State of Fashion 2026 Report: ‘Wellness’ Is the New Aesthetic and It’s Giving!

Here’s something that should terrify every fashion marketer reading this: for the first time in a decade of tracking, expert fashion executives describe 2026 conditions as “challenging” rather than only “uncertain”. And 46% expect the industry to worsen, up 8% points from last year.

I’ve spent over 10 years analysing fashion markets from London’s creative epicentre to Asia’s manufacturing hubs, and I’ve never seen such polarised sentiment. The rules have been completely rewritten this year and if you’re still following the old playbook/report, you’re already behind.

The Perfect Storm: Why Fashion’s Economic Model Is Breaking

Let’s be brutally honest about what’s happening. The McKinsey and Business of Fashion State of Fashion 2026 report predicts turbulence. It confirms that turbulence has become “the new normal”.

The Tariff Tsunami

76% of fashion executives identify tariffs as 2026’s defining issue, with apparel and footwear among the most exposed sectors. This is hitting balance-sheets hard. 71% of executives plan price increases next year, but here’s the catch: consumers are tapped out.

From my conversations with C-suite executives across London’s fashion district, the challenge is more than just absorbing costs, but it’s in maintaining differentiation while simultaneously raising prices in a value-conscious market. Levi’s CEO Michelle Gass mentioned what many are thinking, “There’s only so much you can absorb from tariffs, because they’re just very high.”

The Market Insights: For UK-based fashion businesses, post-Brexit trade complexities compound tariff pressures. Brands sourcing from Asia and selling into North America face double exposure, while European market access remains critical for survival.

The Cash Crunch Nobody’s Talking About

Here’s the hidden crisis, inventory turnover days increased 4% from 2023 to 2024, meaning fashion companies are holding stock longer, tying up working capital and inflating warehousing costs. This is inefficiency and it’s an existential threat.

45% identify sourcing costs as their economic model’s most pressured area, followed by pricing and inventory management. The traditional levers, scale economies, low-cost sourcing, tactical promotions, no longer deliver sustainable margins.

Consumer Sentiment: The Real Culprit

Nearly 80% of executives cite consumer confidence and spending appetite as the top risk. And they’re right to worry. Over 60% of consumers planned to trade down in Q4 2025, yet paradoxically, 31% say they’ll splurge on fashion if it’s the right product. Today’s consumer are rejecting mediocrity.

The AI Revolution: From Competitive Edge to Business Necessity

Now, let’s talk about the opportunity hiding in plain sight. Executives confirmed AI as the biggest opportunity, surpassing product differentiation and sustainability.

Where AI Is Already Winning

Over 35% of executives report using generative AI in online customer service, image creation, copywriting, consumer search, or product discovery. But most applications remain siloed, disconnected pilots that deliver incremental improvements rather than transformational change.

The brutal truth is up to 90% of transformative AI projects remain stuck at pilot stage, constrained by structural and cultural barriers.

The AI Consumer Is Here

23% of consumers now use AI to discover new products, and 41% prefer AI search results to traditional advertising. Read that again, my love. Nearly half your potential customers trust AI more than your carefully crafted campaigns.

This demands a fundamental shift in how we think about discoverability. SEO is being joined and in some cases replaced by GEO (Generative Engine Optimisation). If your brand isn’t visible in ChatGPT searches or Claude conversations, you’re invisible to a rapidly growing consumer segment.

The Workforce Transformation

By 2030, approximately 30% of employee time could be automated by generative AI and other technologies in Europe and the US. This isn’t about job losses, it’s about role evolution. Existing jobs are becoming more AI-centric, enabling roles to shift toward higher-value creative and analytical tasks.

For London’s fashion sector: We’re uniquely positioned to lead this transition, given our concentration of creative talent and tech innovation. The question isn’t whether to adopt AI, it’s how quickly you can embed it across merchandising, operations, assortment planning, logistics, and marketing.

The Wellness Wildcard: Fashion’s New Competitor

Here’s something that shocked me as an analysts: fashion brands are competing with consumers’ focus on personal wellness, body, mind, and health.

84% of US consumers rank wellness as a top priority, rising to 94% in China. This isn’t a trend, it’s a values realignment. Consumers are allocating mental and financial resources to longevity, self-care, and wellbeing, often at fashion’s expense.

