Looking ahead to 2026, brands and retailers face a landscape that has been fundamentally reshaped by trade disruptions, technological transformation, and evolving consumer priorities. McKinsey and The Business of Fashion’s latest State of Fashion report reveals an industry that is no longer defined by “uncertainty”, but by constant change – a “new normal” that demands agility, innovation, and strategic clarity.
Read on for Bleckmann’s top takeaways for fashion brands from the report.
Agility wins in the face of trade disruption
By far the most significant force that is predicted to shape fashion in 2026 is trade turbulence. Indeed, a striking 76% of fashion executives surveyed identify trade disruptions and tariffs as a key factor that will influence the industry in the year ahead. Meanwhile, suppliers are reevaluating their footprints, with larger players pursuing digitalisation and automation while smaller manufacturers face mounting pressure.
Brands are responding across three fronts. First, 55% expect further price rises to offset tariff-increased costs. Second, companies are reducing upstream costs through supplier renegotiations, consolidated shipments, and streamlined product ranges. Third, 35% are shifting production to markets with more favourable trade agreements. For example, Shein is moving its operations to Vietnam, while Gokaldas Exports (a major Indian manufacturer and supplier to top brands) has plans for Kenya and Ethiopia.
Pricing power and sourcing flexibility will therefore be key differentiators in this competitive market. Brands with strong differentiation and a loyal customer base can more readily adjust prices, while those with diversified, agile supply chains can adapt faster to changing trade conditions. In addition, strategic partnerships are a key lever for both brands and suppliers. Co-investing in capabilities that individual players might struggle to finance alone can help to incorporate greater flexibility and mitigate risk.
Understanding the new consumer value equation
Consumer confidence remains fragile, with nearly 80% of executives citing spending appetite as the number-one risk to industry growth. However, fashion brands have multiple levers to reignite demand and capture market share. This requires navigating the delicate balance between product quality and value. For many brands across the spectrum, this has translated into a move upmarket in search of differentiation.
This has seen players in the “value segment” elevating their offerings to distinguish them from ultra-low-cost rivals. For example, between 2023 and 2025, brands like Bershka and H&M reduced the share of SKUs in their lowest price tiers by 15-25% in the UK. Meanwhile, mid-market players are targeting “affordable aspiration” – shoppers who are price-conscious but increasingly prioritize quality and design. One well-known example is Zara, whose products speak to avid fashion followers looking for better cost-to-value.
The report also highlights the changing market dynamics caused by sharp price increases in the luxury category, rising an average of 61% between 2019 and 2025. This has led to “premium/bridge” players such as COS and “affordable luxury” brands like Coach and Ralph Lauren stepping into the white space that has been created. Around one-third of shoppers remain willing to splurge on fashion when products are well-crafted and they feel valued, but brands that command higher prices must deliver corresponding improvements in quality and experience to avoid alienating customers.
Finally, resale is becoming an increasingly prevalent avenue for consumers to find value. The secondhand market is forecast to grow two to three times faster than first-hand fashion through 2027. This suggests that brands can no longer treat resale as peripheral. Whether through platform partnerships or Resale-as-a-Service providers, defining a resale strategy is essential for customer acquisition, retention, and brand perception.
Wellbeing becomes the new fashion playground
Perhaps in reaction to the “dopamine culture” driven by social media, wellbeing is taking over as a priority for shoppers. 84% of US consumers and 94% of Chinese consumers consider wellness key in their daily lives, with 51% willing to maintain or increase wellness spending even if their income decreased. Two ways in which brands can respond are by fostering emotional connection with their communities and developing “third spaces”– environments sitting between home and work that foster meaningful engagement, such as Lululemon’s yoga hubs. Lighter-touch integration might involve wellbeing-focused storytelling, ambassador partnerships, or pop-up experiences.
Getting to grips with the shifting luxury paradigm
Luxury faces a moment of strategic recalibration. After years of price-led growth, the segment’s economic profit (EP) declined for the first time since 2016 (excluding COVID-19), falling 36% in 2024. This may be attributed to factors such as price increases and labour investigations, leaving customers questioning whether goods justify their price tags. In this make-or-break climate, luxury brands are changing their leadership and supporting creativity with data-driven insight and analytics. Meanwhile, tailored outreach and elevated in-store experiences present key opportunities to differentiate creatively from competitors. AI-powered tools are positioned to improve customer experience by enabling a personalized, high-touch, integrated omnichannel service.
The power to navigate a changing industry
The fashion industry’s compounding challenges – trade volatility, margin pressures, technological disruption, and evolving consumer expectations – demand more than resilience. Success will belong to brands with the agility to navigate uncertainty, the discipline to make strategic choices about where to compete and how to differentiate, and the power to invest in capabilities that unlock both efficiency and growth. Whether it’s increasing AI adoption, driving focus on customer retention, leveraging brand communities, or moving upmarket, the future of fashion will be written by the adaptable.
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