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![Executives brace for challenges as concerns
over consumer confidence remain
Looking ahead to 2026, the word most frequently
used to describe expected conditions in the fashion
industry is “challenging,” surpassing “uncertainty”
which was most common in 2024 and 2025.1 2 3
As a result, the industry outlook for 2026 remains
generally downbeat. Forty-six percent of executives
expect industry conditions to worsen, an increase of
8 percentage points (%points) over the previous
year. However, expectations have also become
more polarised, as 25 percent also foresee industry
conditions improving — a 5%point increase.1 2
Overall, the key reasons for concern remain broadly
consistent with last year — nearly eight in 10
executives cite consumer confidence and appetite
to spend as the top risk to industry growth.1
This is
closely tied to geopolitical instability, with broader
macroeconomic conditions continuing to make
consumer behaviour more unpredictable.
More so than in previous years, disrupted trade
flows and deglobalisation are weighing heavily on
executives as they look ahead to 2026. Forty
percent of leaders cite this as one of their top three
risks (up 25%points from last year),1 2 largely driven
by new tariffs that are reshaping supply chains and
raising input costs.
Question: What aspects of the global economy do you expect will be the greatest
risks to growth in the fashion industry in [year]? Select three,
%
1st
2nd
4th
2024
3rd
5th
2025 2026
Geopolitical
instability
62
Economic
volatility
55
Inflation 51
Sustainability 29
Rising interest
prices
27
Consumer confidence
and appetite to spend 70
Geopolitical
instability
67
Economic
volatility
32
Inflation 28
Supply chain
disruptions
22
Consumer confidence
and appetite to spend 78
Geopolitical
instability
66
Economic
volatility
30
Inflation 25
Disrupted trade flows
/ deglobalisation
40
Source: BoF-McKinsey State of Fashion Executive Survey 2024, 2025 and 2026
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![Leaders say AI and digital tools will present the
biggest opportunity for the industry in 2026
Using AI to manage cost pressures and future-proof growth: Executives
identify scaling AI and related digital capabilities as the single biggest
opportunity for 2026.1
To date, most applications have focused on siloed tasks
such as copywriting, image generation and customer service. However, leaders
are now looking to integrate AI across their businesses. The fashion industry
has historically trailed other sectors in adopting AI,28
highlighting the need for
the right organisational structure and skills to capture the full potential of AI-
driven innovation.
Keeping differentiation front of mind: Executives continue to emphasise the
need for a distinctive value proposition rooted in creativity and innovation.1
Given concerns around the unpredictability of consumer behaviour, this
reflects an imperative for brands to differentiate to drive relevance.
Integrating sustainability into the business model: Executives are once
again looking to sustainable practices as an opportunity to improve operations
and meet consumer expectations. Circular approaches, including resale, were
highlighted as areas where executives see potential to create value.1
Navigating economic uncertainty: Executives no longer consider improved
economic conditions in key markets among their top opportunities. Instead,
leaders are focussing on building greater resilience through improving their
own business operations and differentiating their offerings.
1st
2nd
3rd
2026
AI, digital and technology-
related capability
development and integration
into operations
Differentiation in business
strategy through brand
positioning and product
newness
Strengthening sustainability
credentials with circular
business models and broader
environmental initiatives
2025
of respondents
of respondents
of respondents
13%
12%
7%
Question: What do you think will be the single biggest
opportunity for the fashion industry in [year]?
Source: BoF-McKinsey State of Fashion Executive Survey 2025 and 2026
Differentiation in business
strategy through brand
positioning and product
newness
Expanding use cases of AI
and new features
Improving economics (e.g.
lower inflation, higher
disposable income) in select
regions (e.g. US, India)
of respondents
of respondents
of respondents
13%
9%
9%
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![In recent years, the words
‘unprecedented’ and ‘uncertainty’
have been used to describe the
market to the point where they’ve
almost lost meaning. How would you
describe the environment in 2026?
Complex, [among other things].
There are macroeconomic forces,
there are geopolitical, there’s the state
of the consumer, there’s massive
disruption in technology and AI. As a
leader in the retail industry, it’s very
complex, and you have to be really
thoughtful on how you navigate [it].
Fashion is being rocked from top to
bottom right now by shifts in the
global trade system as the US enacts
its most comprehensive tariffs in
nearly a century. What levers has
Levi’s pulled already to address the
trade situation?
From a company standpoint, we are
structurally advantaged:
approximately 60 percent of our
business is international. Many of our
domestic competitors are
much more heavily penetrated in the
US, therefore the tariff burden is
going to be higher. We are working
with our vendors to see what
opportunities we have. We have been,
over time, working to get greater cost
efficiencies. That will help mitigate
the tariff impact.
And then pricing. There’s [three]
parts to that. We are taking some
surgical and targeted pricing
[increases], as probably most apparel
or retailers are. There’s only so much
you can absorb from the tariffs,
because they’re just very high. Two is
promotional levers. [We are] pulling
back on the amount of promoting we
do — less of your ‘20 percent off’
events or ‘friends and family.’ That
helps elevate the brand, and it’s also
good for margins and helps us
mitigate the tariffs. The third piece is
where it makes sense, pricing for
innovation. When you’re coming in
with a new product, consumers are
likely willing to pay more for that, so
therefore we can take advantage.
When you were appointed CEO in
2024, you were tasked with
transforming Levi’s into a ‘head-to-
toe denim lifestyle’ brand. That
means expanding beyond jeans and
taking risks, which becomes harder
to do in a tough economy and
A Levi’s ad featuring Beyoncé in a store window. Sean Gallup/Getty Images.
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![volatile environment. How do you
balance those demands?
We have to stay really close to the
consumer and understand what they
want, what they need — and bring
them things they don’t realise they
need. We will diversify in [lifestyle],
but it has to make sense to the
consumer and what Levi’s can
distinctly own. Quite literally it means
you start with all the amazing things
you can do with denim, whether it’s
this Blue Tab shirt [from our
premium line] to denim dresses,
skirts, jumpsuits, trench coats. But it’s
also [finding] the right products that
do complement our denim. It
significantly expands our addressable
market.
Levi’s made an early call to stop
offering less popular styles during
the holiday season to avoid having to
discount. Do you anticipate that this
lever will be pulled again in the year
ahead?
Simultaneous to us thoughtfully
expanding our assortment into denim
lifestyle, we’re also being deliberate
about where we can pare back and
reduce less productive SKUs. It’s a
journey we’ve been on the last two
years. We operate in 120 countries.
It’s a very complex network of how
we go to market. Over time, our SKUs
had proliferated. If you’re not in
“We're operating in a complex
environment, but we ourselves are
becoming less complex.”
A customer shops in a Levi’s store. Scott Olson/Getty Images.
A customer shops in a Levi’s store. Scott Olson/Getty Images.
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![to brands that do have that value in
the broadest sense. Consumers are
still going to buy, [but] as the walls get
tighter, we have to work harder. We
have to continue to make sure that
our brand is relevant. All the
investments we’ve made to be at the
centre of culture, the partnerships we
have, the collaborations with Nike,
makes us relevant, interesting and
loved. For that consumer who may
feel more pressed financially, we have
a [range of price points].
International markets are really
driving growth for Levi’s. Are there
any emerging markets that Levi’s is
doubling down on in the year ahead?
Asia is a very big opportunity for us,
and India is a key growth opportunity
market. There’s over a billion people,
a growing middle and upper class. It’s
youthful and they already love the
brand.
Are there any macro-shifts or other
currents that you think are
underappreciated by fashion right
now?
The world is in the midst of a major
disruption on what AI is going to
mean to our business. One of my top
priorities is having our teams across
the company embrace and see what’s
possible with AI. Over the last year
there really has been a sea change in
how the company is deploying AI.
[We’re looking at how it can] help us
achieve our strategies better [and]
faster. [We’re] embedding AI in a lot
of our processes, inventory
management and planning and
financial processes. We’re in the
earlier stages of [using AI as part of
our design process], but we see the
potential and how that can not only
help us reduce cycle times but even
open up new ideas.
This year ahead is set to test the
operational prowess and pricing
power of brands at every level. How
do you think it will shake out?
You want to be entering into this time
from a position of strength and
momentum. Disruptive times can
create more separation between
stronger companies and the weaker
companies.
This interview has been edited and condensed.
control of that, you create a lot
of complexity.
We are seeing sequential
improvement on our gross margin
and our EBIT margin. As we become
more profitable, it is giving us more
leverage to mitigate the tariffs. [Now
we are] activating the things we had in
place: greater full-price selling, less
promotion, looking for pricing
opportunities on innovation.
How will the assortment change
next year based on everything that
you’ve learned this year?
We are quite truthfully rewiring this
company end-to-end and top-to-
bottom. We had different assortments
all over the world. Even though
[product] was coming from [our
headquarters in San Francisco], what
Japan might need, versus what the US
might want, versus the UK, was
different things. Not that long ago,
what was common across all of our
stores, it was less than 10 percent [of
product]. Now, about 40 percent of
product is common globally. That’s a
game-changer for how our teams
design, develop, source, how we work
with vendors, how we merchandise,
how we market. It creates a tonne of
efficiency. We’re operating in a
complex environment, but we
ourselves are becoming less complex.
Right now with tariffs, challenges in
the supply chain are hard to predict.
Is diversification enough? How have
you collaborated with your suppliers
to tackle tariffs head on?
We’re all in this together. Our teams
are talking to our suppliers 24/7,
trading information, figuring out what
our plans are, what our forecasts are.
This is a relationship business. Just
like we build relationships with our
consumers, we build very strong
relationships with our vendors. We
want to make sure they get what they
need from us as well. On some of our
key products, we source from
multiple countries. Whether tariffs or
any kind of supply chain disruption, it
does give us flexibility.
The US consumer in particular is
historically resilient, continuing to
spend through downturns. But the
full effect of all of these higher costs
due to tariffs is only starting to
trickle into the marketplace. The
strength of this shopper will be
tested in the year ahead. What do
you foresee in terms of price
sensitivity?
Our consumer has proven to be
resilient; we’ve just posted our fourth
consecutive quarter of high-single-
digit growth. If consumers are feeling
pressure, they're going to be more
choiceful with their dollars, and look
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![“You’re speaking
to someone
extremely biased,
but I think this is
the biggest
platform shift
maybe in the
history of the
internet.”
We hear a lot about the rise of AI
platforms, but overall, they’re still a
small share of total traffic to retailers.
How much do brands really need to
think about how they’re showing up
on these platforms?
You’re speaking to someone
extremely biased, but I think this is
the biggest platform shift maybe in
the history of the internet. The front
door of the internet is changing for
the first time in 25 years. The brands
that are discussed and covered via AI
will naturally receive billions of
eyeballs over the coming years.
Today, I think we see typical [traffic]
referral rates of around 10 percent
from AI answer engines like ChatGPT.
These numbers are only increasing.
Are there any factors that you see
driving more consumers to use AI
platforms for shopping?
It’s fantastic for comparison. If you
imagine that the old paradigm was
that you’d have 10 tabs open in your
Chrome window, and you’re
comparing one against the other, you
can literally feel your rote human
cognition working. That all has just
shifted now into a world where the
entire funnel is being compressed into
a ChatGPT window. You might ask
for help in finding a new pair of
sneakers and it would give you a
shortlist. Then, you narrow down that
shortlist to maybe two options that
you’re thinking about.
Are there other ways the shopping
journey could change as these
platforms evolve?
I think we are going to see a platform
like ChatGPT emerge with the
personalisation of a social-media feed,
because they just capture so much
intent through these interactions that
just didn’t exist in a Google search.
You tell these models so much more
about yourself, and so much more
about what you’re looking for and
what you’re thinking. That allows
them to tailor the results a lot more.
Are there things brands should be
doing for what’s often called answer-
engine optimisation (AEO) or
generative-engineoptimisation(GEO)
that differ from what they’re already
doing to ensure they’re optimised for
traditional search (SEO)?
The way to think about it is you are
creating content for bots, not humans.
In the old world, let’s just say a brand
like Chanel would create web pages
for humans to read, but the future of
the internet looks like Chanel creating
lots of content for AI crawlers to
hoover up into their results. Content
is essentially machine optimised, it’s
far more structured, it’s information
dense. You wouldn’t pay as much
attention right now to imagery, for
example, because it’s the words that
matter. I’m sure that’s going to evolve
and change over time. There’s [also]
technical nuance:JavaScriptisinvisible
to the crawlers that are retrieving
information.The waythatyoustructure
your website, the way that you actually
build your website will change.
Is it realistic to expect AI answer
engines to overtake traditional
search at some point, or will
consumers use both to gather as
much information as they can?
I think it would be over-dramatic to
say that Google search and blue-link
search is going to disappear off the
face of the earth in the next 12
months. I think as these consumer
platforms like ChatGPT get better
and the shopping experiences
improve, which we are expecting
them to, we’re going to see a lot of
consumer behaviour [shift]. As a
techno optimist, I tend to bet on the
best technology will win over time.
The large language models (LLMs)
that power AI answer engines can be
a great way to learn what people
online say is the best electric
toothbrush or the best mountain
bike — functional products that you
can rank based on performance. But
fashion is very individual, it has to
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![spark an emotional connection and
there’s often an aspirational aspect
to it. Do you think consumers will
use LLMs to search for fashion?
The word I would rotate around here
is ‘search.’ I don’t know if they would
use LLMs to discover fashion. These
conversational interfaces are not the
best place to stumble across
something beautiful. However, let’s
say you had decided that you were in
the market for a Chanel 2.55.
Absolutely you’re going to ChatGPT
to ask about the provenance of the
bag, why is the Chanel 2.55 bag so
iconic, what’s the history of it, where
did it come from and how much is it,
what should I look for when I’m
buying one, how do I make sure I
don’t buy a replica? All of that part of
the consumer journey, these AI
answer engines are perfectly
suited for that.
If consumers use LLMs in greater
numbers, does it create a winner-
takes-all environment where the
brands and products the AI
recommends become the entirety of
what consumers consider
purchasing, and anything that
doesn’t show up is invisible?
We’re actually going to see the
opposite be true. I think we’re going
to see a huge, long tail of coverage
because every answer is different.
[Cadwallader types ‘what’s the best
luxury sneaker for men right now?’
into ChatGPT in two separate
browser windows.] In response one,
the answer was Maison Margiela,
Tom Ford, Burberry, D&G, Amiri,
whereas in the second response, we
had Brunello Cucinelli, we had Gucci.
You see this probabilistic nature, the
answers change.
AI is notoriously a black box,
especially as models get more
complex. How do you go about
determining what works and what
doesn’t for getting a brand to show
up in AI search results?
It’s by looking at where they’re going
to build these answers. When we
asked this question earlier about
Platform interface. Profound.
Platform interface. Profound.
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![‘what’s the best luxury sneaker for
men right now’ what happened in the
background is ChatGPT went to a
bunch of different sources to build
this answer. What we’re able to do is
we can show the sources: where the
models are going, what are the names
of the websites, which websites are
being used most frequently.
A lot of the content these LLMs are
drawing on is not under a brand’s
control. How much are brands able
to influence how they show up in
AI answers?
[Cadwallader shows a breakdown on
Profound’s platform of where an LLM
is finding information for a query
about trail-running shoes.] You can
see that Nike.com is the ninth most-
visited site [by the LLM], so Nike.com
is not that far below Reddit or
YouTube. What this shows is that
these models are going to Nike.com.
Nike is actually controlling a lot of the
narrative here.
When you look at the rise of LLMs
and potentially agents that can
actually take action on a consumer’s
behalf, does that change the work of
fashion marketers?
At this point in time, at least — and I
expect this will evolve and change as
well — I think marketers in fashion
right now should focus on description
and lots of coverage around the
quality of the product, having nice,
structured text on their website that
describes what makes their product
special, that describes the look and
feel in a very detailed way, that is
designed to get pulled into responses.
That’s how we’re working with
fashion brands right now.
When we think about how AI is
changing shopping, what do brands
need to do to win in this new
environment?
Honestly, it sounds so trite, and so
unimpressive, and it’s not like the
magical response that I would
imagine you’re hoping for, but it’s just
lean in. Get set up, pay attention,
start. Once you understand how
you’re showing up in answer engines,
which is a very self-serving statement,
but that’s what we help you do, I think
lean in and take it really seriously,
understand that there are billions of
people using these platforms on a
weekly basis. This is the new
marketing channel. It’s happened.
This isn’t a speculation into the
future. You shouldn’t put your entire
2026 marketing budget into your AI
visibility strategy, but in the same
vein, you should have a strategy.
This interview has been edited and condensed.
“Lean in and take it really seriously,
understand that there are billions of
people using these platforms on a
weekly basis. This is the new
marketing channel.”
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![Tech companies have been trying to
make smart glasses a commercial
success for at least a decade. What
did the Ray-Ban Meta glasses do that
previous generations of smart
glasses failed at?
We started with design first, and we
were very rigid in the partnership on
not compromising on design. I think
Meta appreciates this quality, that we
were very firm that the Wayfarer
needs to be a certain level of thickness
or a certain weight. We said, if we
don’t fit the technology into this
frame, we will not have a product.
EssilorLuxottica has said it’s scaling
production volume for the Ray-Ban
Meta glasses and mentioned on its
July 2025 earnings call that sales
grew more than 200 percent year
over year. That’s still very fast
growth. How big is the potential
market here?
We are at the beginning of something;
it’s just starting. We said that we will
be able to produce more than 20
million glasses, so the ambition is
obviously very high. And because we
have the opportunity to scale with
different brands, I think that is key in
accelerating adoption. We already see
that a lot of new customers are buying
Oakley. There are customers buying
the Ray-Ban Meta that bought
[Oakley’s] HSTN or Vanguard, but
EssilorLuxottica trade show booth. Patrick T. Fallon/Getty Images.
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![I think it will evolve with the product.
It’s such new, uncharted territory that
we’re exploring for the first time
together. I think it’s a good thing if the
partnership will change, but
maintaining the skill set of who is
doing what. In design, we can bring
value and we can help them in really
selling the product. They can bring
value on the other end, on having the
magic of technologyandthe investment
that they did on R&D, for example, on
thedisplayglasses.Thelevelofinvestment
that goes into [it], it’s really only a big
tech company can do it.
What advice would you give to a
luxury or fashion brand that’s
thinking about entering into
technology and wearables?
I think it’s key for a fashion brand to
approach this path. I do think there’s
something beautiful about
intertwining technology with fashion.
It’s very difficult to do it right, and
expensive, to be honest, so venture
when you’re ready. But I think it’s
important. I do believe even for
fashion, having some technical part of
some IP, or something you can really
own as a fashion brand, is key,
because wearables are only going to
increase and evolve. If I were a
fashion brand starting now, let’s say,
in my roadmap I would definitely put
wearables.
through the glasses, and I do think
there will be some crossover even in
sports. I imagine being able to see your
speed when you’re skiing, or your
heart rate, or fewer display outputs.
Do you have a sense of which
abilities offered by the display could
become the most used?
Texting, I would say, is the main one,
and translation and caption. The thing
that could be interesting, when you
take a picture right now with the Ray-
Ban Meta, you need to pull out your
phone, look at it and then post it or
send it to a friend. Now you avoid that
step potentially. You can look at the
picture [in the display] and send it
directly to a friend. That’s already the
direction of starting to leave a little bit
your phone in your pocket. We
started this journey with this idea to
bring back people to live a little more
in the moment, and I think AI glasses
do this perfectly.
Could smart glasses eventually
replace smartphones?
It’s difficult to say. I’m a bit sceptical
when people say things like that,
because there is a lot of computing
processing that you probably need
your phone [for]. In the very long
term, that maybe could be a
possibility. I think it’s worth the shot,
because we have been holding our
phones for so many years now, which
even has an impact on our posture. I
do think that maybe there is an
opportunity there to lift people up,
having people looking straight ahead
of them. I am optimistic that that
could happen. I don't see that
happening in the next five years; 10 is
a bit too far to say. But it’s not like the
phone replaced the laptop completely.
I think it will be more an integration
of a bigger ecosystem of devices.
You have a product for the lifestyle
customer and the sport customer.
Could there be a product for a work
customer, who’s using these glasses
for business and day-to-day
productivity?
I think so. We have the tools really to
do it, so we can be very specific, like a
use case could be like a surgeon who
needs to go in the clinics and do his
daily tasks. There are a lot of people
using the glasses already for this use
case, but I do think that could be
something to explore. I think at some
point also, you could develop appsfor
specific use cases. In particular, with
displayglasses, I see the ecosystem
opening up to different use cases and
different platforms and apps.
Are there ways you expect the
partnershipbetweenEssilorLuxottica
and Meta to evolve in the future?
This interview has been edited and condensed.
Meta Ray-Ban Display. EssilorLuxottica.
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![What was your initial analysis of
Burberry when you first joined the
company last year?
I’d been following the brand for 25
years. What Rose Marie Bravo and
Christopher [Bailey] created — and
then when Angela Ahrendts came and
further amplified the brand — had a
huge impact for me. Since then, there
has been a lot of change at Burberry
in terms of logos and brand
expression — and individuals, frankly,
who took the brand in different
directions.
It was clear to me that the brand was
not performing at the level it should
be. In some ways, we had lost our way.
We were focussing on categories that
weren’t our historic core. Burberry
has authority, heritage and legitimacy
as a leader in outerwear and scarves,
but we had adopted a handbag-first
approach.
It looked from the outside that
Burberry had the most opportunity
where it had the most authenticity.
Almost from the moment I walked in
and shared that with the teams, that
idea resonated across the company.
The brand’s marketing message has
shifted since your arrival, with
campaigns full of cinematic
references starring British actors
like Kate Winslet and Olivia
Colman. It seems the company is
recalibrating its approach to
‘Britishness.’
Our brand expression had gone with a
very niche view of British luxury
rather than a globally recognised
view. The wonderful thing about
Britishness is there are so many
stories to tell, whether it’s country
houses or Carnaby Street. I think
what’s important is that they be
recognisable and globally understood
views of Britishness. Daniel [Lee] has
shown that he has a broad repertoire,
and I look forward to seeing how he
interprets them going forward.
Brands across the luxury industry
have struggled to justify price
increases. How are you adapting
Burberry’s approach to pricing?
It’s about having a pyramid of pricing
with [options for] good, better, best.
We had previously pursued elevation
at the expense of our core. We were
abandoning customers who came to
us for the ‘good’ and ‘better’ parts of
the pyramid.
For example, a £600 polo shirt with a
boxy, oversized fit is very different
from our £300 Eddie polo shirt with a
check placket, which for many years
had been a core opening-price
product. We brought back the Eddie The Burberry Knight. Burberry.
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![means investing in design,
merchandising, marketing. Investing
in what the consumer will see. It’s
competitive out there and we need to
break through.
What’s the role of Burberry’s
runway show? Where does that
collection and the innovation we
might see there fit into Burberry’s
strategy?
The show is a tentpole moment for us.
It’s where Daniel has the opportunity
to celebrate Burberry’s codes. I
couldn’t be more excited by the
evolution of what he’s doing over the
past year. Shortly after I joined we
had a discussion around Burberry
check: it’s a cornerstone of the house.
He’s using the check in both more
overt and subtle ways.
The runway is a laboratory for ideas
that get cascaded through the entire
range. The B clip bag with a check
strap, which debuted in September
2024, has become a very important
part of our business since it shipped in
February.