The Strategic Response

Smart brands aren’t fighting wellness, they’re merging with it. Think about Lululemon’s evolution from yoga pants to lifestyle brand, or how luxury houses are incorporating wellness narratives into product positioning.

For marketers, this means:

  • Reframing products through wellness lenses: Is your activewear enhancing performance or enabling stress relief?
  • Storytelling that acknowledges holistic living: Your brand isn’t competing with gym memberships, in fact, you’re complementing them.
  • Product innovation at the fashion-wellness intersection: Smart eyewear that tracks health metrics while looking incredible.

The Resale Revolution: From Threat to Strategic Asset

The second-hand fashion and luxury market will grow two to three times faster than first-hand markets through 2027. If you’re treating resale as a cannibalisation threat, you’ve already lost, my friend.

Why Brands Must Own Their Re-sale Strategy

The BoF report is explicit: brands must define their own resale strategies to boost perception and enrich business models. Here’s why this matters commercially:

  1. Margin protection: Brand-owned resale captures value you’d otherwise lose to third-party platforms
  2. Customer lifetime value extension: Resale keeps customers in your ecosystem across multiple ownership cycles
  3. Sustainability credentials without greenwashing: Tangible circularity beats marketing spin
  4. Data goldmine: Understanding resale patterns informs design, production volumes, and pricing strategies

Market Advantage: The UK’s evolved sustainability consciousness and resale infrastructure make this market particularly receptive to brand-owned circular models. Consumers here expect and reward genuine commitment to product longevity.

The Luxury Paradox: Creative Directors Won’t Save You

Luxury faces an existential crisis. Several of the largest luxury houses welcomed new creative directors in 2025 as sales slowed, but high prices remained as a significant hurdle for aspirational customers.

The Real Problem

Creative talent alone can’t overcome structural challenges:

  • Price inflation has outpaced consumer income growth: Luxury’s accessibility has narrowed
  • Aspirational customers are prioritising wellness investments: A Peloton delivers more perceived value than a handbag for many
  • Brand heat doesn’t automatically convert to sales: Virality won’t always mean revenue

Regional Divergence

Interestingly, Europe’s luxury market expects 1-3% growth in 2026, supported by strong domestic demand. Brands like Hermès, Richemont, and LVMH reported robust local European sales in Q1 2025, suggesting regional consumers maintain luxury appetite despite global pessimism.

For European luxury brands, this means they don’t over-index on macro doom. Their home market remains resilient, lean into it while others retreat.

The Categories Defying Gravity

Whilst apparel struggles, two categories are wining hearts and pounds:

Jewellery’s Golden Moment

Strong volume demand in jewellery is expected through 2028, driven by consumers seeking lasting investments, self-expression, and rising self-gifting among both genders. Jewellery has thrived as fashion brands hiked prices faster, consumers perceive better value retention.

FREE Strategic Insights: If your brand has jewellery adjacencies (even costume jewellery), now is the time to invest. The consumer mindset favours permanence over trend cycles.

Smart Eyewear’s Breakout Year

Smart eyewear blending fashion and technology has become the fastest-growing accessory category, with analysts expecting sales to quadruple and further launches expected in 2026.

Essilor Luxottica’s Chief Wearables Officer Rocco Basilico put it perfectly, “If I were a fashion brand starting now, I would definitely put wearables in my roadmap.” This is fashion’s evolution into tech-enabled lifestyle products. The lines are blurring permanently.

Regional Realities: Where to Place Your Bets

Europe: Resilient But Cautious

European fashion markets expect 1-2% growth in 2026, with GDP growth remaining steady, supported by stable unemployment and inflation easing from 3.3% to 2.5%. Disposable incomes should grow slightly faster than 2025, but consumers remain cautious.

FREE Market Insights: The UK’s recovery trajectory within this European context depends heavily on continued economic stabilisation and consumer confidence rebuilding post-inflation peak. Our market typifies cautious optimism, willing to spend, but demanding value.

