Reykjavik is a great place to shop for quality items with broad appeal and Icelandic charm. The city’s compact shopping district is a short drive from the cruise port, with taxis and shuttles making the connection easy. Once downtown, shopping is a walkable addition to a day ashore or to a city excursion such as the Tuk Tuk Tour of Reykjavik, which rides down Laugavegur. Icelandic wool, Nordic design and volcanic materials are featured in shop windows across downtown, and many purchases qualify for a VAT refund for eligible visitors.

Key takeaways

Laugavegur and Skólavörðustígur streets hold most of downtown Reykjavik’s shops within a compact, walkable area.

Hand-knit lopapeysa sweaters, Icelandic-designed goods and volcanic-stone jewelry are among the purchases worth prioritizing before returning to the ship.

Goods purchases of ISK 12,000 (about $100) or more on a single receipt can qualify eligible non-Icelandic residents for a VAT refund, which is validated by customs when you leave Iceland.

Key shopping streets and districts

Laugavegur is Reykjavik’s main downtown shopping street and a natural route for cruise guests exploring the capital on foot. Running through the heart of the city, this street brings together Icelandic fashion and design shops, galleries, souvenir stores, cafés and restaurants. Visitors can browse everything from technical outerwear and contemporary clothing to home goods and locally made gifts, stopping for coffee or a meal along the way.

Branching away from the main shopping area, Skólavörðustígur (widely known as Rainbow Street for its brightly painted colors) climbs gradually toward Hallgrímskirkja, whose distinctive, blade-shaped church tower provides a visual landmark at the top of the street. The route has a more arts-and-crafts-focused character, with shops and studios specializing in Icelandic ceramics, hand-knit wool clothing, jewelry and other locally designed goods. The Handknitting Association of Iceland is also located here, making the street particularly worthwhile for visitors searching for an authentic lopapeysa (see below for more details).

Bankastræti is the short stretch where Laugavegur and Skólavörðustígur begin, running down toward Lækjartorg square. Although easy to walk through quickly, it is worth slowing down to browse its shops, particularly for travelers interested in Icelandic design, fashion and distinctive souvenirs.

All three streets are clustered within Reykjavik’s compact city center, so guests can comfortably explore them all on foot. With a few hours ashore, it is possible to browse the main shopping areas, stop at cafés and combine shopping with visits to nearby landmarks such as Hallgrímskirkja and the waterfront.

A colorful rainbow path painted down the center of a paved pedestrian street lined with shops, planter boxes and stone buildings, leading towards Hallgrímskirkja church in the distance under an overcast sky.
Stroll down Skólavörðustígur in downtown Reykjavík, where the vibrant Rainbow Street leads the eye toward the soaring tower of Hallgrímskirkja church in the distance.

Icelandic wool and the lopapeysa sweater

Few souvenirs are as closely associated with Iceland as the lopapeysa, the country’s distinctive wool sweater. Its defining feature is the circular patterned yoke surrounding the shoulders and neckline. Traditional versions are made from Icelandic lopi, a lightly spun wool whose fibers provide warmth and weather resistance suited to the North Atlantic climate. Several weights are used, including the lighter léttlopi and the heavier álafosslopi.

Guests should be careful to distinguish between genuine hand-knit Icelandic sweaters and machine-made or imported alternatives. Labels and pricing can provide clues (as the hand-knit sweaters are generally much more expensive), but guests looking for verified hand-knit pieces can visit the Handknitting Association of Iceland on Skólavörðustígur. The shop sells sweaters and other wool products made by Icelandic knitters, providing a reliable place to find an authentic piece. Machine-knit lopapeysa can also be fairly expensive, but they make attractive, practical sweaters for guests who aren’t set on a hand-knit piece.

A lopapeysa can take up considerable luggage space, so a wool sweater is often a one-per-trip purchase rather than an impulse buy. Shopping early in the visit gives guests time to compare patterns, colors, sizing and craftsmanship before choosing the one ideal sweater they want to bring home.

