiency and circular economy projects, complemented by audits and peer-learning. A growing number of initiatives are bridging both agendas, using digital tools to advance sustainability goals such as through smart energy management and supply chain optimisation.

Despite progress, gaps in digital adoption and sustainability practices persist. Micro and independent retailers often struggle to access public support due to complex procedures, strict eligibility criteria and programme designs that overlook the specific sector needs. While digital adoption is advancing, it remains uneven, with many small firms receiving support to acquire tools, but struggling to integrate them strategically. Similarly, sustainability investments are held back by regulatory compliance challenges and uncertainty about long-term returns.

A coordinated, multi-stakeholder approach should prioritise a focused set of policy levers that translate the twin transitions into tangible gains for retail SMEs. These levers include: (i) integrated financial and advisory support that combines funding with tailored guidance; (ii) digital capability pathways that go beyond tool acquisition to full integration into store operations; (iii) SME-friendly sustainability measures, offering sector-specific guidance and practical, ready-to-implement solutions; and (iv) proportional, test-and-learn regulation, including SME-focused impact assessments. Looking ahead, policy frameworks must be simpler, more responsive and better aligned with the realities of small retailers. With active SME engagement, coordinated action – across EU, national, and local levels – can help turn the digital and green transitions into lasting improvements in competitiveness and resilience across the retail ecosystem.

Addressing labour and skills shortages in Europe’s retail sector

Chapter 3 presents new data on employment and skills in the retail sector and related policies and programmes. It covers the new demands of the digital and green transitions, but also implications of inclusion and diversity in the sector.

Retail is a key employer providing diverse entry-level jobs, but faces slow growth and skill gaps

Retail is a major employer across Europe, accounting for over 11% of business-economy jobs in 2023, with a strong role for SMEs. Yet, retail employment has seen minimal growth since 2015, in contrast to steady gains in most other sectors, leading to a decline in retail’s share of total jobs. Regional disparities within large countries further underscore the sector’s uneven footprint, reflecting local differences.

Jobs in the retail sector are evolving, with a growing demand for “back-end” roles requiring digital competences. Although the scale of change varies across countries, front-end roles are becoming less dominant in Europe, while digital-oriented back-end occupations are on the rise. This decline in customer-facing roles reflects the shift towards e-commerce. At the same time, interpersonal skills related to customer support and assistance have become even more important among front-end workers between 2019–2020 and 2022–2023, reinforcing their already high importance compared to other occupations across the broader business economy.

The retail sector lags in adopting digital technologies for hiring, as reflected in the low uptake of digital recruitment tools and weaker demand for advanced ICT skills among retail back-end jobs. Retail companies make less use of online recruitment tools than other industries, which limits their ability to access a broader talent pool. Across Europe, the share of online job postings relative to survey-based vacancy numbers is lower in retail than in the wider business economy, with gaps exceeding 50% in half of the countries. In addition, data from online job postings show that the sector has a lower demand for advanced ICT skills, including among back-end workers, compared to all occupations in the broader business economy. While this gap narrowed in some countries between 2019-2020 and 2022-2023, it widened in others.

Retail employs a diverse workforce, with a higher share of women employees and youth and a similar share of people with a migrant background compared with the wider business economy. Women account for 52% of employees, compared with 38% in the overall business economy. Young workers (aged 15-29) make up 23% of retail jobs in Europe, four percentage points more than in the broader economy. Foreign-born workers, though slightly underrepresented in retail (13%, compared to 15% in other sectors), still form a notable share of the workforce.

The nature of contracts in retail differs from other sectors, with a greater use of flexible employment arrangements. This reflects operational needs linked to extended opening hours, shift-based work, fluctuating demand, and the need to maintain coverage while respecting working-time rules. Part-time work is more prevalent in retail, accounting for 37% of jobs – 14 percentage points higher than the broader economy – with involuntary part-time accounting for only a small share of these positions. Temporary contracts are also widespread, with more than half of retail jobs classified as temporary, a higher share than in other sectors. Additionally, contracts lasting less than one year are more common in retail in half of European countries, reinforcing the perception of the sector as providing flexible employment opportunities, but also the risks of placing workers in unstable working conditions.

Retail jobs also tend to require lower educational qualifications compared to other sectors. Advanced degrees are less in demand, with the sector instead favouring primary, secondary, and short-cycle tertiary education. This lower educational threshold can provide an accessible path for many workers without formal degrees, as well as early school leavers to start working. Combined with the high share of young workers in the sector, this suggests that retail offers valuable opportunities for first-time job seekers and flexible employment options for those still pursuing their studies.