North America: The Danger Zone

36% of executives view North America as unattractive or very unattractive, double last year’s figure. Tariffs, consumer retrenchment, and political uncertainty create perfect storm conditions. US fashion market growth is expected at 1-3%, but sentiment tells a darker story. Brands with heavy North American exposure need contingency plans.

China: The Sentiment Shift

Here’s the surprising data point, 28% now view China as unattractive, down from 41% in 2025. Executive sentiment is improving even as Western markets darken.

This reflects both China’s stimulus measures and the comparative stability of its consumer market versus Western volatility. For globally-minded brands, China may offer growth opportunities others are overlooking.

What This Means For Marketers: Your 2026 Action Plan

Having digested the macro trends, let’s put this into concrete strategy:

1. Embrace AI-Native Marketing (Now, Not Later)

Immediate Actions:

  • Audit your GEO readiness: Are your products discoverable via ChatGPT, Claude, Perplexity? If not, you’re invisible to 23% of consumers and growing
  • Implement conversational AI for customer service: The 35% using gen AI here are seeing measurable ROI
  • Automate content creation for efficiency: Free up budget for higher-value creative and strategy work
  • Train your team on AI tools: Marketing roles are becoming AI-assisted; your people need fluency now

Advanced Moves:

  • Develop AI shopping agent strategies: How will your brand appear in AI-powered comparison shopping?
  • Create LLM-optimised product descriptions: Write for both humans and AI interpreters
  • Experiment with AI personalisation beyond email: Dynamic website experiences, predictive recommendations

2. Reframe Your Value Proposition Through Wellness

Content Strategy:

  • Position products as wellness enablers, not just style statements
  • Create editorial content around holistic living where your products fit naturally
  • Partner with wellness creators and platforms to reach audiences in their wellness moments

Product Innovation:

  • Explore material innovations emphasising comfort, breathability, sustainability
  • Consider function-led design that serves wellness goals (recovery wear, mindfulness-enhancing fabrics)
  • Bundle products with wellness content or experiences

3. Build Your Resale Moat Before Someone Else Does

Strategic Priorities:

  • Launch brand-owned resale platforms or partner with white-label providers
  • Design products with longevity and resale value in mind, this becomes a sales argument
  • Capture customer data across first-hand and resale transactions for unified view
  • Market circularity as premium positioning, not apologetic sustainability

4. Radical Inventory Discipline

With cash tied up in stock longer, you need:

  • AI-driven demand forecasting: Reduce overproduction risk
  • Dynamic pricing strategies: Move inventory faster without eroding brand equity
  • Pre-order models for selected launches: Finance production with customer deposits
  • Ruthless SKU rationalisation: Every product must justify its existence

5. Price With Surgical Precision

You’re navigating between tariff-driven cost increases and value-conscious consumers. And this demands:

  • Tiered value architecture: Protect premium lines whilst offering entry points
  • Transparent pricing narratives: Consumers forgive increases they understand
  • Focus differentiation on hero products: Not everything needs premium pricing
  • Regional pricing flexibility: One global price strategy won’t work in this environment

6. Double Down on Retention

With acquisition costs rising and consumer caution persisting, over half of executives prioritise retention strategies. Your existing customers are your lifeline.

Retention Tactics:

  • Loyalty programmes with genuine value: Points aren’t enough, offer exclusive experiences, early access, styling services
  • Personalisation at scale: Use AI to deliver relevance without creepiness
  • Community building: Create reasons to engage beyond transactions
  • CRM sophistication: Understand purchase cycles, preferences, and trigger moments

The Entrepreneur’s Survival Plan: Thriving When Giants Struggle

If you’re a solo founder or small team competing against established brands in this environment, you actually have advantages:

Agility Is Your Superpower

Large brands need months to pivot. You need days. Use this to:

  • Test new categories rapidly: Smart eyewear, wellness integration, resale models, experiment without corporate bureaucracy
  • Respond to tariff changes faster: Shift suppliers, adjust pricing, reposition products before competitors react
  • Embrace AI-first operations: You’re not burdened by legacy systems or change-resistant cultures

Niche Domination Beats Broad Mediocrity

With consumers demanding specificity and differentiation:

