I said I would write more about Iceland and then I forgot. Whoops! Here goes, then - I did a bunch of shopping when I was in Iceland. I am not much of a shopper when I'm at home, but I do like visiting shops in unfamiliar places, that carry unfamiliar goods. I don't always buy much, but it's fun to look.
Iceland has a reputation for being very expensive, and this is true to some extent; food and alcohol are especially high-priced (with the exception of fish, lamb, and brennivin), and a lot of the items in shops would be much cheaper anywhere other than in Iceland. Check out these Silly Bandz knockoffs selling for almost $3 a dozen!
I don't shop for Silly Bandz regularly but I hope that's not how much they cost in the US, because if so all those poor kids are getting shafted.
But there are bargains to be had in Iceland, especially on wool. Did you know that in Icelandic the word for "money" and the word for "sheep" is the same word? That's what a shopkeeper told me, and this online English-Icelandic dictionary backs me up.
One nice thing about buying wool products in Iceland is that if you export them you can get all your VAT (something like 15%) back, no matter how much wool you buy. These yarns cost about half as much in Iceland as they do in the US, so there are great bargains to be had for knitters. They also have wool for felting at what appeared to be an excellent price, though I am not a felter so I don't know how it compares. I bought a lot of yarn at the Handknitting Association of Iceland shop, enough to fill my small suitcase (fortunately, I had brought an extra suitcase in anticipation of this event). Most of it was for me, but some was for a friend. I swear! I wish I'd bought more.
The Handknitting Association also sells great handmade Lopi sweaters, which are very, very popular in Iceland, though I think most of the ones you see Icelanders wearing are not just handmade but homemade - all Icelanders learn to knit in primary school, and Lopi sweaters are not difficult to knit, so pretty much any grandma or aunt (or uncle or whatever!) has the know-how to make one of these. Non-knitters can skip the rest of this paragraph, but knitting nerds may be interested to know that Lopi sweaters are knitted from the bottom up, in the round, from bulky weight Icelandic wool, and they feature a stranded colorworked yoke, often featuring 3-4 shades of the same color (grays, browns, or blues, for example). Pullovers, buttoned cardigans, and zip cardigans are all pretty popular.
As a knitter, I chose to buy the yarn and knit my own, but if you don't knit but want a great souvenir of Iceland, I think a Lopi sweater is a great choice - they're very attractive, unmistakeably Icelandic, and super-useful (I use mine in place of a jacket in fall and early winter). They're scratchy, but they're also nearly waterproof, and pretty durable. If you can't afford the prices in the tourist shops, check out the Icelandic Red Cross thrift store on Laugavegur in Reykjavik - you might luck out and find a used one you like there.
In addition to the yarn, I bought two scarves, one fancy and one functional, both of Icelandic wool. I spent way too much on the fancy scarf but I love it. It's by a small Icelandic brand called Kurlproject (WARNING: site plays music automatically, ugh). It seems like everyone in Iceland is either a clothing designer or a musician. Or both.
I also bought an adorable felt Christmas ornament:
The brand on this one is Kata Handverk, and the crafter had loads of different types of ornaments and figurines, all the same basic shape. I wish I'd gotten her little nativity/creche! It was so cute. On the other hand, I don't really have any spare surfaces in my apartment that I want to turn over to a nativity scene and I'm not really religious. So, maybe I was right. I like buying souvenir Christmas ornaments, because you don't get used to them - you get to rediscover and remember them every year when you trim the tree.
I bought some other stuff but it was mostly junk. The main exports of Iceland are fish, fishing-related equipment, aluminum, software, and woolen goods. I don't really need any aluminum or fishing-related equipment, software I can buy pretty easily from home, and I can't legally import fish into the US. So woolens it is! Oh, and some cute little hand-carved wooden sheep for a toddler cousin.