Euro zone stocks were down 0.4 percent while Germany's DAX fell 0.1 percent and Britain's FTSE 100 lost 0.2 percent by 0930 GMT.
ASOS shares plunged 41 percent after the British online fashion retailer - a favourite of investors keen to back internet-focused retail - cut its forecasts, saying November was "significantly behind expectations".
It was the latest in a string of profit warnings and negative outlooks from retailers including Sports Direct, Dixons Carphone and Bonmarche highlighting poor performance in the pre-Christmas trading period.
Shares in Zalando, a German rival of ASOS and Europe's biggest online retailer, dropped 15.3 percent, the biggest STOXX 600 fallers.
The selling wiped 1.3 billion pounds off ASOS' market cap and 1 billion euros off Zalando's in the first 30 minutes of trading.
ASOS peer Boohoo fell 18 percent at the open, before recouping some losses after it reported record Black Friday sales. It was last down 10.6 percent.
Swedish retailer H&M fell 3.8 percent despite reporting in-line sales figures, as the Asos stress spread. Next and Marks & Spencer fell 3.7 percent and 2.4 percent.
Puma also fell 5.6 percent, Hugo Boss tumbled 4.6 percent and B&M European Value Retail lost 4.3 percent. Adidas was the biggest faller on the DAX.
Europe's retail sector fell 2.1 percent, the worst-performing and hitting its lowest level since July 2016.
Outside retail, M&A drove some big moves with Ingenico tumbling after it said it had dropped talks over a possible deal.
The stock fell 6 percent to its lowest level in five years.
Innogy shares fell 2 percent and SSE fell 1.6 percent after the two energy firms scrapped plans to merge their British energy retail units, saying they could not agree on new commercial terms after Britain's regulator proposed a cap on energy bills.
Swedish electrical components maker Dometic fell 6.7 percent after Kepler Cheuvreux cut their rating on the stock to a "hold" from a "buy".
Leading euro zone stocks and Britain's FTSE 100 were all set for their worst quarter since 2011, when the region was in the throes of the sovereign debt crisis.
Investors smarting from a tough year also had a week of central bank events looming with meetings of the US Federal Reserve and the Bank of England likely to move markets.
Despite this, Mark Haefele, chief investment officer for Global Wealth Management at UBS, said: "On balance, we are not yet convinced that the profitable thing to do is to position for further policy errors or poor sentiment upending the economy."
He concurs with the Fed's assessment that the risk of a recession in the next 12 months is only around 20 percent, and sees global equities as "reasonably valued". Valuations across global stocks have fallen as a result of recent market turbulence.