  • Own a micro-category: Don’t compete in “sustainable fashion”, dominate “zero-waste workwear” or “wellness-enabled loungewear”
  • Build community, not just customer base: Your engaged 5,000 followers outperform brand X’s disengaged 500,000
  • Charge premium prices justified by genuine differentiation: In a value-conscious market, cheap generics fail but distinctive specialists thrive

Partner Your Way to Scale

You can’t outspend incumbents on AI infrastructure or global supply chains, but you can:

  • Leverage AI tools democratising capabilities: ChatGPT, Claude, Midjourney level the creative playing field
  • Use platform-as-a-service models: Shopify, Klaviyo, and similar tools give you enterprise capabilities at startup prices
  • Collaborate with complementary brands: Co-marketing, shared logistics, bundled offerings

Tell Better Stories

Consumers want value in brand storytelling, clothing quality, and relatable brand values. Your authentic narrative beats corporate messaging. Your founder story, your design philosophy, your supply chain transparency. They’re basically commercial differentiators in a market drowning in sameness.

Social Media Strategies for the 2026 Market

Content That Converts in a Value-Conscious Market

What’s Working:

  • Educational content demonstrating product value: Cost-per-wear calculations, styling versatility, quality comparisons
  • Behind-the-scenes transparency: Manufacturing, material sourcing, pricing rationale
  • User-generated content proving durability: Customer posts showing products after months/years of use
  • Wellness integration: Products as part of holistic lifestyle, not isolated purchases

What’s Dying:

  • Aspiration without accessibility: Luxury imagery that alienates value-conscious consumers
  • Fast fashion trend chasing: Consumers increasingly reject disposability
  • Generic sustainability claims: Greenwashing gets called out immediately
  • Hard selling without context: Education before conversion

Platform-Specific Tactics

TikTok/Instagram Reels:

  • “Worth It” content series: Breaking down why premium pricing delivers value
  • Longevity challenges: Showing products after extended use
  • AI tool demonstrations: How you’re using AI to enhance customer experience or design
  • Resale success stories: Customers selling your products for strong secondary values

LinkedIn (For B2B Fashion Brands):

  • Tariff navigation insights: Position as thought leader helping other businesses
  • AI implementation case studies: Share your transformation journey
  • Sustainability metrics: Transparent reporting builds trust with wholesale partners

Pinterest:

  • Wellness-integrated outfit boards: Fashion meeting self-care
  • Capsule wardrobe planning: Value through versatility
  • Second-life styling: Showing resale pieces styled aspirationally

Influencer Strategy Evolution

Move beyond reach metrics to:

  • Micro-influencers with engaged niche communities: 5,000 passionate followers beat 500,000 passive ones
  • Long-term partnerships over one-off posts: Building genuine advocacy
  • Wellness and lifestyle creators: Reach audiences in their wellness moments
  • AI-savvy creators: Partner with those embracing new technologies

Digital Marketing Channels

Generative Engine Optimisation (GEO)

This is non-negotiable and your immediate checklist:

  1. Structured data markup: Make your products machine-readable
  2. Natural language product descriptions: Write how people speak, not keyword-stuffed copy
  3. Rich content that AI can contextualise: Detailed materials, use cases, sustainability info
  4. Active presence in AI training data: Fresh, crawlable content that AI models can learn from

Paid Media in an AI-Disrupted Landscape

41% prefer AI search to traditional advertising, which means your paid strategy needs evolution:

Shift Budget To:

  • Contextual AI placements: Be in AI-recommended product lists
  • Retail media networks: On-platform advertising on e-commerce sites
  • Creator partnerships: More authentic than display ads
  • First-party data activation: Target your own audiences more precisely

Reduce Spend On:

  • Broad social reach campaigns: Unless top-of-funnel with specific conversion path
  • Generic display advertising: Low trust, declining effectiveness
  • Keyword bidding wars: GEO may reduce search volume over time

Email & SMS: The Retention Workhorses

In a retention-focused environment, owned channels become crucial:

Advanced Tactics:

  • AI-powered send-time optimisation: Personalised timing per subscriber
  • Dynamic content blocks: Each subscriber sees different products based on behaviour
  • Resale notifications: Alert customers when their purchased items gain resale value
  • Wellness content integration: Fashion as part of their broader lifestyle goals

Sustainability: The Business Model

The report is clear, AI surpasses sustainability as executives’ priority, but this doesn’t mean sustainability is irrelevant, in fact, it means performative sustainability is dead.