In addition to Britishness as an idea,
Burberry also has ‘made in Britain’
as part of its message, even if many
products are made elsewhere. Have
you explored ways that you could
retool the supply chain to take more
advantage of British craft and
industry?
Our pinnacle trench coats continue to
be made in Castleford [England]. We
also have another tentpole product —
our scarves — where we have a very
long-term partnership with a
manufacturer in Scotland. But this is
an area we can explore further.
You’ve spoken about polos and
scarves. There also seems to be a
renewed focus on outerwear on the
runway and in Burberry’s
marketing.
Great businesses have a strong core
and great businesses know their own
strengths. The brands that are
succeeding are the ones that forge
their own path and [are] not taking a
formulaic view of luxury. Handbags
are a great business, and they’re a
really great business if you’re born
with legitimacy as a handbag brand.
Outerwear is also a great business if
you’re born with legitimacy as an
outerwear brand. The more we tap
into our authenticity, the more we tap
into who we are, the more we will
succeed.
out of whack for a few years because
we were buying into the runway as if it
were the core.
How was the company able to
implement these changes while
managing high levels of pre-existing
inventory?
The sell-through on the seasonal
collections had been tough. We took
decisive action to do pretty deep
markdowns, even during the festive
season, with the goal of finishing our
last fiscal year with flat inventory. We
were able to finish our fiscal year with
7 percent less inventory. That allowed
us to invest more in the new.
You’ve used the word decisive. One
thing you’ve really been heralded by
the market for was bringing a
renewed sense of urgency, after
years of maybe focussing too much
on medium- and long-term strategic
plans. How do you strike the right
balance?
Long term, Burberry should be a top-
five luxury brand. The goal is still to
sit among the pinnacle brands. But
being an independent, publicly traded
company, looking at the financials
there absolutely was an urgency to get
back on track.
We cleaned up the inventory. Over
many years we had built up a level of
operating expenses which were
misaligned with the size of the
business. So we took fairly decisive
action there as well. This was as much
about the [operating expenses] as it
was about our way of working. We
had a structure in which you had a lot
of the decision making happening far
away from the customer, and a lot of
barriers between the executive
committee and the customer.
Instead of a chief commercial officer,
now the regions report directly to me.
We also looked at the way our regions
were set up, realigning them to have a
Greater China organisation that
oversees the Mainland, Hong Kong,
Macau and Taiwan. These are
examples of how we were able to get
closer to the customer while
improving our [operating expenses].
There have also been quite a few
job cuts.
That’s one of the hardest parts of the
job, frankly, because it’s never easy to
say goodbye to valued colleagues. But
the team has really appreciated the
sense of urgency, also the
transparency around what was
happening in the business.
As we reorganise it’s really with the
idea of how do we continue to have
the funding to reignite desire, which This interview has been edited and condensed.
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![The RealReal store in Summit, New Jersey. The RealReal.
Low-value items under $100, maybe
we’re not the place for those items.
Maybe you need to take them
somewhere else, because it costs us
the same amount to process and
authenticate low-value as it does mid-
and high-value. Our sweet spot is that
mid- to high-value product. The other
place that we made changes is we
were out buying inventory. We went
back to our core consignment [model].
As consumers across income groups
confront higher prices, how has their
willingness to buy luxury items on the
resale market shifted?
Most of our products, you can’t find
anywhere else. So it’s not a commodity.
These are rare items that people are
willing to pay for. People want to
make sure that they’re getting value.
In the primary market, a lot of these
brands kept pushing the envelope on
pricing. Every year, taking their
pricing up pretty significantly. At The
RealReal, it’s really about what the
consumer will pay for something.
We use data to understand how far
the consumer is willing to pay for
something, and they tell us. We’ll see
demand drop, or we’ll see the sell-
through go down. Our sell-through is
quite high. It’s pretty much [around
75 percent] in 90 days, which is
unheard of, because we let the market
set the price. It’s not The RealReal
sitting here and setting the price, it’s
the market, the consumer telling us
what they will pay for something.
There’s been a rise in younger
consumers seeking dupes — less
expensive versions of high-end
goods — and counterfeits. What has
that meant for luxury resale?
There’s always going to be a want for
authentic goods. The value play is
important, but authenticity is
important, too. We do it for a lot of
different reasons. Authenticity is one,
integrity of the product is another,
really preserving the history and
heritage of the brands, keeping these
brands alive.
How has the embrace of counterfeits
impacted your authentication
practices?
We are not new to authenticity.
We’ve invested a lot of time and
dollars and patent technology around
it. I sleep well at night because I know
no one does more than us to keep
fakes off the market. Some of these
brands are authenticated three times,
by three different authenticators.
Then we’re using technology,
something called Vision and Shield, to
not only authenticate the consignor
but also the product.
Thisyearwasmarkedbyadestabilising
trade that’s forced brands to raise
prices. How have tariffs impacted
The RealReal’s growth?
Resale is having a moment, but there’s
a lot of factors that are contributing to
that. Tariffs are one of them. The
inflationary pressures, all of that.
The consumer is just smarter than
they’ve ever been, and they’re like,
‘Why wouldn’t I participate in the
circular economy?’ Even when they’re
buying wedding dresses, they’re now
thinking of the secondary market first.
When [consumers] shop in the
primary market now, they’re thinking
about The RealReal. They actually call
us and ask us, ‘What holds its resale
value? Is it the Louis Vuitton Speedy
or is it the Goyard tote bag?’ They
want to understand that before they’re
even buying in the primary market.
The RealReal has been turning a
profit in recent years. What have
been the biggest profit drivers?
We made some systemic changes to
our business. We changed our
commission structure, for example.
The RealReal store in Summit, New Jersey. The RealReal.
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![Bag authentication. The RealReal.
I’ll use handbags as an example. We
now can measure, on a pixel level, the
handbags, and know if an item is
authentic or fake. It’s this piece of
hardware that goes in and takes a
picture of it at a microscopic level,
and then puts it through the right kind
of funnel and say, ‘Hey, there’s
something wrong with this, at a
microscopic level,’ or ‘This has the
wrong metal at the zipper. It’s not real.’
How will your use of AI continue
to evolve?
Now it’s about coverage across all
products. It’s also going to be about
speed of processing. Some of these
items take two or three weeks to
process. You can see how now it can
take a week to process. Now we’re
authenticating all handbags via AI.
We have all this data [from our] 40
million members. Knowing your
behaviour, you buy a handbag and
your typical pattern is, in six months,
you’re wanting to move on from that
handbag and buy something else.
Then we’d ping you and say, ‘Hey, you
can trade up now.’ So that’s something
called My Closet that we’re launching.
In one click, you’ll be able to re-
consign it and actually sell high.
When is this launching?
Our first part of that was ‘re-consign’
that we already launched, and we’re
seeing huge engagement there. My
Closet will launch early next year.
Consumers are asking for it. What if
you can say to them, ‘You have
$30,000 in your closet, you want to
go out and buy this Cartier watch,
here’s the two things to consign right
now that you’re going to get the most
dollars for. Maybe this is the right
time to consign those things to go buy
your Cartier watch.’
Which regions are driving the most
momentum in luxury resale? Which
regions are underpenetrated but
show a lot of potential?
“Most of our products, you can't find
anywhere else. So it's not a commodity.
These are rare items that people are
willing to pay for.”
Bag authentication. The RealReal.
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![how easy it is. They like that they can
consign all categories, everything, not
just one brand. They like the cash
versus the site credit. They like the
depth of our product and what we sell,
because we sell across all categories.
That is definitely a competitive
advantage for us.
Well, we are mostly domestic [in the
US] right now. We do sell
internationally. So Europe is a big
piece of that. The Middle East a bit.
As well as Australia. Hong Kong is
another one. Northern Europe,
Europe in general. So that’s where
we’re seeing [interest] outside of the
US.
We are looking at a cross-border
solution right now. We think this
could be a big growth driver for us
over the years. We sell to a lot of these
countries overseas, and now it’s about
how we bring in the supply. For
example, Japan, we’re now just
starting to get products from Japan.
We’re also starting to get in product
and partnering with [consignors in
Japan], with something called an API
feed. So they’ll be able to directly post
on our site, and we’ll authenticate
post-purchase.
Customer acquisition costs continue
to go up. How is that impacting the
online resale market? Where are
resellersfindingtheirbestcustomers?
It’s about getting smarter around
attribution and targeting. What we’ve
gotten better at is being able to flag
whichbuyersmake the bestconsignors,
and how do we target them, and
where are they? A lot of the old-
school channels, sometimes radio,
TV, direct mail, being able to target
certain zip codes. If you’re young and
you’re fashionable, usually you’re a
consignor of ours because you do like
to change out your wardrobe every so
often, you do have this love for fashion,
and that does become important to
our ecosystem. So being able to target
those people and getting better at it is
really where we’re focused.
What are some untapped customer
acquisition strategies that you’re not
investing as much in yet but seem
promising?
Another place is the affiliate
programme. If you’re a closet
organiser or a celebrity stylist, you
can earn a few extra thousand dollars
every month, because you earn a
percentage of every sale of your
client’s closet. It becomes interesting
for them. We’re definitely seeing
something there, and we’re building
out what that strategy looks like.
How do you expect the dynamics in
resale to play out in the coming year?
Are more brands going to pursue
resale on their own, and what does
that mean for resale platforms like
The RealReal?
There’s room for all of it. That said,
we’re really focused. We find that our
customer and consignor like the
simplicity of our service. They like The RealReal store in New York. The RealReal.
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![COS launched in 2007 to serve an
older customer base than H&M. The
point was always to be more minimal,
to be more refined. How has this
point of view evolved or shifted?
I wouldn’t say that the brand point of
view necessarily changed. Besides the
aesthetics, which is obviously one
important thing, we make sure that
the entire universe within COS lives
and fits together. We also developed
within the brand point of view more of
a narrative or a storytelling
perspective, where we would like
most of our storytelling to centre
around what we call relevant fashion
moments that we select and pick out
that feel authentic to COS, like
showing up at New York Fashion
Week, or around craftsmanship,
which is about the style and quality of
the product.
In your strategy, or in your
intentions, was elevating COS ever
an explicit objective?
Both yes and no. It’s a little bit
dangerous as a brand to go after a
word that you don’t own yourself,
because I feel true elevation comes
from the one experiencing what
you’re trying to create.
Our hope is that we can deliver on
something that feels elevated, but it’s
more important, I feel, to talk about
the quality and execution than us
producing something that someone
else should express as being elevated.
Ithinkit’smoreimportantto,asabrand,
discuss how you actually show up.
As young customers — Millennials
and Gen Z — discover the brand, how
haveyoubeenabletoensurethatCOS’
identity resonates with them as well
as existing segments of customers?
We tend to look at ourselves as more
ageless, to be honest. We don’t look so
much at our customers depending on
age. We look at it much more [as] we
are tapping into a style that is very
genuine to COS, which is what we
talked about before, being centred
around something that is more
timeless, centred around really
quality materials and also of course
really sustainably sourced materials.
I think we’re not trying to show up
differently. We’re trying to be the
brand we are, no matter what age the
person is experiencing us. I think our
positioning in this is much more
focused on delivering what we feel is
authentic to COS than trying to slice
ourselves into different parts for
different segments.
What does COS’ brand storytelling
look like?
We always go back to, ‘How can we
Inside a COS store in Seoul. COS.
Inside a COS store in Seoul. COS.
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![A COS store in Mexico City. COS.
amplify and use the perspectives of
relevant fashion movements, of
craftmanship and innovation, in our
communication and how we actually
reach out?’ Then we do that in
producing shows. We go back to New
York Fashion Week in the Fall, and
then for the Spring season we are a
bit more playful in where we go.
So, ultimately, product is COS’
biggest vehicle for storytelling?
It’s so easy to talk about the ambition
of generating elevation, but unless
you have a product actually meeting
that feeling, everything you do
becomes unnecessary in a way.
What we are doing [to widen] our
position in the market is to be very,
very considerate in our price
architecture of things. We like to talk
about our positioning as this bridge
between luxury and more mass-
market players, and really giving
more people from the mass market
the opportunity to experience COS.
We have the cotton t-shirt for £19,
which we feel is a competitive price
for many of the customers buying
from mass market today, so giving
them a chance to start experiencing
COS on a price point they are more
familiar with is an important strategic
choice for us.
A COS store in Mexico City. COS.
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- 1.
- 2. ACKNOWLEDGEMENTS The authors wouldlike to thank Emily Beaumont, Laura Hyland, Helena Hyytiä and Aoife Mullan from McKinsey’s London, Helsinki and Dublin offices for their critical roles in delivering this report. We would also like to thank Abhishek Goel for his significant contribution to the MGFI article again this year. A special thanks to all members of The Business of Fashion and the McKinsey communities for their contributions to the research and participation in the BoF-McKinsey State of Fashion 2026 Executive Survey and the BoF-McKinsey State of Fashion 2026 Consumer Survey, especially the many industry experts who generously shared their perspectives during interviews. In particular, we would like to thank Rocco Basilico, James Cadwallader, Michelle Gass, Daniel Herrmann, Rati Sahi Levesque, Alexis Nasard, Joshua Schulman and Ahmed Zaidi. The authors are grateful to Altiant for their contribution to the research. The wider BoF team has also played an instrumental role in creating this report — in particular, Brian Baskin, Nick Blunden, Simone Stern Carbone, Cathaleen Chen, Niamh Coombes, Amanda Dargan, Fred Galley, He Jia, Vikram Alexei Kansara, Presiyana Karastoyanova, Joan Kennedy, Sarah Kent, Rawan Maki, Malique Morris, Alex Negrescu, Carlos Lopez Sanchez, Arunima Sharma, Lillian Sesiguzel, Amy Vien, Amy Warren, Robert Williams, Michelle Wiles, Josephine Wood and Robb Young. We would like to thank the following McKinsey colleagues for their special contributions to the report creation: Ekaterina Abramicheva, Rhythm Ahuja, Julie Annis, Sarah André, Jiamei Bai, Magdalena Balcerzak, Danielle Bozarth, Julia Borrebaeck, Pamela Brown, Inés Casanovas, Joyce Chai, Dhruv Chandras, Michael Chui, Becca Coggins, Gurneet Singh Dandona, Javier Del Pozo, Sandrine Devillard, Hayley Doner, Eric Falardeau, David Fuller, Katharina Giebel, Kenza Haddioui, Sangwoo Han, Holger Harreis, Taka Hemley, Julian Hügl, Patricio Ibáñez, Michael Jennings, Gabrielle Johansen, Younghoon Kang, Sophia Kummers, Nikolai Langguth, Jihye Lee, Clarisse Magnin, Laura Mendoza, Alexandra Mondalek, Blaire Motes, Steve Noble, Olga Ostromecka, Gizem Ozcelik, Roger Roberts, Katharina Rombach, Amaury Saint Olive, Carlos Sánchez Altable, Alice Scalco, Jennifer Schmidt, Alok Singh, Nadya Snezhkova, Henri Stehle, Marie Strawczynski, Corinne Teschner, Katarina Towianska, Yasufumi Tozuka, and Rebecca Zhang. We’d also like to thank Vratislav Pecka for the cover illustration. 2 The State of Fashion 2026
- 3. CONTENTS 6 Executive Summary Theme01: Tariff Turbulence 10 Industry Outlook 18 Global Economy Theme 02: Workforce Rewired 38 Consumer Shifts Theme 03: The AI Shopper Theme 04: Jewellery Sparkles Theme 05: Smart Frames 82 Fashion System Theme 07: Efficiency Unlocked Theme 08: Resale Sprint Theme 09: The Elevation Game Theme 10: Luxury Recalibrated Theme 06: The Wellbeing Era McKinsey Global Fashion Index 128 3 The State of Fashion 2026
- 4. Imran Amed isone of the global fashion industry’s leading writers, thinkers and commentators, and is founder, chief executive and editor-in-chief of The Business of Fashion (BoF), a modern media company and the authoritative voice of the global fashion and luxury industries. Imran holds an MBA from Harvard Business School and a B.Com from McGill University. He was born in Canada and holds British and Canadian citizenship. Previously, Imran was a management consultant at McKinsey & Co. IMRAN AMED Gemma D’Auria is a McKinsey senior partner and leader of the firm’s global Apparel, Fashion & Luxury sector. She has worked extensively in North America, Europe and the Middle East supporting retail, fashion and luxury players and family-owned businesses in shaping bold strategic agendas and driving transformations for higher performance and organisational health. Gemma is also a leader of McKinsey’s CEO Excellence initiative and is passionate about supporting the leadership journeys of top teams and CEOs. GEMMA D’AURIA Anita Balchandani is a senior partner in McKinsey’s London office. Anita co-leads the Apparel, Fashion & Luxury sector in EMEA. She works with global brands and retailers in shaping ambitious growth agendas, driving digital transformation and designing winning models for the future. Anita also works extensively in the private equity space leading diligence and value creation plan support across numerous growth equity transactions. ANITA BALCHANDANI Colleen Baum is a senior partner in McKinsey’s New York office and is a leader of McKinsey’s retail and apparel operations practice in North America. She advises retailers and fashion brands on end-to-end cost management, supply chain strategy, retail footprint, inventory management and omnichannel fulfilment topics. COLLEEN BAUM As director, BoF Insights at The Business of Fashion, Hannah Crump executes in-depth editorial projects and partners with industry experts to create data-driven research and analysis for leaders in the global fashion and beauty industries. Her career spans over 10 years in editorial and project management positions in fashion media and publishing. HANNAH CRUMP CONTRIBUTORS The senior technology correspondent at The Business of Fashion, Marc Bain reports on the innovations reshaping the global fashion industry and writes a weekly tech newsletter. In his career as a reporter, including several years as the fashion reporter at Quartz, he has covered all aspects of the industry, from garment workers to the runway, and in 2021 received an award in business journalism. MARC BAIN David Barrelet is a partner in McKinsey’s Hamburg office and is part of the leadership of McKinsey’s Apparel, Fashion & Luxury sector in EMEA. He works with sportswear, fashion and luxury brands and retailers on a variety of topics including growth strategies, operating model transformations and M&A. DAVID BARRELET Amanda Dargan co-heads BoF Insights, The Business of Fashion’s data and advisory division, where she leads strategy, operations and product development. She oversees the creation and delivery of BoF Insights’ proprietary AI analyses and tools, driving the company’s mission to harness technology and data to generate actionable insights for fashion and luxury leaders worldwide. AMANDA DARGAN 4 The State of Fashion 2026
- 5. Daniel Zipser isa senior partner in McKinsey’s Shenzhen office and leads McKinsey’s Apparel, Fashion & Luxury sector across Asia-Pacific. Daniel works with a broad set of companies across Greater China and Asia-Pacific, primarily on sales and marketing topics, with a deep understanding of local consumers and retail trends in addition to holistic topics including organisation, corporate finance and operations. DANIEL ZIPSER Joëlle Grunberg is a partner in McKinsey’s New York office and is part of the Apparel, Fashion & Luxury sector in the Americas. She focuses on growth strategy, international expansion and commercial transformation. Before re-joining McKinsey, Joëlle served 20 years as a C-suite leader of fashion and footwear brands including Wolverine, Boston Brands and Lacoste Americas. JOËLLE GRUNBERG Rawan Maki co-heads BoF Insights, The Business of Fashion’s data and advisory division, and brings a background in fashion and consulting from Bain & Company. Rawan holds a PhD in fashion and culture from the London College of Fashion. At BoF Insights, she runs BoF’s major client engagements in fashion and luxury, working with clients on developing growth strategies informed by creative and customer fit. RAWAN MAKI CONTRIBUTORS Felix Rölkens is a partner in McKinsey’s Berlin office and a co-leader of McKinsey’s Apparel, Fashion & Luxury sector in EMEA. He works with apparel, sportswear and fashion e-commerce companies in Europe and North America on a wide range of topics including strategy, operating model and merchandising transformations. FELIX RÖLKENS Alexander Li is part of The Business of Fashion’s data and advisory team, BoF Insights. His role as associate director of advisory entails collaborating with fashion and beauty clients to help them achieve new levels of cultural relevance and commercial success. Alexander comes from a consulting background with a focus on growth strategies in the consumer space. ALEXANDER LI Lito Michaelidou is an engagement manager in McKinsey’s London office and is part of the Apparel, Fashion & Luxury sector in EMEA. She works with sportswear, fashion and luxury companies across Europe and the US on a variety of topics including growth strategies, operating model transformations, value creation and M&A. LITO MICHAELIDOU 5 The State of Fashion 2026
- 6. As fashion executiveslook ahead to 2026, they are contending with a fundamentally new reality. US tariffs have redrawn trade maps and forced brands and their suppliers to rapidly adjust and adapt. Consumers continue to rethink their spending, seeking value and devoting more of their budgets to other goals, including their own health and wellbeing. The swift onset of AI, meanwhile, means fashion leaders are navigating a rapidly changing technological landscape. While the ongoing disruptions may feel daunting, they are in fact part of a wider set of longer-term systemic shifts. The Business of Fashion and McKinsey have been tracking global economic dislocations, shifting consumer preferences and changes to the fashion system in The State of Fashion reports for 10 years now. The publication of our first report in 2016 coincided with the Brexit vote in the UK and the first election of Donald Trump. Since then, we have examined the impact of a once-in-a-generation pandemic, global supply chain upheaval and the industry’s track record on sustainability, among many other macro themes. Whereas in previous years fashion leaders facing the volatility of global affairs were uncertain about what lay ahead, now they seem to have accepted that constant change is simply the new normal. “Challenging” has overtaken “uncertainty” as the word executives polled in the annual BoF- McKinsey State of Fashion Executive Survey used most frequently to describe the industry in 2026, with tariffs cited as the number one hurdle. Perhaps unsurprisingly, then, many leaders are feeling pessimistic and are not expecting an easy road ahead. This year, 46 percent say they expect conditions to worsen in 2026, compared with 39 percent in last year’s survey. By geography, 36 percent view North America as unpromising or very unpromising, double last year’s share. But not everyone is so downbeat. Among those polled, 25 percent believe industry conditions will improve, up from 20 percent in 2025, suggesting some players see pockets of opportunity. Sentiment towards China is finally picking up, even as conditions remain difficult: 28 percent view the market there as unpromising in 2026, down from 41 percent heading into 2025. The industry’s main agenda in 2026 will be adapting to this new environment where trade, consumer behaviour and technology remain in rapid flux. Agile brands that can adapt quickly are likely to emerge as the winners. Harnessing Artificial Intelligence With turbulent conditions including volatile input costs, supply chain disruptions and slow growth straining fashion’s economic model, AI is shifting from a competitive edge to a business necessity. Companies are reshaping workforces accordingly, with some existing jobs becoming more AI-centric, enabling roles to shift towards higher-value creative and analytical tasks. To harness this technological change, companies must redesign their processes and compete for AI talent — looking beyond the fashion ecosystem to find it — while protecting the essential creativity that makes fashion tick. Business leaders must shift their focus from small pilots and experiments that can only deliver incremental change towards a more fundamental reassessment of how their organisations work. And while still nascent, agentic AI is reshaping how people work and collaborate, so fashion companies will need to figure out how they can harness this emerging technology too. AI is also transforming how people shop. Customers are turning to large language models to search for products, compare offerings and receive tailored recommendations. Some are already using AI as style and wardrobe consultants, seeking advice on what to buy and where to buy it, making When the Rules Change EXECUTIVE SUMMARY 6 The State of Fashion 2026