A traditional Icelandic lopapeysa wool sweater hangs on a white hanger against a light background, featuring an olive green knit body and a complex patterned yoke in shades of white, light blue, gray and brown rust.
Bring home a piece of Icelandic tradition with an authentic lopapeysa, a hand-knitted wool sweater featuring intricate geometric yoke patterns.
A group of people stands on the deck of a cruise ship, enjoying the view of the open sea. The wooden deck and railing are visible, with the ship's wake trailing behind. The setting sun casts a warm glow over the scene, creating a serene and relaxing atmosphere.

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Icelandic design and fashion brands

Reykjavik features a concentration of home-grown labels along Laugavegur and Skólavörðustígur streets, making the city center a rewarding place to discover Icelandic fashion and design. Shops range from outdoor specialists suited to Iceland’s demanding climate to boutiques showcasing contemporary clothing, knitwear and accessories.

66°North is one of Iceland’s best-known outerwear brands. Founded with roots in producing protective clothing for Icelandic fishermen working in harsh North Atlantic conditions, the label has developed into a contemporary outdoor and lifestyle brand. Its jackets, technical layers and everyday clothing are widely available in downtown Reykjavik.

Farmers Market offers a different interpretation of Icelandic style, combining traditional Nordic influences and wool craftsmanship with clean, modern design. Its collections reflect the country’s strong connection to natural materials and practical clothing.

Many Icelandic designers emphasize sustainability, with approaches that can include recycled or responsibly sourced materials, durable construction and small-batch local production.

A close-up side view of a clothing rack filled with thick, hand-knitted Icelandic wool sweaters featuring various colorful geometric yoke patterns.
Browse through shops in Reykjavík to find handcrafted Icelandic wool garments, where racks of cozy lopapeysa sweaters showcase timeless Nordic patterns and warm natural fibers.

Icelandic skincare and volcanic jewelry

For travelers wondering what to bring home that feels connected to Iceland, geothermal skincare and volcanic-stone jewelry offer two distinctive options rooted in the country’s landscape.

Geothermal-based skincare draws inspiration from Iceland’s hot springs, mineral-rich waters and geothermal pools including the famous Blue Lagoon. Products may incorporate ingredients such as silica, mineral salts and algae associated with the country’s geothermal environments and bathing pools. Many skincare products, including the Blue Lagoon skincare line, are available in downtown Reykjavik shops alongside Icelandic clothing, accessories and design goods, making them easy to browse without planning a separate shopping trip.

Volcanic-stone jewelry provides another connection to Iceland’s natural environment. Designers incorporate lava rock and other materials such as leather, metals and crystals into necklaces, bracelets, earrings and other wearable pieces, often incorporating Nordic symbols. The dark, textured volcanic stone gives these items a look closely associated with Iceland’s lava fields and volcanic geology.

Both categories make memorable alternatives to conventional souvenirs, allowing travelers to bring home something inspired directly by the natural forces that have shaped Iceland.

A close-up view of a person's wrist wearing stacked beaded bracelets made with textured black volcanic lava rock beads, gold accents and blue evil-eye and stone beads, alongside a black braided leather wristband.
Discover Icelandic jewelry in Reykjavík shops, where artisan-crafted bracelets feature black volcanic lava stones paired with metallic accents.

Tax-free shopping and payment

Many purchases can qualify for a VAT (value added tax) refund, if you meet the following conditions:

  • Residency - You must be a non-Icelandic resident permanently living outside Iceland.
  • Minimum spend - You must spend a minimum of ISK 12,000 (about $100) including VAT on a single purchase receipt in one store on the same day.
  • Time limit - You must export the goods out of Iceland within three months of the purchase date (no problem for cruise guests).
  • Documentation - Ask the retailer to sign the tax-free form and keep it with your original receipts and purchases, ideally in your carry-on luggage, so customs can validate the forms when you leave Iceland.
  • Exclusions - VAT refunds only apply to physical goods you take out of the country. You can’t apply for a tax refund on services such as hotels, car rentals, restaurant meals, tours or fuel, for example.

Iceland uses the Icelandic króna, but cards and phone payments are accepted almost everywhere downtown, so cash isn’t necessary.

Exploring Reykjavik and the surrounding area is among the most memorable activities for many cruise guests, particularly those who book a curated Princess® excursion. But whether you enjoy shopping as its own pursuit or as part of an amazing day ashore, you’re sure to find something special in the shops of this remarkable city. Explore European cruises and find your ideal itinerary to Iceland.

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