Retail is adapting its diverse workforce to digital, green and consumer shifts

The retail sector in Europe offers a wide range of employment opportunities, from entry-level positions to senior management roles. The nature and breadth of roles differ by firm size: SMEs often rely on multi-tasking roles within flatter organisational structures, while larger firms offer more specialised positions and more formalised career pathways. Retail also provides accessible jobs for younger workers, including those with lower educational attainment, facilitating school-to-work transitions as well as mobility for workers coming from other industries. Upskilling and training are therefore important to equip all types of workers with the skills required to function productively as tasks evolve.

The digital transition is reshaping consumer shopping habits and the skills required from retail workers. For instance, as consumers increasingly make online purchases, many traditional retailers have also moved online. This shift may also have implications for working-time arrangements, as retailers seek to align staffing and service provision with evolving consumption patterns. While training programmes across the EU have adapted to meet the growing demand for digital and e-commerce skills, in-person retail can offer services not available online, such as a consumer experience and curated product advice. The increasing demand for social skills in job vacancies suggest that many customers still value in-person and personalised treatment.

At the same time, the retail sector can guide customers towards more sustainable options. While environmental and broader sustainability regulations are reshaping production processes, retail can also contribute by raising consumer awareness and promoting responsible consumption. To fulfil this role, retail workers must possess in-depth knowledge of the products they sell, including how they are produced. Skills training programmes can incorporate sustainability-related competencies – from understanding supply chains to addressing ethical considerations within specific retail subsectors.

Retail needs flexible skills programmes tailored to different subsectors and locations. Across Europe, modular initiatives cover many aspects of retail work. Publicly supported, sector-wide schemes aim to improve access for workers and firms of different sizes. Trainings offered on a continuous basis to support long-term retail staff can help them acquire new skills and expertise. Persistent challenges include student retention and low completion rates.

Digital tools play a key role in hiring, with online job portals improving job matching, particularly in high-turnover sectors such as retail. However, smaller retailers often rely on local networks rather than formal online platforms to find workers. Job portals can also offer valuable insights into skill demand and the sector's competitiveness. At a broader level, labour market monitoring systems can help identify skills shortages and inform targeted workforce development strategies.

The attractiveness of retail jobs to current and prospective employees is constrained by widespread part-time or temporary contracts, limited career progression and perceptions of low-skill, demanding work. Emerging safety concerns in front-line roles with frequent customer interaction add to these pressures. Together, these factors weaken returns on skills investment, raise turnover and limit recognition of specialised knowledge.

A coordinated response from employers, social partners and public authorities can improve job quality and make retail work more attractive. As a sector that serves the entire population, with a workforce that reflects this diversity, retail benefits when recruitment, employment and training are tailored to varied individual needs to strengthen inclusion. Priorities include expanding access to diverse skills training to support career progression, addressing workplace safety risks, and drawing on sector-wide strategies to improve job security and contract conditions. Recent initiatives, including Germany’s 2024 retail agreement and France’s 2021 agri-food and retail framework, illustrate these sector-wide approaches. Addressing these challenges is a shared responsibility at local and national levels, with skills development playing a central role.

Harnessing the twin transition to revitalise retail SMEs in town and city centres

The digital transition is reshaping urban retail. The expansion of e-commerce since the 2000s, accelerated by the COVID-19 pandemic, has accelerated the adoption of multi-channel models such as click-and-collect, deepening the integration of online and physical retail. In parallel, hybrid and remote work have also changed shopping patterns, increasing weekday activity in residential neighbourhoods while reducing footfall in city centres. Since the pandemic, teleworking became significantly more common in cities across the EU and elsewhere, while retail vacancy increased in several large urban areas.

Environmental concerns are shaping some consumers’ preferences. According to the European Commission’s 2025 Consumer Conditions Survey, in 2024, 43% of European consumers said they considered environmental concerns in their purchasing decisions and more than a third of them (35%) chose to repair a broken product rather than replacing. If those preferences do not always translate into purchasing habits, they still are, combined with regulatory pressure and high energy costs, pushing urban retailers to green their operations. For retail SMEs in city centres, these shifts bring both challenges and opportunities: delivery and logistics systems must adapt, but proximity-based retail can benefit from sustainable shopping trends and local consumer engagement.

Demographic change further amplifies these pressures. Europe’s population aged 65 or over is expected to rise from 91 million in 2019 to 130 million by 2050, reshaping demand for retail goods and services. Meanwhile, smaller cities and rural areas face population decline, with OECD projections pointing to a 2.3% drop in regions far from metropolitan centres by 2040. This trend poses challenges for local SMEs, particularly in retail, which often rely on a stable local customer base. However, population ageing may offer growth opportunities if retail SMEs adapt their products and services to meet the evolving needs of older adults. By doing so, they can remain viable despite demographic shifts.