- 7. fashion brands’ presencein AI chatbot responses the new SEO. These dynamics will only grow more pronounced as agentic commerce accelerates in the second half of the decade. New Customer Priorities, New Competitors Fostering customer loyalty is emerging as an important frontline in the battle for customers, with more than half of executives citing retention strategies as a key theme shaping the industry in 2026. To retain — and attract — customers, brands will need to give them what they want, and increasingly that means offering value. While luxury players raised prices without corresponding improvements in product quality or creativity, design-led brands in the mid-market elevated their products and store experiences. Now, the mid-market is the fastest- growing segment, replacing luxury as fashion’s main value creator. Jewellery has also thrived as fashion brands hiked prices faster. Strong volume demand in jewellery is expected through 2028, driven by consumers’ desire for lasting investments and self-expression alongside a rise in self-gifting among both men and women. Meanwhile, smart eyewear that blends fashion and technology has become the fastest- growing accessory category, with further product launches expected in 2026. To revive growth, luxury is now embarking on a period of reinvention as several of the largest luxury houses welcomed new creative directors in the year through September 2025. But it may not be enough. High prices remain a significant hurdle for aspirational customers, and anyway, more and more would-be luxury shoppers are focusing on their personal wellness: body, mind and health — a trend we first called out in 2017. In the end, 2026 will inevitably be yet another year of dislocation for fashion companies. In a flat market, only those companies that capture the hearts and minds of customers will manage to grow and gain market share. Are you ready? “The Business of Fashion and McKinsey have been tracking global economic dislocations, shifting consumer preferences and changes to the fashion system in The State of Fashion reports for 10 years now.” 7 The State of Fashion 2026
- 8. 10 Years ofThe State of Fashion Mobile Obsessed In the Neighbourhood Getting Woke Sustainability First Predictably Unpredictable On High Alert AI Gets Real Note: themes are non-exhaustive Beyond China Trade 2.0 Radical Transparency Sustainability Credibility GLOBAL ECONOMY CONSUMER SHIFTS FASHION SYSTEM Uneven Recovery Less is More Gen AI’s Creative Crossroad Inventory Excellence Efficiency Unlocked Two-Track Spending Digital Sprint Seeking Justice Deeper Partnerships Product Passports Circular Textiles Tackling Greenwashing Climate Urgency Sustainability Rules Diminished Demand Logistics Gridlock Bullwhip Snaps Back Trade Reconfigured Value Shift Resale Sprint The Wellbeing Era Discovery Reinvented The Sustainability Collective The AI Shopper Tariff Turbulence Living with the Virus Workforce Rewired Asia’s New Growth Engines Regional Realities Global Fragility THE AGE OF VOLATILITY Geopolitical turmoil makes global trade increasingly complex and unpredictable. ASIA RISING Emerging Asian markets drive momentum as China’s growth stalls. CRITICAL CONSUMERS Fashion shoppers become shrewder, seeking value at every price point. SHOPPING DISRUPTED Retail experiences evolve, from mobile-first to connected stores to AI discovery. SUPPLY CHAIN SPRINT Supply chains get more agile in the face of trade disputes and shipping crises. SUSTAINABILITY STALEMATE Sustainability momentum slows while regulatory and consumer pressure rises. TECHNOLOGY REVOLUTION AI and automation graduate from isolated experiments to core processes. 2018 2019 2020 2017 China’s Comeback? Asian Trailblazers Indian Ascent Materials Revolution Getting Personal Now or Never Caution Ahead Shrewder Shoppers Intensifying Volatility 2021 2022 2023 2024 2025 2026 Fragmented Future 8 9 The State of Fashion 2026
- 9. Industry Outlook A DifficultRoad Ahead 10 The State of Fashion 2026
- 10. Executives brace forchallenges as concerns over consumer confidence remain Looking ahead to 2026, the word most frequently used to describe expected conditions in the fashion industry is “challenging,” surpassing “uncertainty” which was most common in 2024 and 2025.1 2 3 As a result, the industry outlook for 2026 remains generally downbeat. Forty-six percent of executives expect industry conditions to worsen, an increase of 8 percentage points (%points) over the previous year. However, expectations have also become more polarised, as 25 percent also foresee industry conditions improving — a 5%point increase.1 2 Overall, the key reasons for concern remain broadly consistent with last year — nearly eight in 10 executives cite consumer confidence and appetite to spend as the top risk to industry growth.1 This is closely tied to geopolitical instability, with broader macroeconomic conditions continuing to make consumer behaviour more unpredictable. More so than in previous years, disrupted trade flows and deglobalisation are weighing heavily on executives as they look ahead to 2026. Forty percent of leaders cite this as one of their top three risks (up 25%points from last year),1 2 largely driven by new tariffs that are reshaping supply chains and raising input costs. Question: What aspects of the global economy do you expect will be the greatest risks to growth in the fashion industry in [year]? Select three, % 1st 2nd 4th 2024 3rd 5th 2025 2026 Geopolitical instability 62 Economic volatility 55 Inflation 51 Sustainability 29 Rising interest prices 27 Consumer confidence and appetite to spend 70 Geopolitical instability 67 Economic volatility 32 Inflation 28 Supply chain disruptions 22 Consumer confidence and appetite to spend 78 Geopolitical instability 66 Economic volatility 30 Inflation 25 Disrupted trade flows / deglobalisation 40 Source: BoF-McKinsey State of Fashion Executive Survey 2024, 2025 and 2026 11 The State of Fashion 2026 Industry Outlook
- 11. -3 9 2 2 to3 1 to 3 10 5 2 -1 to 1 2 to 4 2 -1 3 2 to 3 1 to 3 Industry growth is expected to remain low as macroeconomic uncertainty persists 13 4 2 1 to 2 1 to 2 12 8 2 -2 to 0 1 to 3 McKinsey’s Fashion Growth Forecasts predict the global fashion industry will once again post low single-digit growth in 2026.4 Heightened macroeconomic volatility is expected to continue to weigh on sentiment and drive value-conscious consumer behaviour. Consumer sentiment has been especially challenged in the US in 2025. In April, the consumer confidence index hit its lowest level since May 2020 amid tariff announcements,5 with overall US industry growth expected to fall short of last year’s forecast for 2025.6 The luxury segment is projected to see modest improvements across markets after a difficult 2025, supported by a flurry of creative resets fashion leaders hope will inject excitement into the industry.7 Europe US Chinab Luxurya Fashion Fashion retail sales year-on-year growth by geography and segment, % 2022 2023 2024 2025E 2026E 2022 2023 2024 2025E 2026E -6 12 -8 -2 to 0 2 to 4 a. Excludes domestic unbranded and branded jewellery b. Mainland China (excl. Hong Kong and Taiwan) Note: Growth rate forecasts are calculated on actuals converted to USD on fixed 2024 exchange rates Source: McKinsey Fashion Growth Forecasts 2026 12 The State of Fashion 2026 Industry Outlook
- 12. Luxury is expectedto improve modestly, while the fashion segment maintains low single digit growth US Chinab Europe Luxury growth driversa +2-4% +2-4% • Domestic spend is set to rise modestly as affluent householdsc are expected to grow 6 percent through 2027,25 while growth in outbound travel to key markets is expected to slow.26 • UHNW consumer net intent to spend on luxury fashion in 2026 is 34 percent in China versus 27 percent on average in markets.27 • Movements in the real estate or equity market remain an important factor influencing outcomes. +1-3% • Duty-free spending is expected to grow in key markets (up more than 3%points in France, Italy and Spain)17 after 2025 spend was dampened by the US dollar’s decline against the euro.18 • Domestic demand remains strong, with brands like Hermès, Richemont and LVMH reporting strong sales from local shoppers in H1 2025.19 20 21 +1-3% • The first full year of tariffs is set to intensify price pressures relative to 2025, with rising prices the top concern for US consumers.12 • After a slowdown in GDP growth and an almost-four-year unemployment high in August 2025,13 GDP growth is set to stay low in 2026.8 Uncertainty remains around further Fed rate cuts. • Consumer sentiment is still cautious, with confidence down by 3.6%points in September 2025 and ongoing uncertainty expected to weigh on sentiment into 2026.14 Fashion growth drivers +1-3% • GDP growth is projected to slow in 2026,8 with disposable income growth also expected to fall below 2024 and 2025 levels.10 • With the real estate market still weighing on sentiment, consumer confidence remains subdued and saving rates elevated.15 • Category performance is mixed: Sportswear sales are up 9 percent in 202516 driven by casualisation and focus on health and wellbeing, while the wider apparel market remains muted. • GDP growth is expected to remain steady in 2026,8 underpinned by a resilient labour market with stable unemployment rates.9 • Disposable incomes are expected to grow slightly faster than 2025,10 with inflation easing from 3.3 percent to 2.5 percent.8 • Consumers are expected to remain cautious, with over 60 percent of consumers planning to trade down in Q4 2025.11 +1-2% 2026E market growth4 2026E market growth4 +1.4% 2026E GDP growth8 +2.1% 2026E GDP growth8 +4.2% 2026E GDP growth8 • Equity market momentum continues to fuel wealth creation. The number of ultra-high-net-worth (UHNW) Americans rose 6.5 percent in H1 2025, following a 21 percent surge in 2024.22 • While economic volatility and high prices curbed 2025 spend from aspirational buyers,23 creative resets could reignite demand. • Brands are investing in the US luxury market, with retail square footage rising 65 percent in H1 2025, compared with a decline the year prior, reflecting efforts to restore growth.24 a. Excludes domestic unbranded and branded jewellery b. Mainland China (excl. Hong Kong and Taiwan) c. Affluent households defined as annual household income above 180,000 RMB (2025 price) 13 The State of Fashion 2026 Industry Outlook
- 13. Fashion executives expectto increase prices more than last year 24 47 18 8 3 2025-2026, %point change Question: How much do you expect your like-for- like retail sales volumes on average across all products/categories to change next year, if at all? % 31 38 15 10 7 More than 5% 1% to 5% No change -4% to 0% -5% or less Question: How much do you expect to increase / decrease your retail sales prices on average across all products/categories next year, if at all? % In 2026, nearly three-quarters of executives expect to raise prices — a 19%point increase from 2025.1 2 In the fashion segment, 26 percent plan to increase prices by more than 5 percent, compared with 18 percent in the luxury segment, where growth has largely been price-driven in recent years.1 Regionally, North American executives expect to increase prices the most, with 45 percent planning to raise them by more than 5 percent in an effort to offset tariff-driven input cost increases.1 Reflecting this, nearly one-quarter of executives in North America anticipate their cost of goods sold (COGS) will increase by more than 9 percent.1 Expectations of cost increases remain elevated across regions: Excluding North America, 11 percent of executives anticipate COGS to increase by more than 9 percent, compared to just 3 percent in 2025.1 2 As these pressures persist, executives are focussing more on efficiency. In 2026, 69 percent plan to prioritise sales growth over cost improvements, down from 73 percent in the previous year.1 2 While top-line growth remains a key focus, the growing emphasis on cost management underscores recognition of higher costs and the need to improve productivity to protect margins. -18 +13 +6 0 -2 2025-2026, %point change -1 +5 -2 -3 1 Source: BoF-McKinsey State of Fashion Executive Survey 2025 and 2026 14 The State of Fashion 2026 Industry Outlook
- 14. Leaders say AIand digital tools will present the biggest opportunity for the industry in 2026 Using AI to manage cost pressures and future-proof growth: Executives identify scaling AI and related digital capabilities as the single biggest opportunity for 2026.1 To date, most applications have focused on siloed tasks such as copywriting, image generation and customer service. However, leaders are now looking to integrate AI across their businesses. The fashion industry has historically trailed other sectors in adopting AI,28 highlighting the need for the right organisational structure and skills to capture the full potential of AI- driven innovation. Keeping differentiation front of mind: Executives continue to emphasise the need for a distinctive value proposition rooted in creativity and innovation.1 Given concerns around the unpredictability of consumer behaviour, this reflects an imperative for brands to differentiate to drive relevance. Integrating sustainability into the business model: Executives are once again looking to sustainable practices as an opportunity to improve operations and meet consumer expectations. Circular approaches, including resale, were highlighted as areas where executives see potential to create value.1 Navigating economic uncertainty: Executives no longer consider improved economic conditions in key markets among their top opportunities. Instead, leaders are focussing on building greater resilience through improving their own business operations and differentiating their offerings. 1st 2nd 3rd 2026 AI, digital and technology- related capability development and integration into operations Differentiation in business strategy through brand positioning and product newness Strengthening sustainability credentials with circular business models and broader environmental initiatives 2025 of respondents of respondents of respondents 13% 12% 7% Question: What do you think will be the single biggest opportunity for the fashion industry in [year]? Source: BoF-McKinsey State of Fashion Executive Survey 2025 and 2026 Differentiation in business strategy through brand positioning and product newness Expanding use cases of AI and new features Improving economics (e.g. lower inflation, higher disposable income) in select regions (e.g. US, India) of respondents of respondents of respondents 13% 9% 9% 15 The State of Fashion 2026 Industry Outlook
- 15. 03. The AI Shopper Artificialintelligence is already disrupting how consumers discover fashion. In the years ahead, autonomous AI shopping agents may even act on their behalf, completing tasks from monitoring prices to buying products. To ensure their products are visible — and favoured by — AI models, brands must rethink their digital marketing and e-commerce infrastructure, where semantically rich data and API-accessible content will be critical to success. 04. Jewellery Sparkles With unit sales growth outpacing all other fashion categories, jewellery’s bright moment is set to continue into 2026. Having defied the broader luxury slowdown, the category will keep reaping the rewards of a growing customer base with a desire for long-lasting investments, self-expression and treating themselves. As jewellery cements its role as accessories centrepiece, fashion players will seek to capture their share of the category’s outsized growth. 05. Smart Frames Style-conscious devices equipped with multi-modal AI are set to redefine the wearables landscape in 2026, with smart eyewear emerging as a leading format. Major players already have product launches scheduled, reflecting strong market momentum. With the category projected to exceed $30 billion by 2030, brands have a timely opportunity to partner with technology leaders to unlock high-value consumer use cases and accelerate adoption. 02. Workforce Rewired Technology is changing workforces globally. Artificial intelligence investments are set to drive productivity, meaning some existing positions will become AI- centric and new roles will emerge. Fashion leaders must prioritise upskilling their workforces and acquiring new talent to stay competitive. Strong change management will be critical to capture AI’s full potential. CONSUMER SHIFTS GLOBAL ECONOMY 76 percent of fashion executives say trade disruptions and rising duties will impact the industry in 2026 By 2030, around one third of employee time across industries could be automated by generative AI and other technologies in Europe and the US 53 percent of US consumers who used AI for search in Q2 2025 also used it to help them shop Jewellery unit sales are expected to grow 4.1 percent annually between 2025 and 2028 – four times the rate of clothing Wearables are set to grow 9 percent annually to 2028, with smart glasses gaining traction amid several new product launches 76% ~1/3 53% 4x +9% 01. Tariff Turbulence US tariffs are reshaping global trade as higher duties push up costs across the value chain, heavily impacting fashion. Brands are making price changes, shifting sourcing and improving efficiency in a bid to counteract the impact. Larger suppliers are pursuing footprint optimisation, digitisation and automation, while smaller players face mounting pressure. Agility will be the defining factor enabling brands and suppliers to maintain their competitive edge. The State of Fashion 2026 08. Resale Sprint Customers are spending more on secondhand fashion in the search for value as prices continue to rise in the primary market. Marketplaces have made shopping secondhand mainstream, but brands must now define resale strategies of their own. While operational hurdles remain, the lure of untapped revenue will make resale an increasingly attractive way to bolster business models and brand perception. 09. The Elevation Game From the value segment up to affordable luxury, fashion brands are moving upmarket. Some want to differentiate from ultra-low- cost competitors, while others aim to capture the former high-end shopper squeezed out by luxury prices. With margins under pressure and competition intensifying in 2026, these elevation strategies will gain new urgency. Product quality and standout experiences could help brands upgrade their positioning. 10. Luxury Recalibrated The luxury slowdown is prompting a phase of strategic renewal. Brands are reducing their reliance on price-led growth and refocusing on creativity and craftsmanship to rebuild client trust. This recalibration calls for brands to balance the needs of distinct customer segments and integrate product, storytelling and client experience into a cohesive expression of brand value. 07. Efficiency Unlocked In a challenging fashion market, companies must become more efficient to drive growth. Old advantages like scale and low-cost sourcing are no longer sufficient to sustain a healthy economic model. By taking advantage of new technology, businesses can improve productivity to reduce costs, unlocking resources to invest in differentiators that enable growth. 06. The Wellbeing Era Wellbeing is becoming central to how consumers live, spend and define themselves. As they tire of attention- grabbing content, they are drawn to brands that reflect their shifting identities and offer them emotional connections. Fashion brands are responding by entering wellbeing-adjacent “third spaces,” but further opportunity lies in integrating these shifting priorities more holistically across the brand universe. FASHION SYSTEM 84 percent of US consumers say wellness is a top or important priority in their day-to-day lives in 2024, rising to 94 percent in China Fashion executives say changing margin, cost and cash strategies will be the second most-important theme to shape the industry in 2026 The secondhand fashion and luxury market is set to grow two to three times faster than the first-hand market through to 2027 Value brands such as Bershka and H&M reduced the SKUs in their lowest price tiers in the UK by 15 to 25 percent between 2023 and 2025 The top reported attribute that ultra-high-net-worth customers say epitomises luxury is “expertise and quality” 84% 2nd 2-3x 15- 25% No. 1 17 16 The State of Fashion 2026
- 16. 01. Tariff Turbulence TheState of Fashion 2026
- 17. EXECUTIVE PRIORITIES KEY INSIGHTS 01.Tariff Turbulence US tariffs are reshaping global trade as higher duties push up costs across the value chain, heavily impacting fashion. Brands are making price changes, shifting sourcing and improving efficiency in a bid to counteract the impact. Larger suppliers are pursuing footprint optimisation, digitisation and automation, while smaller players face mounting pressure. Agility will be the defining factor enabling brands and suppliers to maintain their competitive edge. • The weighted average of tariffs on apparel and footwear imports to the US spiked from 13 percent to 54 percent in spring 2025 before easing to 36 percent at the time of writing in mid-October — still well above historical norms. • 76 percent of fashion executives say trade disruptions and rising duties will shape the industry in 2026. • US apparel and footwear imports from Cambodia have increased 42 percent between 2019 and 2024, while imports from China have declined by 30 percent. • Brands should base price adjustments on consumer reactions and competitor moves, while strengthening their value-for-money proposition. • Suppliers should improve agility by prioritising productivity gains through lean manufacturing and targeted technology investments. • Doubling down on the most strategic partnerships will be as critical as having a diversified customer and supplier base. In a volatile trade environment, stability will depend on partnerships built on collaboration. 19 The State of Fashion 2026 01. Tariff Turbulence Global Economy
- 18. US tariffs haveemerged as a defining force in global trade Top sources of apparel and footwear imports into the US and their trade-weighted tariff rates,a b % In 2025, the US government introduced expansive new import duties. Since the US imports 89 percent of apparel and leather products sold in the country, those sectors are among the most impacted.1 Trading partners have responded with countermeasures, leaving global supply chains in flux. The most significant impact occurred during the 90-day implementation period following the April 2025 announcement, when apparel and footwear tariffs spiked from 13 to 54 percent.2 Some tariffs were later reversed, but as of mid-October, the weighted average tariff rate for apparel and footwear from the top 10 importers stood at 36 percent — well above the industry-wide average of 17 percent for US exports.2 Considerable uncertainty around tariff rates persists, with potential hikes in China’s import duties on the horizon. To assess competitiveness holistically, brands and suppliers must weigh tariffs alongside broader operating conditions, including energy, infrastructure and input costs, to identify sourcing hubs that remain viable in this new environment. Vietnam EU Indonesia Bangladesh Cambodia India Mexico Honduras Pakistan China 25 (21%) 10 (8%) 8 (6%) 7 (6%) 7 (6%) 6 (5%) 4 (3%) 2 (2%) 2 (2%) 30 (25%) Value of exports to the US, 2024c USD, billions (% of total) Top sources of apparel and footwear imports into the US and their trade-weighted tariff rates,a b % 0 10 20 30 40 50 60 70 80 54 Weighted average tariff rate,d % Jan. 1, 2025 Apr. 2, 2025 Aug. 27, 2025 36 13 a. Including the following commodities: woven, leather, circular and flat-knit apparel and accessories as well as footwear b. Jan. 1, 2025 reflects tariff levels prior to the US tariff announcements; Apr. 2, 2025 marks the first wave of measures introduced by the US administration; and Aug. 27, 2025 represents the most recent tariff levels available at the time of writing in mid-October c. Export data based on country of origin, unless there is a substantial change at the location of a transshipment d. Weighted average across the top 10 importers listed here Source: MGI Global Trade Dispute Database, World Bank 20 The State of Fashion 2026 01. Tariff Turbulence Global Economy
- 19. Estimated incremental impactof tariff increases from January 2025 to August 2025 on apparel and footwear imports into the US based on 2024 volumes, USD, billions (% of total) The apparel and footwear industry is among the most exposed to tariff impacts Vietnam India Bangladesh Indonesia Cambodia EU Pakistan Honduras Mexico Other China 5.0 (19%) 2.9 (11%) 1.5 (6%) 1.5 (5%) 1.3 (5%) 0.6 (2%) 0.5 (2%) 0.2 (1%) ~0 (0%) 4.3 (16%) 9.0 (34%) ~$27B estimated increase in duties on global apparel and footwear imports into the US,2 assuming no change to import volumes per country The implications for the apparel industry are profound. Responding to this pressure, 76 percent of fashion executives say that responses to trade disruptions and tariffs will be the single most important factor shaping the industry in 2026.3 Key fashion sourcing hubs are most affected by rising tariff rates — China, Vietnam, India, Bangladesh and Indonesia — which together account for 63 percent of US textile and apparel imports and roughly 75 percent of the incremental impact.2 Source: McKinsey analysis, MGI Global Trade Dispute Database 21 The State of Fashion 2026 01. Tariff Turbulence Global Economy
- 20. Actions that brandsand retailers are taking to mitigate tariff impacts, % of fashion executives Shifting production to countries with lower tariffs or free trade agreements Reducing upstream sourcing costs Consolidating shipments and optimising logistics Reducing product assortment or SKUs Optimising fulfilment and distribution strategies Absorbing tariff costs internally Adjusting product design to reclassify tariff codes Increasing prices 35 29 32 27 26 23 9 55 Expected increase in retail sales prices as a result of tariffs Apparel and footwear companies are implementing pricing, cost and sourcing levers • Adjusting prices: Between January 2025 and July 2025, US apparel prices rose 1.3 percent, and 55 percent of executives expect further increases in 2026 in response to tariffs.3 4 Several players have been explicit about price hikes —Nike, Hermès and Ralph Lauren among them.5 6 7 With inflation still elevated, 92 percent of consumers express concern about their household finances.8 Across price segments, over 80 percent of consumers say good value for money is a top buying factor.9 • Reducing costs: Brands are also optimising efficiency to offset margin pressures, such as by renegotiating supplier terms, consolidating shipments, streamlining assortments and improving logistics. For example, Walmart has asked Chinese suppliers for price reductions, while Levi’s is streamlining its holiday assortment, reducing complexity and inventory to focus on core, higher-margin products.10 11 Many suppliers, though, are already under strain from higher input costs, meaning both sides will need to find balanced ways to share the burden. • Adapting sourcing: Thirty-five percent of executives plan to shift sourcing to markets with more favourable trade agreements, illustrated by Shein’s expansion in Vietnam.3 12 For global brands, urgency depends on the extent of US exposure. However, the effects also extend beyond the US. As US orders retreat from China, global players may move in to fill the space, securing better terms and diversifying their suppliers. Source: BoF-McKinsey State of Fashion 2026 Executive Survey 11% to 15% 6% to 10% 1% to 5% Less than 1% More than 15% 16 38 41 3 3 22 The State of Fashion 2026 01. Tariff Turbulence Global Economy
- 21. Source: McKinsey analysis Archetypesof brands and retailers based on their approach to protecting margins High (e.g. flexible supply chains, low vendor dependence, high negotiation leverage) Low (e.g. rigid supply chains, vendor dependence, low negotiation leverage) High (e.g. differentiated proposition, strong brand loyalty) Low (e.g. value-driven proposition, lower brand loyalty) Brand strength and flexible sourcing are important levers for protecting margins The optimal balance of pricing and cost changes depends on the strength of a brand or retailer’s proposition and flexibility in sourcing operations. Brands with highly differentiated propositions and strong equity — such as those offering innovative or uniquely crafted products — are better positioned to offset costs through pricing levers without eroding demand. Flexibility in sourcing operations adds a complementary dimension. Those with diversified supplier networks and agile operating models can adapt more effectively, whether by reallocating volumes, redesigning products or negotiating terms to offset cost pressures. For suppliers, those with a diversified production base can be at an advantage in this environment, helping brands to navigate and reduce complexity, though only a subset currently can provide this breadth. • Primary lever to manage tariff pressure is pricing • Brand perception, customer loyalty and product quality enable greater tariff pass- through to customers • Greatest flexibility between pricing and sourcing levers • Opportunity to capture market share by keeping prices more competitive, enabled by sourcing • Costs passed through selectively in discretionary or seasonal lines • Likely to absorb some tariffs to protect price-sensitive segments • Primary lever to manage tariff pressures is sourcing • Likely to absorb some tariffs to protect price-sensitive segments • Selective price increases, diffused across the assortment to keep hikes minimal and less visible Brand/retailer pricing flexibility Brand/retailer sourcing flexibility 23 The State of Fashion 2026 01. Tariff Turbulence Global Economy