What Actually Matters Now

Circularity with economics: Resale programmes that generate profit, not just PR Material innovation: Tangible improvements in durability, biodegradability, recyclability Transparent supply chains: Blockchain-verified sourcing that consumers can actually check Take-back schemes: Closed-loop systems that work operationally, not just conceptually

What’s Over: Vague carbon neutral claims: Without detailed methodology Greenwashing through marketing: Consumers see through it instantly Sustainability as premium upcharge: Value equation must work Compliance-minimum efforts: Regulatory floor isn’t differentiating ceiling

The London Sustainability Opportunity

UK consumers rank among the world’s most sustainability-conscious, but also most sceptical of greenwashing. This creates opportunity for brands willing to:

  • Be radically transparent about challenges, not just successes
  • Invest in verifiable improvements over time
  • Partner with credible third-party validators
  • Build community around shared environmental values

Future Trend Predictions: What Comes After 2026

Based on the report’s data and directional indicators, here’s what I’m watching for 2027-2028:

The AI-Native Brand Emergence

By late 2026, we’ll see the first AI-native fashion brands, companies built from inception around AI capabilities:

  • Real-time demand-driven production: Manufacturing triggered by AI-predicted demand
  • Fully personalised customer experiences: Every touchpoint adapted to individual
  • AI co-designed products: Human creativity enhanced by AI pattern recognition
  • Automated supply chain orchestration: From material sourcing to last-mile delivery

The Great Consolidation

46% expect conditions to worsen, which historically precedes consolidation. Expect:

  • Mid-tier brand failures: Caught between value leaders and premium differentiation
  • Private equity exits: Fire sales as funds seek liquidity
  • Strategic acquisitions by survivors: Strong brands buying distressed assets cheaply
  • Vertical integration: Brands acquiring suppliers to control costs and ensure capacity

The Bifurcation of Luxury

Luxury will split into two distinct categories:

  1. Ultra-luxury becoming even more exclusive: Hermès model, scarcity, craft, heritage
  2. Accessible luxury fragmenting: Either moving up-market or accepting mid-tier positioning

Wellness-Fashion Fusion Accelerates

By 2028:

  • Smart fabrics monitoring health metrics: Beyond wearables to the clothes themselves
  • Fashion-forward medical devices: Continuous glucose monitors, heart rate monitors designed beautifully
  • Therapeutic clothing: Compression, temperature regulation, aromatherapy integration
  • Mental wellness fashion: Sensory-optimised fabrics for anxiety, ADHD, autism spectrum

The Resale Market Matures

  • Brand-owned platforms become industry standard: Third-party marketplaces lose share
  • Authentication technology commoditises: Blockchain, NFC chips, digital twins
  • Resale value becomes product design input: “Resale-ability” scores influence development
  • Rental-to-resale pipelines emerge: Rent, wear, buy used, seamless customer journeys

Geographic Power Shifts

  • China’s consumer market stabilises as West’s declines: Brands become China-centric
  • India emerges as the next battleground: Manufacturing and consumption growth
  • Africa’s fashion ecosystem develops: Beyond just sourcing to regional brands and markets
  • Middle East luxury deepens: Beyond tourism to domestic wealth generation

The Bottom Line

The State of Fashion 2026 report documents an industry at an inflection point. The old strategy to scale, bulk production, tactical discounting, is burning. This is being replaced by AI-powered efficiency, hyper-specific differentiation, delivered to value-conscious but discerning consumers, through omnichannel experiences that integrate wellness, sustainability, and technology.

That’s the new table stakes now.

So hear me out marketers, social media managers, and entrepreneurs, the message is clear… the next 12 months will separate those who adapted from those who merely hoped things would return to “normal.”

They won’t.

But here’s the thing about “disruption“, it’s also opportunity. While 46% of executives expect worsening conditions, 25% foresee improvements. The difference between these groups is strategy, agility, and willingness to make uncomfortable changes.

The question is whether you’ll lead the change or become its victim.

Until next time,

Love, Jasmin