10 Trends Reshaping Fashion Retail Today

The latest State of Fashion 2026 report from The Business of Fashion and McKinsey & Company describes an industry that has accepted constant disruption as part of doing business. Tariffs are redrawing supply chains, shoppers are questioning what products are worth and artificial intelligence is changing both internal operations and product discovery. The report, titled When the Rules Change, is the tenth edition in the annual State of Fashion series. Its message is clear: fashion brands won’t be able to rely on market recovery alone. Growth will depend on operational discipline, sharper positioning and a better understanding of how customers now discover, compare and value products.

Fashion has stopped waiting for things to return to normal. According to the BoF-McKinsey executive survey, 46% of fashion executives expect industry conditions to worsen in 2026, while 25% expect conditions to improve. The overall outlook remains difficult, although opinions among industry leaders are becoming more divided. McKinsey expects the global fashion industry to record another year of low single-digit growth. Europe’s economy may remain relatively stable, but shoppers are still expected to trade down and scrutinise discretionary purchases more carefully. Consumer confidence remains the most frequently cited risk, followed by geopolitical instability.

Understanding the State of Fashion

The current industry trends and challenges are largely driven by the impact of tariffs and trade disruption. Disrupted trade flows and deglobalisation have climbed rapidly up the agenda, with 40% of executives naming it as one of the three greatest risks to growth. Consumer behavior and spending habits are also changing, with 59% of global consumers likely to buy secondhand fashion in 2026. This shift towards sustainability and affordability is forcing fashion brands to re-evaluate their pricing strategies and product offerings.

The fashion industry is experiencing a significant shift in consumer behavior, with shoppers looking for deals, delaying purchases and choosing products that feel more useful or durable. Luxury may experience a different trend, but the overall outlook remains challenging. Companies that can adapt to these changes and provide value to their customers will be better positioned for growth. The industry is also seeing a rise in the use of artificial intelligence, with 35% of companies already using generative AI in selected business functions. This technology is changing both internal operations and product discovery, and its impact will be closely watched in the coming year.

Key Findings from the State of Fashion Report

The State of Fashion 2026 report provides valuable insights into the current state of the fashion industry. The executive survey results and industry outlook are particularly noteworthy, with 78% of executives seeing consumer confidence and appetite to spend as a major risk. Growth expectations and market risks are also closely tied, with 76% of executives believing that trade disruption and rising duties will affect the industry more. The role of artificial intelligence in the industry is also a key finding, with many companies already using this technology to improve their operations and product offerings. For more information on the report, visit the McKinsey & Company website.

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The report highlights the need for fashion brands to be operationally disciplined and to have a sharp positioning in the market. This means having a clear understanding of how customers discover, compare and value products, and being able to provide value to them. The use of artificial intelligence is also critical, as it can help companies to improve their operations and product offerings. By focusing on these areas, fashion brands can position themselves for growth in a challenging market. The report provides a detailed analysis of the industry and its trends, and is a valuable resource for fashion executives and professionals.

Slow Growth and Market Rebound

According to the Change report, consumer confidence and appetite to spend remain the most significant risks to the fashion industry, with 78% of executives citing this as a major concern. Geopolitical instability is another key factor, as trade disruption and rising duties are expected to affect the industry. The luxury market is expected to experience slow growth, with customers looking for products that feel more useful or durable.

The outlook differs between markets and segments, with European GDP growth expected to remain relatively steady, helped by stable employment. However, this does not automatically translate into stronger fashion spending. The Change report notes that 46% of fashion executives expect industry conditions to worsen in 2026, while 25% expect conditions to improve.

Tariffs and Sourcing Strategies

Tariff increases on apparel and footwear imports are having a significant impact on the fashion industry, with many brands reconsidering their pricing and sourcing strategies. The Change report notes that 76% of executives believe trade disruption and rising duties will affect the industry, and 40% name it as one of the three greatest risks to growth. As a result, brands are looking to adjust their supply chains and operational priorities to mitigate the effects of tariffs. This may involve sourcing products from different countries or regions, or investing in new technologies to improve efficiency and reduce costs.

The Rise of Secondhand Fashion

Consumer interest in sustainable and secondhand fashion is on the rise, with 59% of global consumers likely to buy secondhand fashion in 2026. This shift in consumer behavior presents opportunities for brands to incorporate secondhand options into their business models. Many fashion retailers are already responding to this trend by launching their own secondhand platforms or partnering with existing ones. For example, some companies are using data analytics to identify which products are most likely to be resold, and then adjusting their production and pricing strategies accordingly. As the demand for secondhand fashion continues to grow, brands that adapt to this trend are likely to benefit from increased customer loyalty and revenue streams.

Market trends and growth expectations also suggest that secondhand fashion will play a significant role in the industry’s future. The global secondhand market is expected to continue growing, driven by increasing consumer awareness of sustainability issues and the desire for more affordable, high-quality clothing. By incorporating secondhand options into their business models, fashion retailers can reduce waste, appeal to environmentally conscious consumers, and tap into the growing demand for pre-owned clothing. Change notes that consumer confidence and appetite to spend are major risks, but secondhand fashion can help mitigate these risks by providing customers with more affordable options.