- 22. Volatility is disruptingfactory utilisation, prompting suppliers to rethink global footprints Source: International Trade Centre Apparel exports to the US over time, Indexed to 2019 (2019 = 100) 2020 2021 2022 2023 2019 50 100 150 2024 China India Cambodia Bangladesh Mexico Vietnam Total Indonesia Tariffs have added yet another wave of uncertainty for suppliers Many suppliers are being asked by brands to absorb part of the cost burden. Larger players are renegotiating contracts to add volume buffers (such as minimum order or capacity commitments) and broaden their customer bases, while others are exploring shifting production towards higher- or lower-value items to stay afloat. Suppliers are reevaluating their footprints: • Cambodia has been gaining momentum as a fashion sourcing hub, supported by competitive wages, a young workforce and favourable trade terms compared to countries like China. US imports from Cambodia increased 42 percent over the last five years and local manufacturers say tariffs have driven up order volumes.13 • US imports from China, by contrast, were down 30 percent from 2019 levels at the end of 2024.13 The open capacity in China could be partially filled by European and other non-US brands, which may secure competitive suppliers as US demand shifts elsewhere. • Suppliers are also considering new locations outside traditional sourcing hubs. For example, Gokaldas Exports, one of India’s largest manufacturers and a supplier to Walmart, Gap and JCPenney, plans to expand production in Kenya and Ethiopia to counter tariffs.14 24 The State of Fashion 2026 01. Tariff Turbulence Global Economy
- 23. Brand and supplierpositioning will shape short- term responses, agility is needed for the long term Many brands and retailers have taken initial pricing and sourcing actions. In the medium term, they must track consumer reactions, test what the market will truly bear and adjust relative to competitors — leveraging social listening, demand forecasting and price benchmarking, among other tools. Improving and communicating value for money will be key — through storytelling that highlights craftsmanship, quality or creative differentiation and through initiatives such as repair or resale that position products as lasting investments. Suppliers must evaluate production footprints holistically, considering total sourcing costs and balancing tariffs, labour and competitiveness across hubs. The ability to shift volumes or redesign networks as trade conditions evolve will remain central to resilience. To strengthen agility and offset cost pressures, suppliers should prioritise productivity gains through lean manufacturing — reducing waste, improving efficiency and optimising workflows — while complementing these efforts with targeted technology investments in automation and digitalisation to streamline operations and enhance visibility across the value chain. Both brands and suppliers could reduce concentration risk by diversifying their customer and supplier bases. At the same time, they must strengthen their most strategic relationships. This can enable suppliers to update their facilities and processes and mitigate risks associated with volatility, for example through co- investment in initiatives that individual suppliers might otherwise struggle to finance. For brands, digitising operations and leveraging AI to optimise and manage a diversified, multi-country supply base can reduce reliance on any individual sourcing partner and protect margins amid rising production costs. Brands should monitor market responses to price changes 1 Suppliers should consider reassessing footprints 2 Diversify and deepen key partnerships to maximise stability 3 EXECUTIVE PRIORITIES 25 The State of Fashion 2026 01. Tariff Turbulence Global Economy
- 24. Levi’s Answer toan Increasingly Complex World: Simplify An emphasis on direct-to-consumer sales, profitability and streamlining the business have set the denim- maker up to better manage tariffs and macroeconomic uncertainty under CEO Michelle Gass. BY JOAN KENNEDY Levi’s was off to a good start at the outset of 2025. It was growing gross margin alongside its direct-to- consumer business, and had even made headlines with a Beyoncé campaign after the star name- dropped the brand on her album “Cowboy Carter.” It was a reassuring moment for Michelle Gass, who had taken over as chief executive in January 2024 as Levi’s was in the midst of a course correction. The 170-year-old US denim giant had become a bit sleepy, bogged down by declining wholesale, underperforming business units and unwieldy inventory mixes — often resulting in heavy discounting. Then came the US tariffs, which plunged the industry into disarray. The duties have redrawn fashion’s supply chains, pinching brands’ margins while testing their agility and the strength of their supplier partnerships. Amid the chaos, Levi’s has emerged as a standout for its tariff playbook. The company has enacted both fast mitigation tactics, like bringing forward holiday inventory and cutting slower-selling SKUs, and long-term strategic initiatives, including maintaining a diversified supply chain and consumer base, reducing intricacies in its design process, creating a more efficient inventory mix and growing higher margin sales. The quick work paid off. In October 2025, Levi’s reported a 7 percent year-on-year increase in quarterly sales, with margins coming in above guidance, though it did warn tariffs would hit margins in the fourth quarter. Even so, the company raised its full-year revenue outlook. 26 The State of Fashion 2026 01. Tariff Turbulence Global Economy
- 25. In recent years,the words ‘unprecedented’ and ‘uncertainty’ have been used to describe the market to the point where they’ve almost lost meaning. How would you describe the environment in 2026? Complex, [among other things]. There are macroeconomic forces, there are geopolitical, there’s the state of the consumer, there’s massive disruption in technology and AI. As a leader in the retail industry, it’s very complex, and you have to be really thoughtful on how you navigate [it]. Fashion is being rocked from top to bottom right now by shifts in the global trade system as the US enacts its most comprehensive tariffs in nearly a century. What levers has Levi’s pulled already to address the trade situation? From a company standpoint, we are structurally advantaged: approximately 60 percent of our business is international. Many of our domestic competitors are much more heavily penetrated in the US, therefore the tariff burden is going to be higher. We are working with our vendors to see what opportunities we have. We have been, over time, working to get greater cost efficiencies. That will help mitigate the tariff impact. And then pricing. There’s [three] parts to that. We are taking some surgical and targeted pricing [increases], as probably most apparel or retailers are. There’s only so much you can absorb from the tariffs, because they’re just very high. Two is promotional levers. [We are] pulling back on the amount of promoting we do — less of your ‘20 percent off’ events or ‘friends and family.’ That helps elevate the brand, and it’s also good for margins and helps us mitigate the tariffs. The third piece is where it makes sense, pricing for innovation. When you’re coming in with a new product, consumers are likely willing to pay more for that, so therefore we can take advantage. When you were appointed CEO in 2024, you were tasked with transforming Levi’s into a ‘head-to- toe denim lifestyle’ brand. That means expanding beyond jeans and taking risks, which becomes harder to do in a tough economy and A Levi’s ad featuring Beyoncé in a store window. Sean Gallup/Getty Images. 27 The State of Fashion 2026 01. Tariff Turbulence Global Economy
- 26. volatile environment. Howdo you balance those demands? We have to stay really close to the consumer and understand what they want, what they need — and bring them things they don’t realise they need. We will diversify in [lifestyle], but it has to make sense to the consumer and what Levi’s can distinctly own. Quite literally it means you start with all the amazing things you can do with denim, whether it’s this Blue Tab shirt [from our premium line] to denim dresses, skirts, jumpsuits, trench coats. But it’s also [finding] the right products that do complement our denim. It significantly expands our addressable market. Levi’s made an early call to stop offering less popular styles during the holiday season to avoid having to discount. Do you anticipate that this lever will be pulled again in the year ahead? Simultaneous to us thoughtfully expanding our assortment into denim lifestyle, we’re also being deliberate about where we can pare back and reduce less productive SKUs. It’s a journey we’ve been on the last two years. We operate in 120 countries. It’s a very complex network of how we go to market. Over time, our SKUs had proliferated. If you’re not in “We're operating in a complex environment, but we ourselves are becoming less complex.” A customer shops in a Levi’s store. Scott Olson/Getty Images. A customer shops in a Levi’s store. Scott Olson/Getty Images. 28 The State of Fashion 2026 01. Tariff Turbulence Global Economy
- 27. to brands thatdo have that value in the broadest sense. Consumers are still going to buy, [but] as the walls get tighter, we have to work harder. We have to continue to make sure that our brand is relevant. All the investments we’ve made to be at the centre of culture, the partnerships we have, the collaborations with Nike, makes us relevant, interesting and loved. For that consumer who may feel more pressed financially, we have a [range of price points]. International markets are really driving growth for Levi’s. Are there any emerging markets that Levi’s is doubling down on in the year ahead? Asia is a very big opportunity for us, and India is a key growth opportunity market. There’s over a billion people, a growing middle and upper class. It’s youthful and they already love the brand. Are there any macro-shifts or other currents that you think are underappreciated by fashion right now? The world is in the midst of a major disruption on what AI is going to mean to our business. One of my top priorities is having our teams across the company embrace and see what’s possible with AI. Over the last year there really has been a sea change in how the company is deploying AI. [We’re looking at how it can] help us achieve our strategies better [and] faster. [We’re] embedding AI in a lot of our processes, inventory management and planning and financial processes. We’re in the earlier stages of [using AI as part of our design process], but we see the potential and how that can not only help us reduce cycle times but even open up new ideas. This year ahead is set to test the operational prowess and pricing power of brands at every level. How do you think it will shake out? You want to be entering into this time from a position of strength and momentum. Disruptive times can create more separation between stronger companies and the weaker companies. This interview has been edited and condensed. control of that, you create a lot of complexity. We are seeing sequential improvement on our gross margin and our EBIT margin. As we become more profitable, it is giving us more leverage to mitigate the tariffs. [Now we are] activating the things we had in place: greater full-price selling, less promotion, looking for pricing opportunities on innovation. How will the assortment change next year based on everything that you’ve learned this year? We are quite truthfully rewiring this company end-to-end and top-to- bottom. We had different assortments all over the world. Even though [product] was coming from [our headquarters in San Francisco], what Japan might need, versus what the US might want, versus the UK, was different things. Not that long ago, what was common across all of our stores, it was less than 10 percent [of product]. Now, about 40 percent of product is common globally. That’s a game-changer for how our teams design, develop, source, how we work with vendors, how we merchandise, how we market. It creates a tonne of efficiency. We’re operating in a complex environment, but we ourselves are becoming less complex. Right now with tariffs, challenges in the supply chain are hard to predict. Is diversification enough? How have you collaborated with your suppliers to tackle tariffs head on? We’re all in this together. Our teams are talking to our suppliers 24/7, trading information, figuring out what our plans are, what our forecasts are. This is a relationship business. Just like we build relationships with our consumers, we build very strong relationships with our vendors. We want to make sure they get what they need from us as well. On some of our key products, we source from multiple countries. Whether tariffs or any kind of supply chain disruption, it does give us flexibility. The US consumer in particular is historically resilient, continuing to spend through downturns. But the full effect of all of these higher costs due to tariffs is only starting to trickle into the marketplace. The strength of this shopper will be tested in the year ahead. What do you foresee in terms of price sensitivity? Our consumer has proven to be resilient; we’ve just posted our fourth consecutive quarter of high-single- digit growth. If consumers are feeling pressure, they're going to be more choiceful with their dollars, and look 29 The State of Fashion 2026 01. Tariff Turbulence Global Economy
- 28. 02. Workforce Rewired TheState of Fashion 2026
- 29. EXECUTIVE PRIORITIES KEY INSIGHTS 02.Workforce Rewired Technology is changing workforces globally. Artificial intelligence investments are set to drive productivity, meaning some existing positions will become AI-centric and new roles will emerge. Fashion leaders must prioritise upskilling their workforces and acquiring new talent to stay competitive. Strong change management will be critical to capture AI’s full potential. • By 2030, 30 percent of employee time across industries could be automated by generative AI and other technologies in Europe and the US. • 92 percent of organisations say they will increase investments in generative AI, but only 1 percent describe their rollouts as “mature.” • Up to 40 percent of workers in developed countries will need to reskill or change roles by 2030 due to technology. • Make AI a strategic priority across the organisation. Start with the processes that will generate the greatest value across functions, integrating it into core operations and executive decision making. • Build the talent base required to meet technology goals, supporting every technology investment with hiring or upskilling. This will require close alignment between the chief technology officer and chief people officer. • Prioritise change management and lead with a clear vision, appropriate resource allocation and transparent communication to capture the full value of technology investments. 31 The State of Fashion 2026 02. Workforce Rewired Global Economy
- 30. Companies worldwide areentering a pivotal moment as AI transforms work A convergence of forces are reshaping global labour markets Automation and generative AI are set to have the most immediate and transformative impact on how organisations operate, reshaping roles, skills and ways of working at a pace comparable to the disruption created by computers and the internet in their early stages of adoption.1 Companies across industries are expected to unlock productivity gains of more than 30 percent over the next five years due automation and generative AI.2 Progress among global organisations remains uneven While 92 percent of companies say they will increase their investments in generative AI, only 1 percent say their deployment of AI has reached maturity.3 Many are stuck in pilot mode, testing siloed AI solutions with limited impact, with scaling often seen as too complex or costly. In fashion, early adoption is proving promising Automation is reshaping many routine tasks, such as customer service and inventory management, freeing up time and resources. Companies like Zalando and Nike are using generative AI across functions, from image generation to product design and personalisation.4 5 At Zalando, generative AI has reduced image production costs by 90 percent.4 Agentic AI is accelerating this further, offering the potential for autonomous decision making and execution. Automation technology E-commerce growth 30 percent of employee time across industries could be automated by generative AI and related technologies in Europea and US by 20306 7 Population aging +25 million more people will be over the age of 65 by 2030 in Europea and the US6 7 Infrastructure investments 12 percent growth is expected in construction jobs from 2022 to 2030 in Europea and US6 7 Net-zero transition 2 million net new jobs will be created by 2030 in Europea and 700,000 in the US6 6 to 11 percent annual growth is expected across Europea and 7 percent in the US between 2022 and 20306 8 Key forces shaping the global labour market Forces shaping the labour market a. Europe refers to Czech Republic, Denmark, France, Germany, Italy, Netherlands, Poland, Spain, Sweden and the UK 32 The State of Fashion 2026 02. Workforce Rewired Global Economy
- 31. AI will impactdifferent functions and types of organisations differently, but fashion companies of the future will be more efficient, with employees focused on higher-value tasks. Some transactional functions with highly repetitive tasks — like core corporate services such as accounting and payroll processing — may become very heavily automated. In 2026, fashion organisations need to evolve in four key areas to capture the benefits of AI 47% of US consumer goods and retail employees say training is the most important factor for generative AI adoption, but nearly half feel they are receiving only moderate support or less3 ROLES AND TALENT 28-38% of consumer goods and retail workers’ current activities in Europe and the US could be impacted by technology by 20303 WAYS OF WORKING ORGANISATIONAL DESIGN With AI, the nature of work will shift from manual tasks, data processing and record-keeping to activities such as troubleshooting and programming. Up to 40 percent of workers in consumer goodsandretail industries in developedcountries may need to reskill or transition to new roles by 2030 due to technological progress.9 However, technology skills remain scarce and technology talent churn is high. Fashion and luxury companies have traditionally attracted talent from within the industry, thereby limiting change. Leaders must widen their approach to talent acquisition and foster cultural changes to support new ways of working. For some functions, such as customer engagement or supply chain automation, third-party solutions may accelerate adoption more than building capabilities in-house. 60% of leaders across industries say company culture is the biggest obstacle to tech-related change10 CULTURE Cross-functional collaboration will become the cornerstone of better- informed decision making. For example, design teams using AI could access real-time material prices from preferred suppliers, enabling quicker choices in conjunction with sourcing and procurement teams. Unlocking this potential requires cultural shifts that break down silos and establish clear roles and responsibilities. 47% of US employees across industries expect more than 30 percent of their work to change because of generative AI3 33 The State of Fashion 2026 02. Workforce Rewired Global Economy
- 32. Expected share ofwork automated by 2030 in US apparel, fashion and luxury companies with and without generative AI acceleration,a % of total time spent Global fashion and luxury players have made progress deploying automation with generative AI in select functions for routine tasks. More than 35 percent of executives report already using it in areas such as online customer service, image creation, copywriting, consumer search or product discovery.11 Yet adoption is not without its barriers: Challenges include high implementation costs, fragmented legacy systems, limited in-house expertise and uncertainty around governance and ethics. Achieving full potential will depend on redesigning processes and team structures rather than simply overlaying new technology onto legacy ways of working, particularly in critical functions — often resulting in longer lead times. Adoption will inevitably lag the technology’s actual potential. However, the efficiencies gained will enable companies to redeploy talent towards higher-value, creative and strategic work — for example, related to innovation, brand storytelling, product development and client relationships. In retail, automation is transforming back-office operations to the greatest degree Without generative AI With generative AI Manufacturing Others Procurement Warehousing Administration IT Logistics and distribution Customer service Legal Communications Sales HR Product design and development Marketing General management and executives Finance 42 39 38 38 35 34 34 32 31 29 27 22 22 22 20 42 a. Assumes moderate pace of adoption by companies Source: McKinsey Global Institute 34 The State of Fashion 2026 02. Workforce Rewired Global Economy
- 33. Generative AI isaccelerating shifts in marketing, merchandising and sales Generative AI could significantly accelerate merchandising with applications ranging from automating assortment selection to detecting microtrends via social listening and translating them into actionable guidance for stock volumes and marketing priorities. MARKETING IS MOVING FROM CONTENT PRODUCTION TO CURATION MERCHANDISING DECISIONS CAN BE ACCELERATED AND MORE INFORMED SALES TEAMS CAN BE EQUIPPED WITH VALUABLE CUSTOMER DATA Around 22 percent of marketing tasks can be automated by 2030, particularly in strategy development,campaignideationandcontentcreation.7 Generative AI will allow creative teams to shift from manual production to curating and directing AI-generated assets. Advancements in this space, however, will require careful risk management around authenticity and consumer trust given the limited precedent for AI-generated assets. Pandora The Danish jewellery brand has partnered with AI software platform o9 Solutions to modernise its planning and merchandising operations. The collaboration focuses on integrating demand, assortment and merchandise financial planning into a single AI-driven platform, replacing fragmented legacy systems. Through o9’s Digital Brain platform, Pandora aims to enhance visibility, forecasting accuracy and responsiveness across its global network, enabling more data-driven, real-time decision-making.12 Zegna Zegna launched Zegna X, an AI-powered clienteling app developed with Microsoft. Using Zegna X, associates can share new arrivals, recommendations and styling ideas with customers via text, email or platforms like WhatsApp. The app consolidates customer data to refine personalisation, making recommendations smarter. The AI supports rather than replaces sales representatives, who remain responsible for finalising client interactions.13 Digital ordering systems and AI tools can increase sales associates’ effectiveness, from offering personalised product recommendations to improving stock visibility. This is particularly relevant for the premium/bridge and luxury segments, where such tools can elevate the shopping experience if executed well, enhancing — not replacing — clienteling or human connection. Zalando The online retailer is using generative AI to accelerate image creation for its app and website, cutting production time from six to eight weeks to just three to four days, according to Zalando’s vice president of content solutions. In the fourth quarter of 2024, 70 percent of its editorial content was AI-generated.4 While traditional photoshoots remain part of the process, creatives involved in the process are now expected to adapt to using AI tools. 35 The State of Fashion 2026 02. Workforce Rewired Global Economy
- 34. Fashion players needto reskill teams and recruit tech expertise to mature their AI pilots Seamless integration into existing workflows Incentives and rewards Company sponsorship for accessing generative AI tools Use of generative AI being a requirement for a certification programme Explicit instructions from managers to use generative AI Being involved in the development of the tools Objectives and key results / KPIs tied to generative AI use Formal generative AI training from their organisation 45 42 38 32 31 29 23 47 Actions that would encourage greater day-to-day use of generative AI tools, % of US employees in consumer goods and retail Source: McKinsey US employee survey, Oct–Nov 2024 Upskilling the workforce Employees are eager for AI training, yet many organisations are not meeting this demand. More than 40 percent of US employees in consumer goods and retail say initiatives such as formal generative AI training, seamless workflow integration and incentives would make them more likely to use generative AI tools daily. Companies should offer practical programmes — whether focused on general- purpose AI tools or domain-specific, custom-built applications. For instance, a marketing-focused programme could demonstrate how agentic AI scans consumer sentiment on social media, integrates those insights with customer data and drafts campaign concepts for teams to refine. Attracting talent Fashion players should be open to bringing in external expertise and attracting talent from beyond the traditional fashion ecosystem. LVMH, for instance, has built a centralised research team of data scientists and engineers to work across its brand portfolio, demonstrating the need to invest in specialised talent to accelerate enterprise-wide adoption.14 However, Big Tech’s competition for AI talent is driving up costs and limiting availability for fashion players. Demand is rising for roles such as product flow engineers, integrative marketing strategists and consumer experience designers — skills in short supply. Key hiring criteria include expertise in data quality, system integration, digital twins and marketing automation. To compete, fashion companies must build a compelling employee value proposition beyond pay and compensation. 36 The State of Fashion 2026 02. Workforce Rewired Global Economy
- 35. Fashion and luxuryplayers must integrate AI into core creative and operational processes, elevating it to a board-level priority rather than limiting it to function- specific pilots. Companies will need to scale and mature these investments to lock in efficiency gains as cost pressures rise from multiple angles. The most effective transformations balance quick wins with long-term ambition — targeting high-value tasks with relatively easier implementation in areas like marketing or back-office functions, while reinvesting gains to advance core product and customer-facing processes. Fashion companies should widen their recruitment net to secure capabilities outside the traditional fashion ecosystem. Limited in-house expertise and competition for scarce technology talent remain critical obstacles. A compelling employee value proposition that highlights innovation and creativity will be critical to differentiate from companies that typically attract top digital talent. Every investment in advanced technologies must also be matched with deliberate workforce development. This requires close collaboration between chief technology officers and chief people officers, as well as targeted upskilling and reskilling employee programmes. Strong change leadership is key to realising AI’s full value. Instead of top-down directives, leaders should identify where innovation is already emerging, support teams, employees or departments that are early adopters, and scale their successes so that momentum builds and employees feel personally invested in the change. Above all, leaders must recognise that the shift is not just about skills but about culture — reshaping how people think, collaborate and embrace change. Without strong leadership to guide both mindset and capability shifts, brands risk falling behind in an industry where AI adoption is accelerating. Building a future-proofed fashion workforce requires talent investments and a mindset shift Make AI a strategic priority and start with high-value processes 1 Build the talent base to support technology goals 2 Prioritise change management and culture transformations 3 EXECUTIVE PRIORITIES 37 The State of Fashion 2026 02. Workforce Rewired Global Economy
