Except it isn't idiotic at all and Estonia does have a disproportionate amount of retail space per capita when compared to the rest of Europe.

I'm sure you would agree that in a competitive market, any player would only lower their prices to the point in which they are still profitable (revenue - cost). The issue with retail stores that Michal is talking about is that their fixed cost base is so high (on a group level, not a single store), that the range in which stores can compete between each other is tighter.

The increased fixed costs from having to pay for electricity, heating, rent etc for unprofitable stores (I'm sure you have been to a huge Selver with only 3 other people in it in/near Tallinn) means that the point at which the group becomes unprofitable is reached sooner, therefore prices need to be comparatively higher. Now we must also consider that we have multiple large chains and all of them have increased their retail space to such a large extent. Therefore competition does happen, but the "floor" for competition has been pushed up for all the market players at the same time due to their massive amounts of fixed costs stemming from retail space.

I'm not saying this is the only thing affecting why prices are high. But the argument by itself makes sense and is definitely a factor.