Generative AI in Fashion Retail

Generative AI is being used in various ways in the fashion industry, from designing new products to personalizing customer experiences. According to the executive survey, 35% of fashion executives already use generative AI in selected business functions. This technology has the potential to transform the fashion industry by enabling brands to create customized products, predict fashion trends, and optimize their supply chains. For example, AI-powered design tools can help designers create new patterns, colors, and styles that are likely to be popular with consumers.

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Potential applications and benefits of generative AI in fashion retail are numerous. AI can help brands to improve their product development processes, reduce production costs, and enhance customer engagement. Additionally, AI-powered chatbots can provide personalized customer service, helping customers to find products that fit their needs and preferences. However, there are also challenges and limitations to AI adoption, such as the need for high-quality data, the risk of job displacement, and the potential for AI-generated content to lack the creativity and originality of human designers. As the fashion industry continues to evolve, companies like McKinsey & Company are helping brands to understand the potential of generative AI and develop strategies for successful implementation, which can be learned more about by visiting their website at https://www.mckinsey.com.

As the use of generative AI becomes more widespread in the fashion industry, companies will need to address the challenges and limitations associated with this technology. This may involve investing in employee retraining programs, developing new data management systems, and establishing clear guidelines for the use of AI-generated content. The ability of companies to adapt to this technology will be critical to their success in the years to come, and those that fail to do so risk being left behind.

Fashion Retail in Europe

Europe’s economy may remain relatively stable, but shoppers are still expected to trade down and scrutinise discretionary purchases more carefully.

Customers are still looking for deals, delaying purchases, and choosing products that feel more useful or durable. Luxury may experience slower growth, while affordable and mid-market segments may see more opportunities. Fashion retailers in Europe need to adapt to these changing consumer habits and market trends to remain competitive.

History of Fashion Retail Disruption

The fashion retail industry has undergone significant disruption in recent years, driven by changes in consumer behavior, technology, and market trends. To understand the current state of the industry, it is essential to examine the major milestones and turning points that have shaped the market. The evolution of consumer behavior and technology has played a key role in disrupting traditional fashion retail business models.

For more information on the current state of the fashion industry, visit the McKinsey & Company website.

Operational Discipline and Sharper Positioning

Change emphasizes the importance of operational efficiency and effectiveness in the current fashion retail environment. Fashion brands must focus on streamlining their internal processes, leveraging data-driven decision making, and analytics to stay competitive. Strategies for sharpening brand positioning and differentiation are also critical, as they enable fashion brands to stand out in a crowded market and build strong relationships with their target audiences. According to the, 35% of fashion executives already use generative AI in selected business functions, which can help with tasks such as supply chain management and product design.

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Companies like McKinsey are helping fashion brands to implement operational discipline and sharper positioning. For instance, McKinsey’s expertise in analytics and data-driven decision making can assist fashion companies in identifying areas for improvement and developing targeted strategies to enhance their operations. As a result, fashion brands can achieve greater efficiency, reduce waste, and improve their overall performance. The use of data analytics can also inform product development, allowing companies to create products that meet the evolving needs and preferences of their customers.

Customer Discovery and Product Valuation

Today, customers discover and evaluate fashion products through a variety of channels, including social media, influencer marketing, and online reviews. Social media platforms have become essential for fashion brands, as they provide a means to connect with customers, showcase products, and build brand awareness. The report notes that 59% of global consumers are likely to buy secondhand fashion in 2026, which highlights the growing importance of sustainability and affordability in the fashion industry. To create value and drive sales, fashion brands must develop strategies that cater to the changing needs and preferences of their customers, such as offering high-quality, durable products, providing excellent customer service, and promoting their brand through engaging and authentic marketing campaigns.

Fashion brands can leverage social media and influencer marketing to create engaging content and product showcases that resonate with their target audiences. For example, they can partner with popular influencers to promote their products, share behind-the-scenes content, and provide exclusive offers to their followers.

Moreover, fashion brands must prioritize customer experience and provide personalized services to build strong relationships with their customers. This can be achieved by offering tailored product recommendations, providing excellent customer support, and creating loyalty programs that reward repeat customers. The Change report provides valuable insights into the current state of the fashion industry, and its findings can inform strategic decisions for fashion brands seeking to thrive in a rapidly changing environment.

Future Outlook and Growth Opportunities

However, shoppers are still expected to trade down and scrutinize discretionary purchases more carefully. Consumer confidence and appetite to spend are seen as major risks, with 78% of executives citing this as a concern. The report also highlights the impact of trade disruption and rising duties, with 76% of executives believing this will affect the industry. As a result, fashion retailers must focus on operational discipline and sharper positioning to stay competitive.

The role of innovation and technology in driving growth is significant. Many fashion retailers are already using generative AI in selected business functions, with 35% of executives reporting its use. This technology has the potential to transform internal operations and product discovery, allowing retailers to better understand their customers and respond to their needs. For more information on the latest trends and technologies in the fashion industry, visit https://www.mckinsey.com.

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