- 36. 03. The AIShopper The State of Fashion 2026
- 37. KEY INSIGHTS EXECUTIVEPRIORITIES 03. The AI Shopper Artificial intelligence is already disrupting how consumers discover fashion. In the years ahead, autonomous AI shopping agents may even act on their behalf, completing tasks from monitoring prices to buying products. To ensure their products are visible — and favoured by — AI models, brands must rethink their digital marketing and e-commerce infrastructure, where semantically rich data and API-accessible content will be critical to success. • Optimise for AI discoverability by overhauling product content and digital infrastructure to ensure AI agents can readily access and read it. • Set your agentic AI strategy before mass consumer adoption. Identify potential partnerships and assess the value of building proprietary AI tools. • Plan to dedicate marketing budget to supporting an AI visibility strategy. • Keep human connection at the centre of the brand experience. Balance AI discoverability with rich storytelling and branding that inspire human shoppers. • 53 percent of US consumers who used generative AI for search in the second quarter of 2025 also used it to help them shop. • Shopping-related searches on generative AI platforms grew 4,700 percent between 2024 and 2025. • 41 percent of consumers say they trust generative AI search results more than traditional advertising, and 85 percent express higher satisfaction with AI-assisted shopping journeys than conventional ones. 39 The State of Fashion 2026 03. The AI Shopper Consumer Shifts
- 38. While traditional searchstill dominates, shoppers are increasingly turning to large language models of consumers primarily use generative AI to discover products, while the majority still use traditional search1 TRADITIONAL SEARCH STILL DOMINATES FOR NOW 23% AI IS ENHANCING CONSUMER SATISFACTION 85% of US consumers that use generative AI for shopping say they have a better experience than traditional methods6 41% CONSUMER TRUST IN GENERATIVE AI IS GROWING of consumers say they trust generative AI search results more than paid search ads8 Unlike paid ads which are clearly sponsored, over 40 percent of consumers say AI responses feel more reliable, while only 15 percent consider them less reliable.8 Shoppers are therefore increasingly willing to make purchases from AI-based recommendations, as seen in the 84 percent growth in AI-driven revenue per visit on US retail sites between January and July 2025.6 AI-DRIVEN DISCOVERY IS ACCELERATING 53% of US consumers who used generative AI for search in Q2 2025 also used it to help them shop5 Though still comparatively small, shopping-related generative AI searches grew 4,700 percent between July 2024 and July 2025, with AI supporting inspiration and product comparison — especially helpful in the fashion category where choice abounds.6 This is impacting brands’ traffic sources. According to SimilarWeb, ChatGPT accounted for 16 percent of Zara’s and 8 percent of H&M and Aritzia’s inbound traffic between June and August 2025.7 Technical improvements, such as reduced hallucinations (where a model generates incorrect, misleading or nonsensical information), combined with access to consumer behavioural data are making generative AI more reliable and user- friendly. These models provide more relevant recommendations, reduce search friction and build consumer confidence as the algorithm learns and improves over time. While search engines remain dominant, driving around 80 percent of all search traffic, the rapid rise of AI-driven discovery highlights a fundamental change in how people find and evaluate products.2 3 4 Nearly a quarter of global consumers already rely on generative AI as their main starting point when shopping. As tools become more advanced and trusted across different use cases in everyday life, more consumers will adopt AI for shopping. 40 The State of Fashion 2026 03. The AI Shopper Consumer Shifts
- 39. Generative engine optimisationis becoming an essential add-on to search engine optimisation Generative engine optimisation (GEO) is fast becoming a critical counterpart to search engine optimisation (SEO) as AI’s role in product discovery continues to grow. GEO ensures content is visible to and optimised for generative AI models Large language models (LLMs) like ChatGPT, Claude, Perplexity and Gemini respond to consumer search queries by providing conversational, synthesised and structured answers rather than ranked lists of links. To appear in answers, website content must be easily read, contextualised and considered credible by the AI. GEO focuses on optimising content such as products listings to be just that, with early movers like Estée Lauder Companies, L’Oréal and Mejuri experimenting with GEO.9 10 Bettered-structured content is more likely to be surfaced by AI Making content visible and easy to pick up means showing up in more places (different channels, languages, platforms) and making sure the basics are done right — like clear product titles, descriptions and metadata tags (descriptive data labels that help AI tools understand and surface products). Reviews, blogs and partnerships are also powerful signals that AI tools use to judge trustworthiness that brands should amplify. Brands and retailers should tackle GEO alongside SEO Traditional search, including paid and organic, still drives most search traffic. (Bing alone accounts for 4 percent of global search volume, more than all generative AI platforms combined.)Overlooking either GEO or SEO risks leaving critical gaps in visibility.2 3 4 Estimated annual global search volume by source, % a. By Q3 2025, Google and other search engines will provide AI overviews for most searches, with rollouts advancing country by country Note: Percentages may not total 100 percent due to rounding. Data reflects global search traffic across all industries and includes traditional search engines (e.g. Google) and LLM/AI chatbots (e.g. ChatGPT). Direct site visits (e.g. Amazon) that bypass search engines are excluded Sources: SearchEngineLand, DemandSage, Economic Times, The Verge, Semrush, Statista, Pew Research, OpenAI 6-8 91-93 2024 2-4 1-3 74-79 H1 2025a 16-23 Generative AI platforms (e.g. LLMs) AI summaries in traditional search (e.g. Google AI overview) Traditional search engines 41 The State of Fashion 2026 03. The AI Shopper Consumer Shifts
- 40. In the yearsahead, consumers could rely on autonomous AI agents to help them shop From human-first Agent suggests a purchase proactively — for example, linked to a specific occasion or recurring purchases Customer sees ads, hears recommendations or notices a need Prompt Customer prompts an agent to perform a product search. Agent finds products, checks preferences, reviews and compares prices across sites Customer browses websites, reads reviews, checks prices and delivery times Search and Compare Customer weighs options based on features, price and brand equity Recommend Agent completes payment and delivery details automatically. The website records purchase history and applies loyalty benefits automatically Customer enters payment details, selects shipping option and applies discount codes Purchase Agent monitors delivery and updates the customer of arrival status Customer checks emails or tracking pages for updates Track Agent helps to orchestrate returns, schedules pickups and tracks refunds Customer contacts support, arranges returns and follows up on refunds Support To agent-first Agent presents a shortlist of options for customer approval, or agent takes pre- approved action on behalf of consumer Source: McKinsey analysis Stage Customer journey shifts expected from agentic AI Advances in AI are opening the door to autonomous agents that act on behalf of consumers and businesses. These agents could streamline journeys by condensing multiple steps into a single action. While still nascent, agentic AI has the potential to fundamentally transform digital commerce, taking on the role of intermediary between brand and consumer, like retailers and marketplaces today. With AI simplifying product comparisons, brand loyalty will become even more important in purchase decisions. Brands should double down on retention tactics to build the emotional resonance that will influence consumers’ choices. The technologies that would allow agents to transact on someone’s behalf remain in development. As they mature, agentic AI models may either integrate into existing e-commerce ecosystems or create entirely new channels of discovery and purchase, reshaping how brands both market and sell their products. Some AI players are already testing these models. For example, OpenAI struck deals with Shopify and Etsy to let shoppers buy products from those platforms directly in ChatGPT, while Amazon’s “Buy for Me” lets consumers buy from third-party platforms within the Amazon app.11 12 42 The State of Fashion 2026 03. The AI Shopper Consumer Shifts
- 41. To compete inthe age of agentic commerce, some players may build their own shopping agents Generations of e-commerce OPTIMISE FOR AGENT INTERACTION BUILD AN AI AGENT Approaches to engaging with AI shopping agents E-commerce 1.0 to 2.0 E-commerce evolves from straightforward transactions to omnichannel and digital-first models Mobile-first e-commerce Shopping shifts into consumers’ hands as smartphones make purchasing instant and on-the-go, and mobiles overtake desktop in traffic Social and live e-commerce In Asia, shopping via livestreams and social media grow significantly, with the trend also gaining traction in Europe and the US Generative AI e-commerce Purchases are made directly through chatbots, which consumers increasingly adopt for fashion discovery Agentic commerce Autonomous AI agents transact on behalf of consumers with minimal or no input required from users In the era of agentic commerce, optimising for engagement from shopping agents will be a high priority for nearly every brand and retailer. Common standards will likely emerge to let agents interact directly with brand and retailer ecosystems, but players must act now to control their visibility: • Expand content reach across channels and languages while increasing volume. • Structure content for AI readability using proper layout, data formatting and markup. • Adopt common protocols that let agents easily pull information from and carry out actions on a brand’s website while establishing links to the CRM to track customer data and enable loyalty features. • Actively monitor and encourage third-party content since reviews, blogs and affiliate posts make up around 80 percent of the sources that AI uses.13 For some players, developing a proprietary shopping agent may align with strategic goals, enabling seamless onsite experiences — from tailored recommendations to checkout. The case for proprietary agents is generally stronger for retailers than brands. Retailers — whether specialists with authority or those with large inventories — can use agents to reinforce their aggregator role and offer specialised abilities like asking style questions to better personalise their recommendations. Most brands, by contrast, can focus on optimising products to be surfaced by third-party agents. For luxury brands, which differentiate through in-store experiences, a proprietary agent may be relatively less important. While AI costs are declining, agents remain expensive to run as of now. Complex workflows can use hundreds of thousands of tokens versus only a few hundred for a simple chatbot, according to the Wall Street Journal.14 43 The State of Fashion 2026 03. The AI Shopper Consumer Shifts
- 42. $3-5T potential value ofagentic commerce in 2030 if adoption is similar to mobile commerce in the 2010s with higher levels of internet connectivity globally15 Agentic AI will shift the underlying economics of digital commerce The growth of agentic commerce is set to accelerate in the second half of the decade as LLM-powered shopping becomes mainstream. Its value could grow to be as much as $3-5 trillion by 2030, assuming moderate adoption by both consumers and businesses.15 16 17 As shoppers shift from apps and websites to AI agents, fashion players risk losing ownership of the consumer relationship. Going forward, brands may also need to pay for premium integration and placement in agent recommendations. However, the precise monetisation model of agentic commerce as well as the distribution of the value captured between AI platforms and brands and retailers remains undefined. A brand’s value proposition will be more critical than ever as AI agents compare brands across dimensions like delivery time, price points, assortment range and colour variability. Excelling across these factors will provide a more distinct competitive advantage when comparisons are algorithmic and instantaneous. 11-18% agentic commerce’s share of the total projected business-to- consumer retail market in 203015 16 17 Customer shopping for fashion online. Pexels. 44 The State of Fashion 2026 03. The AI Shopper Consumer Shifts
- 43. Companies should optimisefor agent interaction to maximise discovery in 2026 EXECUTIVE PRIORITIES Assess discoverability by auditing content and digital infrastructure 1 Structure product content and data sharing feeds so AI agents can interpret and display the product catalogue. Whether or not proprietary agentic tools are appropriate, securing visibility at the point of consumer search is essential. At the same time, SEO remains a core driver of traffic, making a balanced approach across both GEO and SEO key. Set an agentic AI strategy ahead of mass adoption — whether by optimising for third- party agents or developing proprietary ones in cases where it is advantageous, such as for multi-brand retailers. Building an in-house agent will likely require leveraging an LLM- based platform, supported by dedicated engineering and continuous iteration to tailor the experience to target customers. As discovery shifts from search to AI assistants, brands need to treat AI ecosystems as a new marketing channel with new rules of discovery, requiring a deliberate strategy and supporting budget. Balance machine-readiness with storytelling, striking imagery and a distinctive digital identity. People — not just algorithms — remain central to the brand experience, with stores, frontline staff and human interactions continuing to inspire customers and drive conversions. Strengthen the brand’s value proposition, as differentiators like delivery speed, price and product quality will help AI surface the brand and make it stand out to humans alike. Set your agentic AI strategy now 2 Dedicate marketing budget to support an AI visibility strategy 3 Continue strengthening the brand’s storytelling and value proposition 4 45 The State of Fashion 2026 03. The AI Shopper Consumer Shifts
- 44. For Brands Tryingto Stand Out in AI Search, Profound Is There to Help As more consumers adopt tools like ChatGPT for shopping, startups such as Profound are helping brands make sure their products appear in AI search results. Co-founder and CEO James Cadwallader talks about how online shopping is evolving in this new era, and how brands must adapt. BY MARC BAIN Large language models are already transforming the way consumers find and buy products, letting them ask questions in natural language to get more tailored recommendations than what they typically receive from traditional keyword searches. That’s just the start. In September 2025, OpenAI announced deals with Shopify and Etsy to let shoppers buy from their platforms directly through ChatGPT, while Google and Perplexity have unveiled agents that can complete purchases on a shopper’s behalf. At the moment, shopping is still just a fraction of consumers’ total use of AI. Researchers found 2.1 percent of a sample of 1.1 million messages sent to ChatGPT between May 2024 and July 2025 sought information about purchasable products. Still, that’s a significant amount of traffic given the authors said ChatGPT received 18 billion messages per week,andit continuestogrow. The situation changes the online playing field for fashion brands. If consumers now get a short list of product recommendations, rather than a long list of links to sources to sift through themselves, brands not appearing in that consideration set may as well be invisible. It’s kicked off a race to improve what’s known as answer-engine optimisation (AEO) or generative-engine optimisation (GEO), as opposed to traditional search engine optimisation (SEO). Profound is among a crop of startups on the frontlines of assisting retailers such as Mejuri to adapt to this new environment. In August 2025, the company announced a $35 million funding round led by Sequoia Capital, with participation from Kleiner Perkins, Khosla Ventures, Saga VC and South Park Commons. 46 The State of Fashion 2026 03. The AI Shopper Consumer Shifts
- 45. “You’re speaking to someone extremelybiased, but I think this is the biggest platform shift maybe in the history of the internet.” We hear a lot about the rise of AI platforms, but overall, they’re still a small share of total traffic to retailers. How much do brands really need to think about how they’re showing up on these platforms? You’re speaking to someone extremely biased, but I think this is the biggest platform shift maybe in the history of the internet. The front door of the internet is changing for the first time in 25 years. The brands that are discussed and covered via AI will naturally receive billions of eyeballs over the coming years. Today, I think we see typical [traffic] referral rates of around 10 percent from AI answer engines like ChatGPT. These numbers are only increasing. Are there any factors that you see driving more consumers to use AI platforms for shopping? It’s fantastic for comparison. If you imagine that the old paradigm was that you’d have 10 tabs open in your Chrome window, and you’re comparing one against the other, you can literally feel your rote human cognition working. That all has just shifted now into a world where the entire funnel is being compressed into a ChatGPT window. You might ask for help in finding a new pair of sneakers and it would give you a shortlist. Then, you narrow down that shortlist to maybe two options that you’re thinking about. Are there other ways the shopping journey could change as these platforms evolve? I think we are going to see a platform like ChatGPT emerge with the personalisation of a social-media feed, because they just capture so much intent through these interactions that just didn’t exist in a Google search. You tell these models so much more about yourself, and so much more about what you’re looking for and what you’re thinking. That allows them to tailor the results a lot more. Are there things brands should be doing for what’s often called answer- engine optimisation (AEO) or generative-engineoptimisation(GEO) that differ from what they’re already doing to ensure they’re optimised for traditional search (SEO)? The way to think about it is you are creating content for bots, not humans. In the old world, let’s just say a brand like Chanel would create web pages for humans to read, but the future of the internet looks like Chanel creating lots of content for AI crawlers to hoover up into their results. Content is essentially machine optimised, it’s far more structured, it’s information dense. You wouldn’t pay as much attention right now to imagery, for example, because it’s the words that matter. I’m sure that’s going to evolve and change over time. There’s [also] technical nuance:JavaScriptisinvisible to the crawlers that are retrieving information.The waythatyoustructure your website, the way that you actually build your website will change. Is it realistic to expect AI answer engines to overtake traditional search at some point, or will consumers use both to gather as much information as they can? I think it would be over-dramatic to say that Google search and blue-link search is going to disappear off the face of the earth in the next 12 months. I think as these consumer platforms like ChatGPT get better and the shopping experiences improve, which we are expecting them to, we’re going to see a lot of consumer behaviour [shift]. As a techno optimist, I tend to bet on the best technology will win over time. The large language models (LLMs) that power AI answer engines can be a great way to learn what people online say is the best electric toothbrush or the best mountain bike — functional products that you can rank based on performance. But fashion is very individual, it has to 47 The State of Fashion 2026 03. The AI Shopper Consumer Shifts
- 46. spark an emotionalconnection and there’s often an aspirational aspect to it. Do you think consumers will use LLMs to search for fashion? The word I would rotate around here is ‘search.’ I don’t know if they would use LLMs to discover fashion. These conversational interfaces are not the best place to stumble across something beautiful. However, let’s say you had decided that you were in the market for a Chanel 2.55. Absolutely you’re going to ChatGPT to ask about the provenance of the bag, why is the Chanel 2.55 bag so iconic, what’s the history of it, where did it come from and how much is it, what should I look for when I’m buying one, how do I make sure I don’t buy a replica? All of that part of the consumer journey, these AI answer engines are perfectly suited for that. If consumers use LLMs in greater numbers, does it create a winner- takes-all environment where the brands and products the AI recommends become the entirety of what consumers consider purchasing, and anything that doesn’t show up is invisible? We’re actually going to see the opposite be true. I think we’re going to see a huge, long tail of coverage because every answer is different. [Cadwallader types ‘what’s the best luxury sneaker for men right now?’ into ChatGPT in two separate browser windows.] In response one, the answer was Maison Margiela, Tom Ford, Burberry, D&G, Amiri, whereas in the second response, we had Brunello Cucinelli, we had Gucci. You see this probabilistic nature, the answers change. AI is notoriously a black box, especially as models get more complex. How do you go about determining what works and what doesn’t for getting a brand to show up in AI search results? It’s by looking at where they’re going to build these answers. When we asked this question earlier about Platform interface. Profound. Platform interface. Profound. 48 The State of Fashion 2026 03. The AI Shopper Consumer Shifts
- 47. ‘what’s the bestluxury sneaker for men right now’ what happened in the background is ChatGPT went to a bunch of different sources to build this answer. What we’re able to do is we can show the sources: where the models are going, what are the names of the websites, which websites are being used most frequently. A lot of the content these LLMs are drawing on is not under a brand’s control. How much are brands able to influence how they show up in AI answers? [Cadwallader shows a breakdown on Profound’s platform of where an LLM is finding information for a query about trail-running shoes.] You can see that Nike.com is the ninth most- visited site [by the LLM], so Nike.com is not that far below Reddit or YouTube. What this shows is that these models are going to Nike.com. Nike is actually controlling a lot of the narrative here. When you look at the rise of LLMs and potentially agents that can actually take action on a consumer’s behalf, does that change the work of fashion marketers? At this point in time, at least — and I expect this will evolve and change as well — I think marketers in fashion right now should focus on description and lots of coverage around the quality of the product, having nice, structured text on their website that describes what makes their product special, that describes the look and feel in a very detailed way, that is designed to get pulled into responses. That’s how we’re working with fashion brands right now. When we think about how AI is changing shopping, what do brands need to do to win in this new environment? Honestly, it sounds so trite, and so unimpressive, and it’s not like the magical response that I would imagine you’re hoping for, but it’s just lean in. Get set up, pay attention, start. Once you understand how you’re showing up in answer engines, which is a very self-serving statement, but that’s what we help you do, I think lean in and take it really seriously, understand that there are billions of people using these platforms on a weekly basis. This is the new marketing channel. It’s happened. This isn’t a speculation into the future. You shouldn’t put your entire 2026 marketing budget into your AI visibility strategy, but in the same vein, you should have a strategy. This interview has been edited and condensed. “Lean in and take it really seriously, understand that there are billions of people using these platforms on a weekly basis. This is the new marketing channel.” 49 The State of Fashion 2026 03. The AI Shopper Consumer Shifts
- 48. 04. Jewellery Sparkles TheState of Fashion 2026
- 49. KEY INSIGHTS EXECUTIVEPRIORITIES 04. Jewellery Sparkles With unit sales growth outpacing all other fashion categories, jewellery’s bright moment is set to continue into 2026. Having defied the broader luxury slowdown, the category will keep reaping the rewards of a growing customer base with a desire for long-lasting investments, self-expression and treating themselves. As jewellery cements its role as accessories centrepiece, fashion players will seek to capture their share of the category’s outsized growth. • Between 2025 and 2028, jewellery is projected to record annual unit growth of 4.1 percent — four times the rate of clothing. • 42 percent of women and 35 percent of men report buying more jewellery for themselves than two or three years ago. • Lab-grown diamonds are expected to account for half of all diamond jewellery unit sales by 2030, thanks to more affordable prices, growing ethical concerns and expansion beyond bridal occasions. • Anchor category extensions into jewellery in the core brand DNA, such as craft or innovation, to resonate with customers already aligned to brand codes. • Expand male and genderless collections to meet demand for jewellery from new customer segments. • Reposition jewellery as a form of self- expression by emphasising personalisation and self-purchasing in communications. • Define a strategic approach and value proposition for lab-grown gemstones. 51 The State of Fashion 2026 04. Jewellery Sparkles Consumer Shifts
- 50. Jewellery volume growthis set to outpace other categories, reflecting consumer value perceptions Over the next few years, jewellery is forecast to be the fastest-growing category in fashion by unit sales, growing at nearly four times the rate of clothing. Both costume and fine jewellery are expected to grow similarly, with sales growing between 5.3 and 5.6 percent per year through 2028.1 This growth is particularly pronounced in branded jewellery: Sales of branded jewellery made up 25 percent of the market in 2024 and grew 8.3 percent per year between 2021 and 2024, almost double unbranded jewellery’s 4.3 percent growth.1 In 2025, 61 percent of consumers say jewellery is a category in which brand matters most, increasing to 82 percent in China.2 Diamond jewellery accounts for roughly one-third of global jewellery sales and is expected to expand at 4 to 5 percent per year through 2028. Within this, lab- grown diamonds are forecast to grow 15 to 16 percent annually as adoption increases, particularly in India, China and the US.3 This momentum reflects jewellery’s unique role as both an emotional and financial value store. When asked to compare categories for their investment potential, consumers rank jewellery top — 15 percentage points higher than handbags and other accessories.2 Projected growth by category, 2025E–2028E % 4.4 5.3 5.4 4.8 6.1 2.9 a. Volume growth is growth in the number of units sold Note: Other accessories includes fashion glasses, belts, scarves, gloves, hats, caps, ties and other small accessories Source: Euromonitor Overall sales CAGR, % 3.4 3.9 1.2 1.5 3.8 3.5 1.0 1.2 4.1 3.3 2.2 -0.6 Footwear Jewellery Clothing Handbags Other accessories Watches Price growth CAGR Volume growth CAGRa 52 The State of Fashion 2026 04. Jewellery Sparkles Consumer Shifts