Chapter 4 explores how national and local governments help retail SMEs in cities adapt to these changes. It showcases strategies to strengthen skills, foster sustainable practices, and align retail with technology and green goals.

Cities can support retail SMEs by encouraging digitalisation, sustainability practices and vibrant public spaces

To help SMEs adapt to the digital transition, national and local governments are supporting retail digitalisation. Integrating the strengths of physical retail with the reach of e-commerce can enable SMEs to expand their customer base and operate more efficiently. In-store technologies can further boost customer engagement and store performance. Digital platforms managed by local governments can enhance the visibility of local retailers and showcase city amenities, while targeted training can address persistent digital skills gaps. Reliable and affordable high-speed internet and advanced connectivity remain essential foundations for these efforts.

Energy efficiency is also becoming a priority in retail. Many retail establishments operate in ageing infrastructure with inefficient electric and heating systems while rising energy costs have also heavily affected the sector. Greenhouse gas emissions from energy use in buildings account for 34% of energy-related emissions in the EU, underscoring the urgency of retrofit programmes and sustainability investments. Policy responses can combine immediate relief, such as targeted financial support, with long-term investments like retrofit programmes to lower emissions and costs. Some degree of flexibility in planning agreements – including in historic town centres – together with dialogue between local authorities and property owners, is also necessary to enable implementation of energy retrofit programmes. Supporting circular business models can help small retailers innovate and differentiate themselves. Policymakers can accelerate this shift through procurement rules, grants, preferential loans and demand-side incentives such as reduced VAT for specific sustainable products. Local authorities can also strengthen urban logistics by promoting low-emission solutions, including logistics hubs and designated delivery zones.

Beyond directly supporting individual firms, urban policies can support the vitality of city centres which in turn help retail SMEs better navigate the twin transition. Walkability and access to efficient, affordable public transport increase footfall and strengthen retail performance. However, such improvements can also contribute to gentrification and the displacement of shops serving lower-income or marginalised communities. Urban regeneration and mixed-use planning offer ways to mitigate these risks while revitalising local economies. These approaches help reduce vacancy rates, enhance the urban image and improve competitiveness against online retail. Investments in public spaces, as well as green, social and cultural assets, attract more visitors, improve shopping experiences and benefit retail SMEs. For example, green spaces enhance urban liveability while drawing more customers to nearby shops.

Diversity, cultural activities and authenticity further support retail vitality. Local governments can support this by promoting distinctive retail experiences, local heritage and cultural engagement. Events, festivals and cultural programming can increase visits and enhance the city’s image, while large events generate additional foot traffic and provide exposure for local shops. Retail performance depends on integrating commerce with culture and community participation.

Governance and monitoring shape how retail supports urban vitality

Effective urban governance is needed to make retail strategies work, aligning planning, transport, logistics and economic development. City centres bring together diverse stakeholders and functions (including work, leisure, culture, education, retail, health and public services), which makes coordination essential.

Governance approaches across the EU vary. Public sector-led models, such as place managers or district management teams, provide structured coordination, linking departments, businesses, and communities while supporting local businesses and accessing national funding. Private sector-led models, such as Business Improvement Districts (BIDs) that require enabling legal frameworks, allow businesses to invest collectively in public space, marketing, safety and infrastructure through levies. Investments and improvements, whether public- or private-led, can raise property values and rents, which may displace smaller retailers unless safeguards are in place. The most successful approaches typically rely on public-private-people partnerships, which pool resources, expand expertise and build community support.

Monitoring and evaluation (M&E) are equally essential to assess retail’s contribution to urban vitality and promote continuous improvement. While many cities collect business data, few monitor outcomes for people and places, limiting the ability to assess retail’s contribution to urban attractiveness and cohesion. Developing robust M&E frameworks is often hindered by limited financial, human and technical resources, and by fragmented systems and data gaps, particularly for small and micro retailers. Granular, geographically detailed, and sector-specific data are needed to capture trends in retail vitality. Citizen-centred approaches, public input, and disaggregated demand data help align retail with community needs, while integrating tourism and mobility data provides a fuller picture of retail dynamics.

National governments can support local authorities in overcoming these challenges by funding knowledge-sharing platforms, providing training for administrators, and fostering vertical collaboration. Engaging existing local knowledge and institutions (e.g. chambers of commerce, universities, research institutes, NGOs or private consultancies) can enhance data collection and public transparency. Finally, adopting systemic M&E frameworks that link retail to the wider local economy, by integrating data on mobility, logistics, culture and identity, can allow cities to better understand the drivers of urban vibrancy and sustainability.