Icelandic woolens are the most traditional souvenir. Warm, colorful and practically waterproof, sweaters and scarves are never considered out of style even on the streets of super-stylish Reykjavík.
Iceland's best-kept souvenir secret is the Álafoss Factory Outlet (Álafossvegi 23, 270 Mosfellsbær; tel. +354 566 6303; fax +354 566 8330; www.alafoss.is) in the Reykjavík suburb of Mosfellsbor. Elsa and Peter, the owners, sell woolen goods and other handicrafts for prices 30% below Reykjavík rates, with sweaters and blankets as cheap as ISK 2800 and most sweaters in the ISK 4000-6000 range. They also showcase glass and ceramic works from local artists, also at a 30% discount over prices "in the city." While you're there, wave hello to Icelandic art-rock supergroup Sigur Ros -- their studio is in a nondescript gray house just across the street.
The outlet is open Monday-Friday 9-6 and Saturday 9-4. If you're driving, take Route 1 to Mosfellsbær. By bus, take the #10, 15, 110 or 115 from downtown to the Artun bus station and there switch for the #25 to the outlet. It takes about 20 minutes to drive there from Reykjavík, or about 40 by bus.
The best store for woolens in Reykjavík itself is run by the Icelandic Handknitting Association, a local cooperative. It's at Skólavörðustígur 19 (tel. +354 552 1890; fax +354 552 1912; www.handknit.is). The crowded little shop is literally stuffed with sweaters, blankets and scarves, but expect to walk out with your wallet at least ISK 6000 lighter. It's open Monday-Friday, 9-6 and Saturday 9-4.
If you can, though, try to break free of the woolen trap and go for the gold. Icelandic goldsmiths have a striking, unique style merging Celtic imagery, ancient Norse shapes and the natural volcanic landscape. A slew of goldsmiths crowd Laugavegur, in downtown Reykjavík; probably the best is Hansina Jensdottir, at Laugavegur 20b (tel. +354 551 8448; fax +354 551 8449; www.hansinajens.is). You can pick up a pair of one-of-a-kind, silver and copper earrings for ISK 4500; necklaces start at ISK 6000 or so. Of course, the sky's the limit for gold and precious stones.
If you discover yourself empty-handed in Keflavik airport, walk into the Islandia duty-free shop and pick up a tiny bottle of Brennevin, the Icelandic caraway-flavored vodka. It'll only cost you around ISK 300, plus it's easily portable and it won't cause trouble with US customs like foodstuffs will.