- 51. Asia Pacific willcontinue to drive the largest share of market growth through 2028, led by China and India, where jewellery sales already represent around two-thirds of the APAC market. Market drivers in China For international brands — which account for over 50 percent of branded jewellery sales in China4 — sharp price increases in soft luxury categories such as ready-to-wear and handbags have weakened perceived value, prompting consumers to shift spending towards hard luxuries like jewellery. Several local brands are also performing well, including Laopu Gold — which offers fixed- price gold, where prices do not fluctuate daily with the market rates— and Kering-owned Qeelin, whose Chinese heritage design codes are resonating with local consumers.5 6 In the unbranded jewellery segment, a softer property market has reinforced fine jewellery’s appeal as a store of value.7 Market drivers in India According to De Beers, India has now overtaken China as the world’s second- largest diamond market, accounting for roughly 11 percent of global demand, second only to the US at over 50 percent.8 9 India’s rising middle class and deep cultural affinity for gold and diamonds are fuelling sustained double-digit growth for domestic jewellers — which make up more than 90 percent of branded jewellery sales.1 Regional tailwinds and demand for long-term value will propel the market Share of total jewellery market by region, 2025E–2028E, % (USD billions) 3% 3% 10% 10% 65% (300) 20% (90) 2028E 2025E 63% (250) 395 460 2% 2% 22% (85) Share of global growth, 2025E-2028E, % 70-75 5-10 10-15 0-5 0-5 Source: Euromonitor, McKinsey analysis Latin America Middle East and Africa Asia Pacific North America Europe 53 The State of Fashion 2026 04. Jewellery Sparkles Consumer Shifts
- 52. Jewellery is movingbeyond gifting, with more men and women buying it for themselves As jewellery becomes more associated with personal identity than occasion,10 more consumers are buying it for themselves rather than as a gift for others. Forty-two percent of women and 35 percent of men report buying more jewellery for themselves than two or three years ago.2 This shift is fuelled partially by rising incomes and evolving gender roles.By 2028, women will command over 75 percent of global discretionary spend,11 likely benefitting jewellery sales to women buying for themselves. Forty-one percent of jewellery retailers surveyed say female self- purchasing is the top opportunity in silver jewellery, whereas just 26 percent cite gifting.12 Self- purchasing is set to propel accessibly priced jewellery, with retailers already seeing strong sales for pieces priced $100 to $500.12 Although still a small part of the market, men’s jewellery is one of fast-growing segments, set to grow 7 to 8 percent per year through 2028, compared to women’s jewellery at 4 to 5 percent.1 13 14 Brands are meeting this demand by launching male or genderless collections, often fronted by celebrities like Korean actor Byeon Woo Seok. 75% of consumers say they love to treat themselves with jewellery2 +58% increase in jewellery sales of women buying for themselves in 2024, compared to 202112 David Yurman The American jewellery brand launched its first-ever men’s high jewellery collection in 2024 with campaigns featuring brand ambassador Michael B. Jordan. It comprised a 30-piece assortment of necklaces, bracelets, rings and cufflinks, and supplements the brand’s existing men’s offering, which was introduced in 2004.15 De Beers As women have increasingly become independent consumers in the diamond market, De Beers has shifted its messaging from a primary focus on everlasting love and marriage to celebrating one’s authentic self in a bid to stay relevant. Its revised messaging highlights narratives such as uniqueness and self-worth.16 Graff Diamond jeweller Graff launched a unisex line in 2024, the Laurence Graff Signature collection, featuring rings, pendants and bracelets, moving beyond its traditional bridal focus. Though diamonds are traditionally associated with women, the collection extends the brand’s DNA as well as the addressable market. Mejuri The fine jewellery brand is known for its competitive prices, thanks to its direct-to- consumer model, as well as its marketing that encourages women to buy jewellery for themselves. Female self-empowerment is core to the brand’s story, including its Mejuri Play initiative, which launched in 2025 and celebrates female athletes. 54 The State of Fashion 2026 04. Jewellery Sparkles Consumer Shifts
- 53. Self-expression is becominga defining force in jewellery across price segments Jewellery is increasingly valued as a canvas for individuality and signifier of taste. For example, buyers can signal their taste and style through artisan handwork, customisation and unique materials at the higher end of the market,17 18 as well as express their identity through layering and stacking pieces in custom ways — a trend that applies to jewellery across price segments. Novelty jewellery featuring whimsical, fun designs — from food-themed rings to neon enamel pendants that lend themselves to social media — is growing in appeal. This spans from entry-level costume jewellery to precious gemstone pieces costing $25,000 or more.19 Smaller jewellery brands that offer unique, limited quantity designs, such as Irene Neuwirth or Nadine Ghosn, are also on a rise. The rise of jewellery as a form of self-expression is creating momentum for branded players. Unlike unbranded pieces, branded jewellery often carries its own iconography and symbolic language — a shorthand for identity. Strength of consumer associations of fashion categories with key emotional attributes 75% of consumers say they prefer jewellery designs that are creative or unique2 71% of consumers say jewellery is how they express their personality2 Source: McKinsey jewellery consumer survey, September 2025 Offers really unique pieces Offers really authentic pieces Can easily be personalised Clothes Footwear Jewellery Watches Bags and accessories Skincare and makeup Fragrances High association Low association 55 The State of Fashion 2026 04. Jewellery Sparkles Consumer Shifts
- 54. Lab-grown gemstones aremaking fine jewellery more accessible for everyday occasions Average retail price of two-carat polished lab-grown vs. natural diamonds, 2024, USD (thousands) 2 4 6 8 10 12 14 16 18 0 22 24 26 20 Jan 2021 Jan 2022 Jan 2023 Jan 2024 Oct 2024 Jan 2020 Lab-grown diamond Natural diamond CAGR 2% CAGR -38% The rise of lab-grown diamonds As prices for lab-grown diamonds continue to fall — now priced 80 to 90 percent below mined equivalents — diamonds are expanding from symbols of heritage and permanence to more accessible accessories worn for a broader range of occasions.16 20 Lab-grown diamonds account for nearly 20 percent of global diamond jewellery sales and could reach 50 percent by 2030.21 22 Lab-grown gemstones for everyday While half of US lab-grown diamond sales come from bridal jewellery, brands can fuel growth by expanding their use across other collections and introducing lab-grown coloured gemstones into pieces that tap into consumer demand for individuality and self-expression.21 22 Reflecting this shift, consumers are wearing lab-grown diamonds more regularly: 57 percent would wear lab-grown diamonds daily, versus 30 percent for natural diamonds.23 Brand and retailer strategies for lab-grown and natural diamonds As lab-grown diamonds reshape the market, brands and retailers must sharpen the narratives around their collections. Prices for lab-grown stones may continue to fall, strengthening value-for-money narratives. Lab-grown diamond marketing can also emphasise sustainability, which resonates strongly with younger consumers.8 24 25 By contrast, natural diamond players are emphasising rarity, provenance and emotional value: De Beers and Signet have partnered in the US to train associates on these attributes.26 Source: Edahn Golan Tenoris, October 2024 56 The State of Fashion 2026 04. Jewellery Sparkles Consumer Shifts
- 55. Brands should capitaliseon the sector’s growing diversification and changing consumer tastes EXECUTIVE PRIORITIES As more fashion and luxury players move into or expand their presence in jewellery, success will depend on articulating a credible point of differentiation. Brands should identify existing strengths, such as heritage craft or material innovation, and reflect these in collection development for it to feel like a natural extension of the brand rather than an opportunistic add-on. Brands can develop modular, minimalist and sculptural designs that transcend traditional gender categories. This may also involve reducing gendered product segmentation — both in-store and online — and marketing existing pieces as universal. Product and marketing should reflect regional nuances: In some markets, social stigma around men wearing jewellery persists. Male influencers can help build credibility and reframe jewellery as a form of self-expression. Examine how existing products can be customised and personalised. This may differ across price segments, from engraving core pieces as an add-on service to offering custom jewellery painting or bespoke creation. Brands should rebalance messaging around bespoke jewellery and customisation to include self- reward and self-expression as well as gifting, targeting women and younger consumers as empowered buyers. Anchor a jewellery extension into the brand’s core DNA 1 Expand male and genderless jewellery collections 2 Empower personal expression through customisation 3 Brands — especially pure jewellery players — should define a clear approach to if, where and how lab-grown diamonds and coloured gemstones can be incorporated into the product pyramid beyond bridal occasions. For example, they could be incorporated into multi-stone pieces like bracelets or necklaces, or as melee stones to highlight mined solitaires. This strategy should be tailored to regional differences in consumer attitudes. Retailers should clearly differentiate marketing between natural and lab- grown diamonds to emphasise distinct value propositions. Define a strategic approach to lab-grown gemstones 4 57 The State of Fashion 2026 04. Jewellery Sparkles Consumer Shifts
- 56. BY SIMONE STERNCARBONE Swarovski came into 2025 sparkling. Its jewellery business grew 9 percent year on year in 2024, with particularly strong results coming from the US and lab-grown diamonds, which more than doubled in sales. Alexis Nasard, Swarovski’s chief executive since July 2022, is confident the momentum will continue. The brand’s plan for 2026 is to maintain its focus on creative craftsmanship, while catering to trends in design and customer behaviour — like jewellery being used for all-day wear — that are reshaping the market. It also aims to keep serving customers acrossprice points.Swarovskisegments its offering into low, medium and high complications — much like the watch industry— withthe strongestgrowthin the mid-range,where Nasard noted the brand has little competition. Lab-grown diamonds remain another strong point. Nasardsays they’ve been effective for drawing in new customers, even those who’ve traditionally favoured mined diamonds, withsome of the newcomers converting to buyers of the brand’s other lines, such as its crystal pieces. These moves play to the brand’s positioning as “pop jewellery” that actively engages with and shapes the cultural zeitgeist, staying relevant and fresh. To that end, Swarovski has launched strategic capsule collections and partnerships with celebrities, the latest being Ariana Grande, who had the best-selling capsule in the brand’s history. The strategy works particularly well in the US, the brand’s largest market, where Nasard expects consumers to keep buying Swarovski’s jewellery as long as the job market remains strong. Swarovski’s Strategy for Maintaining Its Shine Chief executive Alexis Nasard sees more opportunity ahead for the brand by embracing lab-grown diamonds and leaning into culture and design trends as jewellery continues to be a bright spot in the fashion market. 58 The State of Fashion 2026 04. Jewellery Sparkles Consumer Shifts
- 57. Ariana Grande ina Swarovski campaign. Swarovski. Luxury fashion has struggled lately due to price hikes that go beyond inflation. How is Swarovski approaching pricing, and what strategies have you employed to engage consumers? We have kept our pricing largely in line with inflation. In terms of customers, our focus is on building strong engagement with local customers in key metropolitan areas in our established markets — Europe and the US — but also in our key growth markets like South Korea, Brazil, Japan and Mexico. Cosmopolitan areas drive trends, so to keep up with the cultural zeitgeist, we have a city-focused strategy. We want our stores to be destinations in their own right, offering experiences that encourage repeat visits and self- purchase — a trend we see growing among women that we find empowering and strongly encourage. By combining compelling product design, cultural alignment and a seamless shopping experience, we aim to create reasons for consumers to shop beyond holidays or gifting for special occasions. In this context, jewellery becomes a medium for everyday expression, even when the economy is troubled. Jewellery is ultimate discretionary spending, but in markets like the US, as long as consumers have some money to spare and the value proposition resonates, they will spend. Some brands in luxury jewellery are simplifying their assortment to manage inventory, reduce overstock and minimise risk. How is Swarovski approaching its product range, and do you see any shifts in consumer demand influencing this strategy? At Swarovski, we maintain a broad price range and variety of designs, but we are highly disciplined about what we offer. Our assortment reflects both creative innovation and consumer expectations. The mid-tier complexity segment has emerged as particularly strong because it combines originality with accessible pricing. In a landscape where competitors may overextend or dilute their offerings, our strategy is to curate thoughtfully, ensuring that each product resonates with customers and supports the brand’s cultural relevance. You mentioned that mid-tier complexity is driving growth. Can you explain why this segment is performing so well, and how it fits into the broader jewellery market? Mid-tier complexity bridges the gap between entry-level pieces and high jewellery. It allows customers to access designs that are original, "Consumers buy not just a product but the cultural narrative and emotional experience it represents." 59 The State of Fashion 2026 04. Jewellery Sparkles Consumer Shifts
- 58. theirroleevolvinginluxuryjewellery? Lab-grown diamonds area critical part of the future of jewellery. They offer the same brilliance and durability as mined diamonds while enabling more imaginative design options. They allow us to engage customers who are looking for creativity, sustainability and value. The US is leading in adoption — over half the diamond market there is now lab-grown — and we expect the growth to continue globally. Cultural trends are increasingly influencing jewellery design. Which trends do you expect to shape the market in 2026? We see several intersecting trends. Jewellery designed for all-day wear is becoming more prevalent, moving seamlessly from professional settings to leisure activities — from date night to tennis to the meeting room. Multi- metal pieces and multicoloured crystals are growing in popularity, allowing for more playful and versatile styling. Men’s jewellery is slowly gaining traction, reflecting broader shifts in gender expression, though it still only makes up around 2 percent of the market — women will always be key consumers for jewellery. Pearls and charms are also being reimagined for contemporary use beyond traditional settings. intricate and emotionally resonant without the costs of high jewellery. There is relatively little competition in this range, and it offers a compelling value proposition.Customersrecognise the creativity and craftsmanship in these pieces, which makes them a strong choice for self-purchasers. It’s a segment that reflects both aspiration and accessibility, and it aligns with the evolving desires of contemporary consumers. How is Swarovski responding to the rise in women shopping for themselves, particularly with the adoption of lab-grown diamonds? Women are increasingly choosing jewellery for themselves, and lab- grown diamonds play a significant role in facilitating that. These diamonds offer exceptional quality and design flexibility at a price point that makes acquisitions attainable. They are also more sustainable, using renewable energy and recycled metals, values that resonate strongly when self-purchasing. We have observed that stores offering lab- grown diamonds attract new customers who then also engage with other parts of the Swarovski range, like our crystals, creating a positive ripple effect across the business. Lab-grown diamonds are becoming more mainstream. How do you see Swarovski Asia flagship store in Shanghai. NurPhoto/Getty Images. 60 The State of Fashion 2026 04. Jewellery Sparkles Consumer Shifts
- 59. Customisation, on theother hand, is not a game changer for us, though we saw a small uptick four to five years ago. We offer some customisation but it’s still a small part of the business and the market at large. The majority of customers go for standard collections. China remains a complex market for luxury brands.1 How have the market’s current dynamics affected Swarovski’s strategy there? China presents unique challenges due to demographic shifts, macroeconomic pressures and regulatory uncertainty. Youth unemployment in major cities is high, and population trends suggest a contraction in the younger consumer base, Millennials and Gen Z, who represent half of the domestic luxury market. These factors, combined with the unpredictability of policy and geopolitical tensions, make our strategy more cautious. We maintain a presence in key cities with designs that resonate locally, ensuring the brand remains relevant while avoiding disproportionate risk. The US appears to be a strong growth driver. What factors are contributingtoyoursuccessthere? In the US, discretionary spending remains strong because employment levels are stable, and consumers continue to prioritise categories like jewellery. Additionally, Swarovski’s brand perception is at an all-time high in the US: Americans resonate particularly well with the ‘joyful exuberance’ our jewellery embodies. We don’t even have 250 stores stateside yet, so there is room for much more footprint, which keeps us quite optimistic. With branded jewellery increasingly dominant globally, how does Swarovski position itself in this competitive landscape? Branded jewellery offers creativity, culture and a sense of participation in a broader lifestyle. These are key differentiators to unbranded jewellery. Consumers buy not just a product but the cultural narrative and emotional experience it represents. Swarovski’s strategy emphasises brand consistency, creativity, engaging with the cultural zeitgeist, especially pop-culture, with ambassadors like Kim Kardashian, Bella Hadid and now Ariana Grande, whose capsule collection was our all- time bestseller. Tapping into these elements differentiates us from unbranded alternatives. Value considerations remain important in some markets, like secondary cities in emerging markets such as India. There, especially in economically tough times, unbranded jewellery may be favoured for value purposes. Globally, branded jewellery will win in the long run. Howdoyouseejewelleryconsumption evolving between investment pieces and everyday wear, and are these even mutually exclusive? Everyday wear and investment pieces are not mutually exclusive; both will continue to coexist. Economic cycles and consumer segments influence preferences, but jewellery fundamentally serves multiple roles. Middle-class consumers in emerging markets may prioritise value and longevity, especially when the economy is down, while socialites in established markets are more likely to seek instant gratification. We cater to both ends of the spectrum. This interview has been edited and condensed. Kim Kardashian, Swarovski x Skims collaboration. Taylor Hill/Getty Images. 61 The State of Fashion 2026 04. Jewellery Sparkles Consumer Shifts
- 60. 05. Smart Frames TheState of Fashion 2026
- 61. KEY INSIGHTS EXECUTIVEPRIORITIES 05. Smart Frames Style-conscious devices equipped with multi-modal AI are set to redefine the wearables landscape in 2026, with smart eyewear emerging as a leading format. Major players already have product launches scheduled, reflecting strong market momentum. With the category projected to exceed $30 billion by 2030, brands have a timely opportunity to partner with technology leaders to unlock high-value consumer use cases and accelerate adoption. • Monitor consumer adoption of wearables as well as technological advancements enabling improved design or functionality. Brands must assess carefully if and how wearables appeal to their target audience. • Brands entering smart eyewear should secure strategic partnerships that complement their in- house expertise. For example, fashion brands without a core eyewear business can license their brands to technology leaders, whereas eyewear players can enter joint ventures with tech firms or commission specialist suppliers. • Leverage fashion expertise to elevate wearables with complementary products such as protective cases and straps, as well as product personalisation. • Wearables — including smart watches, rings, eyewear and bands — is the fastest-growing accessory category, with growth of 8.3 percent per year since 2022, set to continue at 9 percent annually to 2028. • Consumer adoption of smart watches is high, with the category representing 35 to 40 percent of watch market volume, while smart eyewear and smart rings represent less than 10 percent of their respective market volume. • Consumers are expected to further embrace smart glasses in 2026. Ray-Ban Meta glasses were already the top-selling product in 60 percent of Ray-Ban’s EMEA stores as of Q3 2024. 63 The State of Fashion 2026 05. Smart Frames Consumer Shifts
- 62. Wearables will continueto be the fastest-growing accessory category and an opportunity for brands 47% 2019 49% 51% 2022 44% 56% 53% 42% 58% 2028E 147M units 198M units ~230M units ~280M units 2025E Basic activity wearables: focused on health and fitness tracking, with limited additional features (e.g. fitness bands, rings) Smart wearables: incorporating smartphone-like features (e.g. message response, voice assistant, cellular connectivity) and can run third- party applications independently from a smartphone (e.g. smart watches and eyewear with those features) Wearables market, volume by number of units sold, 2019-2028E 5.2% 6.5% $24B $33B ~$42B ~$55B Wearables is the fastest-growing accessory category Sales of wearables reached $42 billion in 2025, equating to 230 million units, and while small compared to some other categories, it is set to remain the fastest-growing accessory category to 2028.1 Smart wearables — devices with voice assistants, messaging and other intelligent features — are expected to account for 58 percent of volume by 2028.1 Smart watches have propelled the category Early wearables appeared in the 2000s with GPS devices like Garmin’s ForeRunner 101. The breakthrough in the wearables category came with smart watches, which grew from around 15 percent of the watch market in 2016 to 35 to 40 percent today.1 Fashion players have also entered the space, with brands like Tag Heuer, Tissot and Louis Vuitton launching their own lines. The performance of other wearables is mixed Smart bracelets, once 40 percent of the basic activity wearables market in 2016, now account for less than 10 percent. Smart rings, dominated by Oura, which had an 80 percent market share in 2023, are becoming popular — Oura has sold over 5.5 million rings as of September 2025, with more than half of those sold in the preceding year.2 3 Smart eyewear is poised for breakout growth in 2026 Despite several false starts over the past decade, smart eyewear is finally gaining traction as hardware advances and multi-modal AI make them sleeker and more functional. EssilorLuxottica reported in February 2025 that Ray-Ban Meta sales had reached two million pairs and announced plans to increase production capacity to 10 million annual units by the end of 2026.4 5 Value 9.0% 8.3% 10.5% 11.8% Source: Euromonitor Growth 64 The State of Fashion 2026 05. Smart Frames Consumer Shifts
- 63. Lower consumer pricesare set to propel smart eyewear growth Global shipments of smart glasses rose 110 percent year on year in the first half of 2025, with AI-enabled models representing 78 percent of shipments (up from 46 percent the same period the year prior).6 Analysts expect sales to quadruple in 2026, supported by lower average prices of $300 to $400 per pair today — about one-third of Google Glass’s original cost in 2014.7 Eyewear demand is strong across price points The broader eyewear category grew 6 percent annually from 2022 to 2025, with sustained 5.2 percent growth projected through 2028.1 Eyewear is increasingly seen as an accessible status symbol, illustrated by Jacques Marie Mage’s $1,000 frames and the rise of challenger brands offering distinct aesthetics, from Gentle Monster’s bionic designs to Blue Elephant’s grunge style and L.G.R’s travel-inspired look. Smaller components are enabling more stylish frames Advances in technology have reduced chip size and power use, allowing more compact designs. Style is a critical purchase driver in eyewear, influencing one- third of smart glasses buyers compared with one-fourth of smart watch buyers. AI is expanding smart eyewear use cases Multi-modal AI now powers image recognition, natural language processing and autonomous tasks, aligning with existing consumer habits — for example, close to 60 percent of Americans use voice assistants.8 Smart eyewear enables hands-free content capture as well as everyday functions like navigation and communication. It is the only wearable for which AI features rank among the top five purchase drivers. Eyewear fashion trends and tech advances will accelerate smart eyewear adoption in 2026 Most important factors influencing wearable purchases, % of wearable users Smart watches Smart rings Smart glasses 35 28 22 45 40 42 27 27 33 24 38 26 31 32 Factors expected to increase in importance in 2026 Brand Appearance AI features Compact design Fitness tracking Health monitoring Affordability 34 34 31 31 29 24 38 Source: BoF-McKinsey State of Fashion 2026 Consumer Survey 65 The State of Fashion 2026 05. Smart Frames Consumer Shifts
