Overall, after a whole decade of tracking trends, the bank of more experienced business leaders can declare: Yes, we are actually moving out of the ‘uncertain’ into ‘challenging’ category for the first time. And 46% predict the ‘challenging’ space will actually get worse – an increase of 8pp versus last year.
In ten years of writing about fashion markets, in the streets of London, in markets in Asia – I’ve never seen a more fragmented set of opinions. The rules are different this year. Play the game, or pull out.
The Perfect Storm: How the Economics of Fashion Are Going Sour
Cut to the chase McKinsey and Business of Fashion’s State of Fashion 2026 predicts a rollercoaster. It reaffirms turbulence is here to stay – “the new normal”.
The Tariff Tsunami
Clothes and shoes have been hit hardest by tariffs, which accounted for the most concerns of 76% of fashion executives. That’s a big blow to profits. And 71% intend to hike prices next year, a blow to consumers already under pressure.
For whom the bell tolls: Talking to the fashion elite in London this week the argument about whether to do a price increase is not just about how you do it but how you make sure you will be heard regarding why you will do it differently to take maximum advantage of a price increase, in a value driven world. Michelle Gass, CEO, Levi’s summed it up: “It was very high tariffs so you can only swallow so much.”
Market insight: for UK fashion brands, the pain of tariffs gets even more complex after Brexit. However, the ultimate way to take advantage as a manufacturer is to develop European production, and then reimport from Asia to North America.
Money Crunch No One Talking About
Less days in inventory, 4% higher than in 2023-2024 for apparel companies “Physically holding inventory longer, which ties up extra working capital and incurs higher storage costs”.
45% of respondents said sourcing was the one pressure they experienced most on their business model, followed by pricing/inventory management. All the talk about economies of scale, low-cost sourcing and snap deals are not translating into sustainable margins.
Consumer Sentiment The Real Catalyst
8 in 10 agree that the number one concern they have for the retail industry’s future is consumer confidence and spending. And they’re not far from the mark. While more than 60% of consumers say they will trade down in Q4 2025, 31% say that they will take the fashion leap if the footwear is just right. It’s simply not enough to be bland.
The AI Revolution: From Edge to Essential
So let’s look at what we are going to do: Leaders identified AI as the biggest opportunity for product differentiation and sustainability in the next year.
Where AI Is Already Making an Impact
More than a third of executives are using generative AI for online interactions with customers, images, copywriting, consumer searches, or product discovery. But most pilot projects and proof-of-concept efforts – at most organizations – represent isolated efforts yielding incremental – if any – benefits.
Just for you to have in mind: 90% of these ventures stay stuck in pilot.
The AI Consumer Right Now
23% of your customers are searching for new products with AI. 41% of your customers would prefer AI over every other form of advertising. Do. Not. Stop. Read. Repeat. Almost half of your customers believe in AI more than your best campaign.
It needs a significant jump in discoverability. SEO is being prompted-and in some instances, set to be retired-to be beat out by GEO (Generative Engine Optimisation). You’ll be buried if your brand isn’t able to be found in ChatGPT search and chats.
THE WELLNESS WILDCARD: The Most Recent Challenger to Fashion
— A commercial ex-official’s POV Consumer breakdowns. As a consumer, what shocked me the most was this: that every fashion brand is fighting other brands for the consumers personal-healthbody-mind-and wellbeing. Consumer out.
Almost 84% of consumers in the US and 94% of consumers in China say wellness is a higher priority. It’s not a trend. It’s a reset. Consumers are spending more time and more dollars on health & wellness. They’re doing it before the trend does.
The Strategic Reaction
Smart brands don’t compete with wellness – they jump aboard. Just look at how Lululemon is re-branding themselves as a lifestyle brand (as opposed to a yoga pant brand) or how luxury brands are now embracing the wellness story.
Why brands need to take control of their resale strategy
There is no two ways about it: brands will need to come up with their own resale solutions in order to communicate their personality and grow their business. This is the Business case you should not miss:
Market insulation: it secures the platform from the resale of brands to marketplaces.
The customer remains in your universe for multiple periods of ownership.
Genuine Circularity – No “Greenwashing”: The Actual Circular Economy is Superior to the Buzz and Hoopla
An Image, An Instantaneous, An When The Other Shoe Comes Amt Of What: the resale volume design amt. And price with:
With high sustainability awareness, as well as second hand infrastructure in place, the UK is ready for a circularised approach that puts brands in the driving seat and consumers on board, comfortable in the knowledge that they can return whenever they want.
Focused Expertise Surpasses General Apathy
As consumers look for specificity and differentiation:
Create a microcategory for you-Own “zero waste work wear” ” Wellness-enabled loungewear” or whatever you are best at.
Community over list – 5,000 engaged followers > 500,000 disengaged followers
In a time when the world is starved for value, only the specialists who bring real differentiation will live.
Grow Through Partnerships
Yes-you may not be able to beat incumbents on raw AI compute horsepower or the muscle of a large global supply chain-but there are things you can do:
Design your creation ChatGPT, Claude & Midjourney make it possible for creators of all levels of expertise to create.
Reduce up front costs on Shopify, Klaviyo and other platform as a service to get started.
Partner with brands we’re able to serve: co-marketing, group shipping, bundled sales
Share More Compelling Stories
They are purchasing stories – what the product feels like rather than the name on the label. The true story trumps corporate communications. The founder’s story, a product engineered to principles, sourcing aligned to values. Genuine commercial content in a world of sameness.
Social media: Gearing Up for 2026
Content That Converts in a Value-Conscious World
What Works:
Educational Content Evidence of Value: cost per wear, styling opportunities, fit & quality align
Open the “black box”: manufacturing, sourcing and what (really) makes up one hundred (or more) dollars?
Ruggedized, real content-products from customers after months/years of usage.
Wellness inspired: co-created in your home; not just as a theme nor accessories.
The dark side: The dummy – carbon-neutral claims and the missing methodology; greenwashing in marketing; consumers as king of sustainability; the premium markup, more for what? The legal minimum: a beginning not an end!
London Sustainability Opportunity
UK consumers are among the most conscious around sustainability and the most wary of greenwashing.
The question is whether you’ll lead the change or become its victim.
Until next time,
Jasmin