- 64. Fashion’s involvement insmart eyewear is recent, but 2026 is poised to offer more opportunities Stylish glasses with AI- enabled voice features AI voice features enabled broader use cases. This included voice assistants, expanding possible tasks to include hands-free messaging, calls and search. Tech accessories and industrial solutions Nascent fashion wearables Examples: • Second generation Ray-Ban Meta glasses featuring three styles of frames (2023) • Launch of Oakley Meta HSTN featuring seven styles (2025) Pivot to enterprise Enterprise use cases took priority. High prices (around $1,500 per pair), short battery life and privacy concerns led technology players to focus on professional settings such as manufacturing, healthcare and remote support. Examples: • Google Glass, first launched for consumers (2013), re- focused on enterprise (2017) • Microsoft HoloLens (2016) Stylish and multi-function AI glasses New fashion-forward releases include integrated products with AI assistants, supporting navigation, fitness, translation, video calls and health tracking — making eyewear a true multi-use wearable. Examples: • Xreal One Series • Oakley Meta Vanguard • Meta Ray-Ban Display • Expected future launches: Google with Kering, Gentle Monster and Warby Parker, Snap Spectacles (relaunch), Samsung, Amazon9 10 11 12 Advanced fashion wearables Early prototypes and first consumer products Early experiments were niche and impractical. Initial products were designed for specialised use cases (e.g. astronaut training, remote robotics) and suffered from bulky design, short battery life and no connectivity. Examples: Ÿ Steve Mann’s Eyetap (1990s) • MicroOptical’s Myvu, iPod compatible glasses (2000s) Stylish products with select consumer use cases Consumer eyewear re- emerged with select functions. To improve style, brands narrowed functionality to focus on simpler use cases such as taking photos and videos for social media or listening to music. Examples: • Snap Spectacles (2017) • Amazon Echo Frame (2019) • Xiaomi Smart Audio Glasses (2021) • Ray-Ban Stories (2021) 1960s-2000s 2010s 2016 onwards 2023 onwards 2025 onwards (Left to right): 1. Steve Mann’s Eyetap. Randy Quan/Getty Images. 2. Microsoft HoloLens. Justin Sullivan/Getty Images. 3. Snapchat Spectacles. David McNew/Getty Images. 4. Meta Ray-Ban second-generation smart glasses. Josh Edelson/Getty Images. 5. Meta Ray-Ban Display. EssilorLuxottica. 66 The State of Fashion 2026 05. Smart Frames Consumer Shifts
- 65. Three distinct consumersegments are shaping the smart eyewear market Essential feature Optional feature Capabilities Consumer use cases for smart eyewear Lifestyle brands with eyewear lines and dedicated eyewear brands Sports and athleisure brands Lifestyle brands and dedicated eyewear brands Everyday Supports daily tasks like getting directions, calling and listening to music Sports Supports physical activity by providing hands-free guidance and health tracking Work/enterprise Offers alternative screen to take conference calls and complete desktop tasks Relevant brand archetypes Voice assistant Audio and video recording Voice call capabilities Hands-free control Productivity apps integration Proximity sensors Built-in display Health tracking Social media streaming Video call capabilities Across use cases, certain smart features will be non- negotiable. Consumers will expect reliable internet connectivity, seamless integration with their existing devices like phones and laptops, and compatibility with multi-modal AI to enable smooth, hands-free operation. Everyday eyewear will demand lightweight, discreet designs, while sports and technical eyewear will require durability and advanced functionality. Models used in work settings will require a different approach again. For instance, work/enterprise models — such as mixed-reality headsets designed for industries such as manufacturing and design — can be up to 10 times heavier than models designed for everyday or sports.13 Brands that want to compete will need to find the right balance between design and function. 67 The State of Fashion 2026 05. Smart Frames Consumer Shifts
- 66. Partnerships will drivethe segment’s growth as interest in smart eyewear rises Search interest for smart wearables, H2 2020-H2 2025, Google interest over time Although subscale compared to smart watches, search interest in smart eyewear has seen significant growth in the second half of 2025. With major launches taking place in 2026, momentum is expected to accelerate. Partnerships between tech players and fashion brands will be critical to this growth, likely falling under two models: 1. Joint ventures with technology players Meta’s $3.5 billion investment in EssilorLuxottica, Ray-Ban’s parent company, illustrates the power of the joint venture model.14 EssilorLuxottica contributed styling, manufacturing expertise, brand equity and distribution, while Meta focused on hardware and software. Ray-Ban Meta glasses were the best-selling product in 60 percent of Ray-Ban’s EMEA stores in Q3 2024, according to EssilorLuxottica.15 Most current partnerships follow this structure, including Google’s deals with Kering, Gentle Monster and Warby Parker.9 With technology giants such as Samsung and Xiaomi entering the space and introducing AI-enabled eyeglasses, opportunities for new ventures continue to expand.11 16 2. Brand-led development with tech suppliers Brands can develop proprietary products by working with hardware specialists. Suppliers such as Qualcomm, Applied Materials, Lumus and Schott are already offering tailored components.17 18 19 This approach mirrors luxury watch collaborations, where Tag Heuer (Intel), Louis Vuitton (Qualcomm) and Montblanc (Qualcomm) partnered with hardware providers to launch branded smart watches. In this model, operating systems are either developed in-house (e.g. Swatch) or integrated with third-party solutions (e.g. Google’s Wear OS).20 Source: Google Trends 75 100 0 H2 2022 H1 2023 H1 2022 H1 2024 H2 2024 H1 2025 H2 2025 H2 2021 H1 2021 H2 2020 H2 2023 Smart watches Smart rings Smart glasses H2 2020- H2 2025, % change +1,800 +300 -10 68 The State of Fashion 2026 05. Smart Frames Consumer Shifts
- 67. Smart eyewear offersa new growth platform for both eyewear and non-eyewear brands Brands must assess carefully if and how wearables appeal to their target audience — staying on top of emerging technology, wearable trends and consumer attitudes through social listening and market data — and prioritise investments accordingly. Authentic engagement in the category is a non-negotiable. For example, smart eyewear will be an appropriate extension for some brands with the right image, positioning and consumer base, but not all. Instead, some fashion players may be better suited to engaging with other wearables such as smart rings if they have a more luxe, minimalist brand image, or if they already have a jewellery line. Brands must link clear use cases with consumer personas and need cases in their target audience. Fashion and eyewear brands entering smart eyewear must secure strategic partnerships that complement their in-house expertise. Eyewear players should be first-movers in the category. They can enter joint ventures with tech firms to produce smart eyewear or commission specialist suppliers like Qualcomm or Lumus to support product development. Fashion brands without a core eyewear business can license their brands to technology leaders such as Meta, Xreal or Google, leaning on their expertise in manufacturing and production as well as their marketing reach. As wearables become daily essentials, demand for cases, skins, straps and customisation is likely to grow. Fashion brands can extend their influence by creating seasonal and trend-driven designs for both established and emerging formats, including smart eyewear. Offering in-store personalisation, such as engraving or painting, can further differentiate the experience, drive traffic and create opportunities for cross-selling in other categories. Closely monitor adoption of wearables and determine how to engage 1 Secure strategic partnerships to enter smart eyewear 2 Elevate wearables through complementary products and services 3 EXECUTIVE PRIORITIES 69 The State of Fashion 2026 05. Smart Frames Consumer Shifts
- 68. BY MARC BAIN EssilorLuxotticaand Meta reached a new milestone in their six-year-old partnership in September 2025 when they introduced the Meta Ray-Ban Display, their first smart glasses with an in-lens display, controlled via a bracelet that translates hand gestures into actions. The glasses offered capabilities like letting the wearer readtextmessages,see atranscription of what a speaker is saying or get turn- by-turn navigation. Just as important: They still look like regular glasses. For more than a decade, tech companies promised that smart glasses would be the next breakthrough consumer device. They never connected with mainstream shoppers, however, because to make capabilities like a display possible, the glasses required bulky or awkward designs that weren’t what people wanted to wear on their faces. Ray-Ban and Meta attacked the challenge head-on, focussing on design first. The second generation of their Ray-Ban Meta glasses, which didn’t offer full augmented reality but packaged audio, image capture and Meta’s AI into Ray-Ban’s classic frames, became a surprise hit, selling more than two million pairs since their launch in 2023. That success has bolstered the companies’ confidence. Last year they announced a long-term extension of their partnership, and this year Meta bought a minority stake in EssilorLuxottica for $3.5 billion. As EssilorLuxottica’s chief wearables officer, Rocco Basilico has worked to preserve the balance of form and function in the company’s collaboration with Meta, and believes what they’ve unveiled so far is just the beginning. EssilorLuxottica Thinks It Cracked the Code on Smart Glasses The collaboration between the world’s largest eyewear player and tech giant Meta has produced the first commercially successful smart glasses, and more recently a new version with an in-lens display. EssilorLuxottica chief wearables officer Rocco Basilico believes they’re just getting started. 70 The State of Fashion 2026 05. Smart Frames Consumer Shifts
- 69. Tech companies havebeen trying to make smart glasses a commercial success for at least a decade. What did the Ray-Ban Meta glasses do that previous generations of smart glasses failed at? We started with design first, and we were very rigid in the partnership on not compromising on design. I think Meta appreciates this quality, that we were very firm that the Wayfarer needs to be a certain level of thickness or a certain weight. We said, if we don’t fit the technology into this frame, we will not have a product. EssilorLuxottica has said it’s scaling production volume for the Ray-Ban Meta glasses and mentioned on its July 2025 earnings call that sales grew more than 200 percent year over year. That’s still very fast growth. How big is the potential market here? We are at the beginning of something; it’s just starting. We said that we will be able to produce more than 20 million glasses, so the ambition is obviously very high. And because we have the opportunity to scale with different brands, I think that is key in accelerating adoption. We already see that a lot of new customers are buying Oakley. There are customers buying the Ray-Ban Meta that bought [Oakley’s] HSTN or Vanguard, but EssilorLuxottica trade show booth. Patrick T. Fallon/Getty Images. 71 The State of Fashion 2026 05. Smart Frames Consumer Shifts
- 70. we saw morethan 60 percent of new customers reaching out and discovering wearables through Oakley. It’s such an important metric because you understand that we are not selling to the same bucket of people. Now we are going through the list of our brands and understanding what is the right mix for wearables as a category. Sports obviously are very important. Then it’s important also to reach more women, so we have plans for that. We do it through style expansion, but at some point we will do it also from brand expansion. Are you using the same strategy with the Meta Ray-Ban Display? You’re going to see a lot more. As you probably guessed, there is a lot of product strategy that goes behind this roadmap. The things that we’re going to release a year from now, or a year and a half, are planned now. We’re very fast between the decision- making of, ‘Ok, we’re going to do this,’ and the release date. We can be faster; it can be two years or even less, which is a very, very fast product cycle. So you’re going to see way more products coming down the pipeline starting in the next months, not even the next years. But the strategy goes much deeper than that. We have a multi-year partnership; we have a very strong three-year roadmap that we feel very proud of. The Meta Ray-Ban Display only just went on sale, so it’s still very early, but can you say what the response has been so far? We sold out, then we replenished, and we are trying to keep up. But the first day that we launched in our stores, we sold out. We had queues all over. We had queues at LensCrafters at five in the morning in New York. It’s intentional that you have to go to the store to try the product, because you need to try the bracelet, you need to try the fitting of the frame. It’s a new technology. The volume driver will be still AI glasses in the short term, but I do see at some point this category of display glasses becoming more important. There are some unique features that you can only have "I do think there’s something beautiful about intertwining technology with fashion." Meta Ray-Ban campaign. EssilorLuxottica. Meta Ray-Ban campaign. EssilorLuxottica. 05. Smart Frames
- 71. I think itwill evolve with the product. It’s such new, uncharted territory that we’re exploring for the first time together. I think it’s a good thing if the partnership will change, but maintaining the skill set of who is doing what. In design, we can bring value and we can help them in really selling the product. They can bring value on the other end, on having the magic of technologyandthe investment that they did on R&D, for example, on thedisplayglasses.Thelevelofinvestment that goes into [it], it’s really only a big tech company can do it. What advice would you give to a luxury or fashion brand that’s thinking about entering into technology and wearables? I think it’s key for a fashion brand to approach this path. I do think there’s something beautiful about intertwining technology with fashion. It’s very difficult to do it right, and expensive, to be honest, so venture when you’re ready. But I think it’s important. I do believe even for fashion, having some technical part of some IP, or something you can really own as a fashion brand, is key, because wearables are only going to increase and evolve. If I were a fashion brand starting now, let’s say, in my roadmap I would definitely put wearables. through the glasses, and I do think there will be some crossover even in sports. I imagine being able to see your speed when you’re skiing, or your heart rate, or fewer display outputs. Do you have a sense of which abilities offered by the display could become the most used? Texting, I would say, is the main one, and translation and caption. The thing that could be interesting, when you take a picture right now with the Ray- Ban Meta, you need to pull out your phone, look at it and then post it or send it to a friend. Now you avoid that step potentially. You can look at the picture [in the display] and send it directly to a friend. That’s already the direction of starting to leave a little bit your phone in your pocket. We started this journey with this idea to bring back people to live a little more in the moment, and I think AI glasses do this perfectly. Could smart glasses eventually replace smartphones? It’s difficult to say. I’m a bit sceptical when people say things like that, because there is a lot of computing processing that you probably need your phone [for]. In the very long term, that maybe could be a possibility. I think it’s worth the shot, because we have been holding our phones for so many years now, which even has an impact on our posture. I do think that maybe there is an opportunity there to lift people up, having people looking straight ahead of them. I am optimistic that that could happen. I don't see that happening in the next five years; 10 is a bit too far to say. But it’s not like the phone replaced the laptop completely. I think it will be more an integration of a bigger ecosystem of devices. You have a product for the lifestyle customer and the sport customer. Could there be a product for a work customer, who’s using these glasses for business and day-to-day productivity? I think so. We have the tools really to do it, so we can be very specific, like a use case could be like a surgeon who needs to go in the clinics and do his daily tasks. There are a lot of people using the glasses already for this use case, but I do think that could be something to explore. I think at some point also, you could develop appsfor specific use cases. In particular, with displayglasses, I see the ecosystem opening up to different use cases and different platforms and apps. Are there ways you expect the partnershipbetweenEssilorLuxottica and Meta to evolve in the future? This interview has been edited and condensed. Meta Ray-Ban Display. EssilorLuxottica. 73 The State of Fashion 2026 05. Smart Frames Consumer Shifts
- 72. 06. The WellbeingEra The State of Fashion 2026
- 73. KEY INSIGHTS EXECUTIVEPRIORITIES 06. The Wellbeing Era Wellbeing is becoming central to how consumers live, spend and define themselves. As they tire of attention-grabbing content, they are drawn to brands that reflect their shifting identities and offer them emotional connections. Fashion brands are responding by entering wellbeing-adjacent “third spaces,” but further opportunity lies in integrating these shifting priorities more holistically across the brand universe. • 84 percent of US consumers said wellness is a top or important priority in their day-to-day lives in 2024, soaring to 94 percent in China. • 51 percent of consumers would spend the same or more on health and wellness if their discretionary income decreased. • Nearly nine in 10 consumers say being part of a like- minded brand community strengthens their connection to a brand more than other engagement tactics like influencer marketing. • Determine if wellbeing sits at the core or periphery of the brand by understanding what matters most to consumers and how effectively the brand aligns with their sense of identity. • Execute wellbeing initiatives in a credible, authentic way, ensuring they align with the brand’s overarching purpose and values. • Build credibility in the wellbeing space through long-term commitment, integrating wellbeing across touchpoints and partnering with established voices to strengthen authority. 75 The State of Fashion 2026 06. The Wellbeing Era Consumer Shifts
- 74. Consumers are seekingmeaningful connections to brands embodying what matters most to them Dopamine hits lose their edge Fashion has been rewired by “dopamine culture,” where social media algorithms reward speed, spectacle and constant novelty and fuel a cycle of short-lived viral trends.1 But that model may be reaching its limit. Microtrends are losing their grip on audiences, who are gravitating towards longer- form content with more narrative depth and shifting their focus to brands that reflect their identities and give them a sense of belonging. Nearly nine in 10 consumers say being part of a like-minded brand community strengthens their connection to a brand more than other engagement tactics like influencer marketing.2 Focus shifts from attention to retention AI is impacting brand loyalty by making product comparisons easier, while consumers simultaneously shift discretionary spend away from goods to travel and experiences. Executives say customer retention is therefore more important than ever, with 50 percent identifying it as a top priority for 2026.3 Fashion brands that connect with what matters most to today’s consumers will be best positioned to earn lasting loyalty. 89 80 72 68 67 67 63 Great user reviews online Memorable advertising campaigns Engaging and creative social media content Being part of a like-minded community Engaging content across channels Celebrity endorsements Influencer endorsements Top drivers of emotional connection with a brand, % of respondents Source: BoF-McKinsey State of Fashion 2026 Consumer Survey in the US, UK and China 43% higher reach for videos over 60 seconds than shorter ones on TikTok in March 20254 62% of consumers say they have an emotional connection to the brands they buy from the most5 76 The State of Fashion 2026 06. The Wellbeing Era Consumer Shifts
- 75. A growing focuson wellbeing is shaping the identities and priorities of consumers today The democratisation of wellbeing Wellbeing is redefining how consumers globally live and define themselves, shifting from a pursuit of niche enthusiasts to a priority across consumer segments. Eighty-four percent of US consumers and 94 percent of Chinese consumers now consider wellness a top or important priority. Gen Z and Millennials are at the forefront, accounting for over 40 percent of US wellness spending in 2024.6 For many in this generation, wellbeing has evolved from hobby into a defining part of who they are, with 55 percent considering fitness to be a core part of their identity.7 The longevity movement Consumers today are focused not just on living longer but living better. Around 60 percent of consumers say “healthy ageing” is a top priority.8 This is fuelling the longevity movement, which reframes everything from diet and sleep to skincare and fitness through the lens of vitality and balance. The focus has shifted from relentless self- optimisation to equilibrium, where health is balanced with enjoyment and discipline with indulgence. 49 48 37 36 32 27 47 44 36 31 30 27 45 39 36 26 31 23 US UK China Better health Improving overall health Better sleep Improving sleep onset, duration or quality Better nutrition Eating a healthy diet Better mindfulness Increasing calm and improving mental health Better fitness Optimising exercise Better appearance Improving skin, hair and nail health Consumer prioritisation of wellbeing dimensions, % of respondents who consider the dimension a very high priority Source: McKinsey & Company, Future of Wellness 2025; US (N=3,700), UK (N=2,003) and China (N=2,002) 77 The State of Fashion 2026 06. The Wellbeing Era Consumer Shifts
- 76. As the wellbeingmovement accelerates, there is a growing opportunity for fashion brands The wellness market is surging as wellbeing becomes central to how consumers spend their time, money and engage with brands. This is not a passing trend, but an enduring lifestyle shift, with the wellness market growing 6 percent annually from 2019 to date9 and forecast to continue growing at 5 to 6 percent per year through 2028. It is reshaping consumers’ spending across categories, from what they eat (around half of consumers and two-thirds of Gen Z and Millennials purchased functional-nutrition products and supplements last year)10 to how they socialise (as seen in social wellness clubs such as Remedy Place gaining traction). Since they are intrinsically linked to lifestyle, fashion brands should consider how they engage with the wellbeing-focused customer. For many, this space has offered a natural entry point into adjacent categories such as athleisure and skincare, enabling brands to capture a broader share of lifestyle spending. But further opportunity lies in integrating consumers’ shifting priorities towards wellbeing — and the changing consumer identities they reflect — more deeply across their ecosystems. 55% of consumers are willing to invest more than $100 a month in nutrition, self-care, physical and mental health11 51% of consumers would spend the same or more on health and wellness if their discretionary income decreased12 2028E $2T $2.4T-$2.5T 2024 Estimated annual spend in the global wellness industry, 2024-2028E USD (trillions) +5-6% CAGR Notes: Wellness market sizing includes products and services aligned to health, sleep, nutrition, fitness, mindfulness and appearance (excludes certain wider categories e.g. public health, real estate and workplace wellness). Estimated compound annual growth rates (CAGR) calculated using Global Wellness Institute, “Global Wellness Economy Monitor 2024” — sectors of Personal Care & Beauty; Healthy Eating, Nutrition & Weight Loss; Physical Activity; Wellness Tourism; Mental Wellness; Spas — triangulated with category level data Source: McKinsey & Company, Future of Wellness 2025; Global Wellness Institute 78 The State of Fashion 2026 06. The Wellbeing Era Consumer Shifts
- 77. Brands are leveraging‘third spaces’ increasingly tied to wellbeing to deepen connection KITH IVY IN NEW YORK CITY ALO WELLNESS CLUB AND RETREATS Kith Ivy, a new members club in New York City scheduled to open in late 2025, blends retail, dining, wellbeing and leisure into a single experience. It includes rooftop padel courts, an Erewhon tonic bar and Moroccan-inspired cuisine from Café Mogador. It also includes an Armani Spa, offering wellbeing-orientated experiences including sports massages and IV drips. In celebration of the launch, Kith will introduce its first collection of apparel and equipment, available at the Pro Shop located within the club. Together, these elements create a holistic environment where culture, commerce and self-care meet.14 Alo Yoga’s Wellness Club is a subscription-based digital platform centred on the pillars of yoga, fitness, mindfulness and self-care. The online experience offers members on-demand access to fitness instructors.15 The brand has also moved into physical spaces and offers in-person wellness retreats that bring community members together around Pilates, mindfulness and food. Most recently, a three-day retreat at a luxury resort in Mexico offered an immersive experience led by renowned instructors.16 Fashion players are attempting to deepen emotional connection with customers by creating “third spaces”— social environments that sit between home and work, encouraging customers to spend valuable time with a brand, whether online or in-person. Brands are leveraging these spaces as tools to attract and retain customers, with almost one third of consumers first discovering a brand aligned with their values through brand-community interactions.13 Wellbeing is becoming increasingly central to these third-spaces as brands seek to connect with customers on what matters most to them. For example, Dior’s growing portfolio of branded spas extends the brand further into customers’ lifestyles, while Lululemon’s yoga hubs and Missoma’s London running clubs promote mindful, community-focused engagement. The Kith Ivy club. Kith. Alo Wellness Club private saunas. Alo Yoga. 79 The State of Fashion 2026 06. The Wellbeing Era Consumer Shifts
- 78. Truly aligning withevolving consumer priorities will require a holistic transformation While wellbeing-orientated third spaces can deepen connection and drive footfall, truly reflecting consumers’ evolving priorities and wellbeing-shaped identities requires brands to embed wellbeing consistently and deliberately across strategic levers. Lighter-touch wellbeing integration Brands can embed storytelling that promotes balance and vitality into their marketing messages to credibly align to the wellbeing-orientated consumer. In addition, they can collaborate with wellbeing ambassadors or influencers to connect with their audiences organically. As a step further, brands can create pop-up events or immersive in-store experiences, such as the Wellness Galerie at Galeries Lafayette, and launch product extensions like Celine’s Pilates clothes and accessories. Holistic wellbeing integration To fully tap into the wellbeing movement, brands should consider embedding wellbeing into both their DNA and go-to-market approach. This means intentionally rethinking assortment and design codes to reflect a deeper commitment to wellbeing and balanced living, with these principles carried through channel strategy and retail experiences to authentically reinforce the brand’s positioning and drive revenue. Sporty & Rich, for example, has built its identity around “wellness-inspired apparel and accessories,” and also offers a beauty range, sleepwear and the recently published “Sporty & Rich Wellness Book” written by the brand’s founder, Emily Oberg. Extent of wellbeing integration TRANSFORM INSPIRE EXTEND Adjust storytelling with wellbeing-focused activations, in-store experiences, and ambassador or influencer partnerships Move into wellbeing-aligned offerings, such as product extensions and long- term collaborations, that complement the core brand identity Embed wellbeing in the brand DNA via core product offerings, design codes and channel strategy, fundamentally shaping core values Light touch Holistic 80 The State of Fashion 2026 06. The Wellbeing Era Consumer Shifts
- 79. Brands need todefine how wellbeing fits into their identity today and in the years ahead Define how far the brand should evolve to align with the wellbeing movement, from marketing shifts to full brand DNA transformation. Begin by developing an in-depth understanding of what the brand stands for, what matters most to customers and how effectively the brand already delivers on those expectations today. Stay abreast of consumers’ shifting identities using insights from tools such as social listening and search analytics to guide the extent of wellbeing integration. Build meaningful and lasting connection with customers around wellbeing through discipline and consistency. This demands sustained action that shows up across products, services and experiences. Track consistency of brand values to ensure initiatives enhance rather than dilute brand equity and resonate with customers. Partnerships can further strengthen credibility. Collaborating with credible wellbeing experts, creators, and adjacent sectors such as fitness, hospitality and beauty enables brands to expand their influence and reinforce authority in the space. Determine if wellbeing sits at the core or periphery of the brand 1 Build credibility in the wellbeing space through long-term commitment 3 EXECUTIVE PRIORITIES Map how your brand can authentically execute on the wellbeing opportunity across relevant categories, services or communities. Identify white spaces that align with existing offerings, brand values and design codes to embed wellbeing authentically and avoid overextension. Successful integration often builds on what the brand already does well and extends those strengths into the wellbeing space in ways that feel natural and emotionally resonant. Prioritise opportunities with data-led insights on projected customer adoption, revenue potential and risk. Execute strategic integrations authentically 2 81 The State of Fashion 2026 06. The Wellbeing Era Consumer Shifts
- 80. 07. Efficiency Unlocked TheState of Fashion 2026
- 81. KEY INSIGHTS EXECUTIVEPRIORITIES 07. Efficiency Unlocked In a challenging fashion market, companies must become more efficient to drive growth. Old advantages like scale and low-cost sourcing are no longer sufficient to sustain a healthy economic model. By taking advantage of new technology, businesses can improve productivity to reduce costs, unlocking resources to invest in differentiators that enable growth. • Fashion executives say changing margin, cost and cash strategies will be the second most-significant theme to shape the industry in 2026, second only to tariffs and trade disruptions. • 45 percent identify sourcing costs as the area of their economic model under the most pressure, followed by pricing and inventory management. • Up to 90 percent of transformative AI projects are stuck at pilot stage, constrained by structural and cultural barriers. • Evaluate where margin gains can be unlocked by assessing the full company P&L and prioritising technology that offers the greatest efficiency improvements. • Bring renewed focus to enablers such as data sharing, change management and a culture of experimentation to accelerate efficiency gains. • Reinvest freed-up resources into customer-facing differentiators that matter most to the target audience. 83 The State of Fashion 2026 07. Efficiency Unlocked Fashion System
- 82. For much ofthe last decade, fashion companies relied on scale, low sourcing costs and tactical promotions to grow profit. Today, these levers no longer provide the same advantage: • Costs along the value chain are rising, driven by tariffs — most notably US-imposed — together with inflation and supply chain disruptions. It is estimated that tariffs introduced in 2025 will drive price increases of 35 percent for apparel and 37 percent for leather goods in the short term.1 To add to this, fashion’s reliance on low-cost labour in sourcing countries is under growing scrutiny, raising questions about fair pay and sustainability.2 • Consumers are more price-sensitive, constraining margins and limiting the ability to pass on costs. Seventy percent of shoppers intend to spend less across apparel categories from Q3 to Q4 2025, and almost 80 percent say that when prices go up, they will not buy at full price but will wait for a sale, buy a cheaper alternative, postpone their purchase or buy secondhand.3 • Cash is under pressure as faster trend cycles and uneven demand result in overstock and tie up working capital in inventory. The number of days fashion companies held inventory before turning it into sales rose 4 percent from 2023 to 2024, inflating warehousing and logistics expenses.4 Executives recognise these pressures and say changing margin, cost and cash strategies will be the second most-significant theme to shape the industry in 2026, second only to tariffs and trade disruptions.5 Compounding challenges mean fashion companies can no longer rely on old levers to grow 45 39 38 32 29 28 23 22 17 13 12 Pricing, promotions, markdowns Inventory management Labour Marketing Assortment complexity Sourcing costs Technology and digital infrastructure Payables and receivables Capex management Returns Logistics and fulfilment Deep dive to follow Parts of fashion’s economic model under the greatest pressure, % of executives who ranked in the top three Source: BoF-McKinsey State of Fashion 2026 Executive Survey 84 The State of Fashion 2026 07. Efficiency Unlocked Fashion System
- 83. Leading companies arepioneering technology to reshape their economic models Revenue COGS Operating margin before tech- enabled efficiencies Other operating expenses Operating margin after tech-enabled efficiencies SG&A Margin gain Customer- facing differentiation boosts pricing power and drives sales growth Digitised sourcing, improved production efficiency and better demand forecasting reduce input costs Technology- enabled automation lowers operating expenses R&D in technology fuels innovation for future growth Automation of cost-intensive processes frees up resources By automating parts of processes such as sourcing, inventory management and physical sampling, companies can save money to dedicate to customer-facing differentiators, such as personalisation, product innovation and enhanced store experiences. Generative and agentic AI are evolving quickly and promise to transform processes like these. Leading players are overcoming challenges in scaling AI use cases Research suggests that up to 90 percent of initiatives fail to scale beyond the pilot phase. This is caused by structural barriers (such as weak governance, poor data quality and fragmented tools) and cultural barriers (such as absence of incentives to reward thoughtful risk taking), both of which constrain experimentation at scale.6 Digital tools, backed by strong data foundations are enabling leading players to overcome these hurdles.Coach-parent Tapestry has used generative AI design tool Adobe Firefly to scale its use of “digital twins,” which are virtual replicas of real products.7 Digital twins were first created to aid product development, reducing the need for physical samples, then expanded to applications like content creation for social media campaigns and in-store merchandising.8 Margin loss Revenue growth from differentiators COGS savings SG&A savings R&D investment Total margin gain Illustrative operating margin improvements from tech-enabled optimisation 85 The State of Fashion 2026 07. Efficiency Unlocked Fashion System
- 84. Rising input costs,geopolitical tensions and shorter trend cycles are making improvements to supply chain agility a top priority for cost savings. While many fashion brands still rely on legacy systems, top-performing brands are digitising their sourcing practices to improve flexibility in response to changes in demand and supply chain shocks. Brands are pursuing digitisation in different ways: Many partner with third-party providers such as product lifecycle management platforms, while others build proprietary systems. Shein, for example, has begun offering its digitised supply chain platform as a service to external brands.9 Looking ahead, the next wave of innovation will be driven by AI, enabling companies to leapfrog from early foundational sourcing models to advanced, AI-driven models. Using tools such as AI agents, companies can link systems like product lifecycle management and enterprise resource planning to create a unified view of sourcing, enabling real-time analytics and unlocking double-digit cost savings. Digitisation can unlock double-digit reductions to sourcing costs Sourcing maturity stages, Potential cost reduction compared to basic procurement,a % Most brands Top performers • High-level product cost estimates without detailed breakdowns • Direct sourcing through existing manufacturers • Target costs based on margin goals, with limited transparency of cost drivers • Limited diversification across sourcing countries Pioneers Foundational sourcing Strategic sourcing Advanced sourcing Next-gen sourcing 3-4% 5–8% 7–10%+ 8–12%+ • Detailed cost breakdowns include materials, labour and logistics • Structured supplier competition through Request for Quotation processes • Value-engineering methods used to redesign products, balancing cost with quality • Product sourcing from the most suitable country with periodic updates • Dynamic, real-time, predictive costing • Live vendor collaboration through shared digital platforms • Design choices made in real time by balancing cost, speed and sustainability • Dynamic supplier network with real- time tracking of landed costs, including labour and freight a. Basic procurement is transactional and cost-focused, driven by freight on board price negotiations, reliant on intermediaries or agents, and marked by limited supplier competition or cross-sourcing Source: McKinsey analysis, values based on 30+ sourcing maturity transformations Using AI, pioneering brands can skip intermediate stages and progress to next-gen sourcing • Models estimate what a product should cost for a negotiation benchmark • Digital Request for Quotation processes, where data and benchmarks drive supplier bids • Product design uses consumer insights to reduce costs while keeping high-value features • Sources closer to end markets 86 The State of Fashion 2026 07. Efficiency Unlocked Fashion System
- 85. AI can offeran edge in a price-sensitive market The hunt for the lowest prices is intensifying, driven by rising price sensitivity, the surge of dupes and use of both established consumer tools such as Google Shopping and Lyst as well as newer entrants like Phia.10 This shift means brands must accurately align prices with perceived customer value to remain competitive. AI is unlocking new levels of precision and agility in this task. Leading companies are leveraging AI to integrate cost, competitor and customer data in real time to optimise pricing, either by building proprietary pricing engines, or leaning on specialist vendors that deliver similar capabilities. In doing so, they may not only optimise prices but also build richer insight to guide future pricing decisions. Prices at launch are set using static data, failing to account for evolving market conditions Access to real-time market and competitor data enables optimal prices to be set for each product at the right moment, maximising their competitiveness and customer appeal Prices are revisited only through infrequent manual reviews, making the pricing process slow and resource-intensive Real-time insights enable frequent price reviews based on inventory levels and shifts in demand across substitute products (e.g. silk vs. satin blouses), leading to better- informed pricing decisions and regular adjustments if required Targeted promotions by channel, product and store, based on demand, sell-through and related inventory levels (e.g. winter coats promoted only to customers near locations with excess stock) steering demand and clearing inventory where needed, while avoiding unnecessary discounting FROM TRADITIONAL TO AI-ENABLED Uniform markdowns and promotions applied across channels, products and locations (e.g. winter coats reduced 30 percent across all stores, even in locations with little excess stock) AI-enabled pricing optimisations 87 The State of Fashion 2026 07. Efficiency Unlocked Fashion System
- 86. Demand-driven strategies aregaining traction as a lever to reduce inventory pressures Inventory challenges continue to weigh heavily on the fashion industry. The number of days inventory outstanding — meaning the average number of days a company holds stock before converting it into a sale — reached all-time highs in 2024, based on analysis from the McKinsey Global Fashion Index.4 Upcoming legislation will intensify the financial burden of inventory In 2026, legislation such as the Ecodesign for Sustainable Products Regulation in the EU and the Responsible Textile Recovery Act in California will penalise unsold or obsolete stock, impose recycling and take-back obligations, and raise the costs of non-compliance.11 12 Demand-driven inventory optimisation is one way to protect margins Technologies such as digital textile printing, combined with AI tools that analyse demand and optimise production workflows, are making on-demand solutions more feasible. Initiatives such as Nike’s SNKRS Reserve system, which allows a select group of customers to preorder sneakers before they are made, illustrate how companies are beginning to experiment in this space.13 Some brands are even developing their own inventory management platforms that generate insights from data across operational and commercial functions to improve accuracy and speed. 50 47 33 Assortment mix Inventory Pricing and promotions Fashion executives’ top targets for optimisation to protect margins in 2026, , % who ranked the initiative in their top three Number of days inventory outstanding per year across fashion companies 147 160 168 2024 2020-2023 average 2016-2019 average +14% Source: McKinsey Global Fashion Index Source: BoF-McKinsey State of Fashion 2026 Executive Survey 88 The State of Fashion 2026 07. Efficiency Unlocked Fashion System
- 87. Evaluate where margingains can be unlocked by assessing the full company P&L — for example, improving cash flow through better inventory management or boosting revenue by offering fewer discounts. Target high-return technologies. Focus on solutions that tackle the biggest inefficiencies first. Use a pilot-test-learn- scale approach to manage risk, measure impact and scale promising solutions across the business. Enable data sharing between functions for faster, more-informed decisions. External partners such as AI and cloud providers should also be integrated. Support employees with adequate training and change management to enable widespread adoption of new processes. Strong governance structures are needed to sustain momentum, with clear ownership to ensure accountability, defined decision rights to enable effective collaboration and aligned incentives across functions to prevent pilots from stalling or remaining siloed. Encourage experimentation and treat failures as learning opportunities. Leadership should embody the culture they want to build, communicate openly and signal that AI is a priority that offers development opportunities. Redirect savings from cost efficiencies into strategic customer-facing investments that will enable the brand to stand out in a highly competitive market. Study customer preferences and benchmark against competitors to prioritise differentiators. For luxury brands, invest further into clienteling to offer highly personalised services to VICs, while sustainability- focused brands could channel investment into blockchain traceability to reinforce brand values with eco-conscious consumers. Executives should prioritise structural enablers and organisational readiness to scale innovation Prioritise the most impactful areas to scale innovation 1 Support innovation with enablers such as data sharing and change management 2 Reinvest freed-up resources into customer-facing differentiators 3 EXECUTIVE PRIORITIES 89 The State of Fashion 2026 07. Efficiency Unlocked Fashion System
- 88. BY ROBERT WILLIAMS Burberryhas been hard hit by luxury’s slowdown, with sales down 15 percent year on year in the 12 months through March 2025. But the British trenchcoat maker has nonetheless been the object of investor euphoria, with the brand’s share price more than doubling from September 2024 to October 2025. What’s got markets bullish on Burberry? Simply put, confidence — that after years of “square peg, round hole” turnaround plans aimed at transforming Burberry into a top-end, fashion-forward leather goods house, new CEO Joshua Schulman’s more pragmatic approach to branding, pricing and more will pay off. Schulman joined Burberry in July 2024 following a transformative tenure at Tapestry’s Coach and a stint leading Michael Kors. Since his arrival, Burberry moved to swiftly clear inventories to make room for new collections, refreshed to include a greater share of accessibly priced optionsandidentifiable more branding. Hero bags priced around £2,000 (approximately $2,661), tartan scarves for £420 ($559) and staples like polo shirts with touches of Burberry check were a focus. Raingear has been front-and-centre in campaigns referencing iconic British films, featuring globally recognised British talents like Kate Winslet. With Burberry’s assortment, pricing and marketing reworked, Schulman is looking to get the brand back on the track to growth. Burberry Lights a New Way Forward by Reigniting Its Core In his first year as CEO of Britain’s biggest fashion firm, Joshua Schulman has pushed Burberry to rebalance pricing, refocus on outerwear and reassert a globally understood vision of British luxury, while instilling a new sense of urgency inside the heritage brand. 90 The State of Fashion 2026 07. Efficiency Unlocked Fashion System
- 89. What was yourinitial analysis of Burberry when you first joined the company last year? I’d been following the brand for 25 years. What Rose Marie Bravo and Christopher [Bailey] created — and then when Angela Ahrendts came and further amplified the brand — had a huge impact for me. Since then, there has been a lot of change at Burberry in terms of logos and brand expression — and individuals, frankly, who took the brand in different directions. It was clear to me that the brand was not performing at the level it should be. In some ways, we had lost our way. We were focussing on categories that weren’t our historic core. Burberry has authority, heritage and legitimacy as a leader in outerwear and scarves, but we had adopted a handbag-first approach. It looked from the outside that Burberry had the most opportunity where it had the most authenticity. Almost from the moment I walked in and shared that with the teams, that idea resonated across the company. The brand’s marketing message has shifted since your arrival, with campaigns full of cinematic references starring British actors like Kate Winslet and Olivia Colman. It seems the company is recalibrating its approach to ‘Britishness.’ Our brand expression had gone with a very niche view of British luxury rather than a globally recognised view. The wonderful thing about Britishness is there are so many stories to tell, whether it’s country houses or Carnaby Street. I think what’s important is that they be recognisable and globally understood views of Britishness. Daniel [Lee] has shown that he has a broad repertoire, and I look forward to seeing how he interprets them going forward. Brands across the luxury industry have struggled to justify price increases. How are you adapting Burberry’s approach to pricing? It’s about having a pyramid of pricing with [options for] good, better, best. We had previously pursued elevation at the expense of our core. We were abandoning customers who came to us for the ‘good’ and ‘better’ parts of the pyramid. For example, a £600 polo shirt with a boxy, oversized fit is very different from our £300 Eddie polo shirt with a check placket, which for many years had been a core opening-price product. We brought back the Eddie The Burberry Knight. Burberry. 91 The State of Fashion 2026 07. Efficiency Unlocked Fashion System
- 90. polo and itbecame a bestseller again. We can still sell the £600 polo, but it will have less demand. It’s been a lot of those types of decisions. Bags were almost entirely over £3,000, with some prices going up to £5,000. We had walked away from where we have our core strength, which is broadly speaking around £2,000. So last year Daniel introduced B Clip bags priced just under £2,000, and those are selling very well. They had the look of a fashion luxury bag, but also an identifiable brand signifier, a check- trim strap. It’s all about balance. Burberry is a luxury brand with broad universal appeal. The top five luxury brands all have different access points to come into the brand. Chanel has an amazing beauty business. At Burberry, we provide access into the brand through things like polo shirts and scarves. We have legitimacy at the top of the pyramid with our runway, but we got “Britishness” expressed in a Burberry campaign. Burberry. 92 The State of Fashion 2026
- 91. means investing indesign, merchandising, marketing. Investing in what the consumer will see. It’s competitive out there and we need to break through. What’s the role of Burberry’s runway show? Where does that collection and the innovation we might see there fit into Burberry’s strategy? The show is a tentpole moment for us. It’s where Daniel has the opportunity to celebrate Burberry’s codes. I couldn’t be more excited by the evolution of what he’s doing over the past year. Shortly after I joined we had a discussion around Burberry check: it’s a cornerstone of the house. He’s using the check in both more overt and subtle ways. The runway is a laboratory for ideas that get cascaded through the entire range. The B clip bag with a check strap, which debuted in September 2024, has become a very important part of our business since it shipped in February. In addition to Britishness as an idea, Burberry also has ‘made in Britain’ as part of its message, even if many products are made elsewhere. Have you explored ways that you could retool the supply chain to take more advantage of British craft and industry? Our pinnacle trench coats continue to be made in Castleford [England]. We also have another tentpole product — our scarves — where we have a very long-term partnership with a manufacturer in Scotland. But this is an area we can explore further. You’ve spoken about polos and scarves. There also seems to be a renewed focus on outerwear on the runway and in Burberry’s marketing. Great businesses have a strong core and great businesses know their own strengths. The brands that are succeeding are the ones that forge their own path and [are] not taking a formulaic view of luxury. Handbags are a great business, and they’re a really great business if you’re born with legitimacy as a handbag brand. Outerwear is also a great business if you’re born with legitimacy as an outerwear brand. The more we tap into our authenticity, the more we tap into who we are, the more we will succeed. out of whack for a few years because we were buying into the runway as if it were the core. How was the company able to implement these changes while managing high levels of pre-existing inventory? The sell-through on the seasonal collections had been tough. We took decisive action to do pretty deep markdowns, even during the festive season, with the goal of finishing our last fiscal year with flat inventory. We were able to finish our fiscal year with 7 percent less inventory. That allowed us to invest more in the new. You’ve used the word decisive. One thing you’ve really been heralded by the market for was bringing a renewed sense of urgency, after years of maybe focussing too much on medium- and long-term strategic plans. How do you strike the right balance? Long term, Burberry should be a top- five luxury brand. The goal is still to sit among the pinnacle brands. But being an independent, publicly traded company, looking at the financials there absolutely was an urgency to get back on track. We cleaned up the inventory. Over many years we had built up a level of operating expenses which were misaligned with the size of the business. So we took fairly decisive action there as well. This was as much about the [operating expenses] as it was about our way of working. We had a structure in which you had a lot of the decision making happening far away from the customer, and a lot of barriers between the executive committee and the customer. Instead of a chief commercial officer, now the regions report directly to me. We also looked at the way our regions were set up, realigning them to have a Greater China organisation that oversees the Mainland, Hong Kong, Macau and Taiwan. These are examples of how we were able to get closer to the customer while improving our [operating expenses]. There have also been quite a few job cuts. That’s one of the hardest parts of the job, frankly, because it’s never easy to say goodbye to valued colleagues. But the team has really appreciated the sense of urgency, also the transparency around what was happening in the business. As we reorganise it’s really with the idea of how do we continue to have the funding to reignite desire, which This interview has been edited and condensed. 93 The State of Fashion 2026 07. Efficiency Unlocked Fashion System
- 92. 08. Resale Sprint TheState of Fashion 2026
- 93. KEY INSIGHTS EXECUTIVEPRIORITIES 08. Resale Sprint Customers are spending more on secondhand fashion in the search for value as prices continue to rise in the primary market. Marketplaces have made shopping secondhand mainstream, but brands must now define resale strategies of their own. While operational hurdles remain, the lure of untapped revenue will make resale an increasingly attractive way to bolster business models and brand perception. • The secondhand fashion and luxury market is forecast to grow two to three times faster than the first-hand market through to 2027 as consumer appetite grows and scale and technology unlock profitability. • Almost 60 percent of global consumers say they are likely to shop resale in 2026. This figure exceeds 70 percent in China, where secondhand growth is being propelled by strong appetite for premium and luxury goods at accessible price points. • Both marketplaces and brand-led resale are growing. European resale platform Vinted grew net profit more than 330 percent from 2023 to 2024, while the number of brand-led resale programmes in the US grew around 300 percent from 2021 to 2025. • Identify the appropriate resale model, from lighter- touch platform partnerships to integrated, brand- led offerings powered by Resale-as-a-Service providers. • Prioritise resale for categories aligned to the core brand proposition and regional market dynamics, as well as those with strong resale value, such as outerwear and bags. • Use resale to create a brand halo around the primary offering by capturing new customers, reinforcing perceptions of quality and durability, and creating loyalty loops. 95 The State of Fashion 2026 08. Resale Sprint Fashion System
- 94. Resale continues tooutperform the broader fashion and luxury market. Looking ahead, the secondhand market is expected to grow two to three times faster than the first-hand market from 2025 to 2027. Online resale marketplaces make up the lion’s share of sales, accounting for 88 percent of resale spending in the US in 2024. US online resale is forecast to grow 16 percent annually, reaching $34 billion by 2027.1 Asia has become the largest and fastest-growing market. China is a key growth driver, where even wealthier shoppers are seeking deals by shopping resale.2 Over 60 percent of Chinese consumers report shopping more from resale platforms today compared with two to three years ago, while over 70 percent report plans to shop resale in 2026.3 The luxury resale market in China is expected to reach $33 billion by 2025.4 Globally, 59 percent of consumers say they are likely to purchase secondhand in 2026.3 Gen Z and Millennials continue to be the core consumer groups buying secondhand, but older generations are also increasingly shopping resale. The global secondhand apparel market is expected to reach $317 billion by 2027 Global secondhand fashion and luxury market by region, 2023-2027E, Gross merchandise value, USD (billions) 6% 25% 2023 3% 39% 2% 26% 5% 25% 2025E 3% 3% 2% 26% 5% 24% 2027E 41% 26% 2% 317 38% 197 256 +14% +11% 13 CAGR 2023-2027E, % 15 11 12 8 11 North America South America Europe Australasia Asia Africa Note: Secondhand includes all used apparel (resale plus thrift/donation) Source: ThredUp, GlobalData 96 The State of Fashion 2026 08. Resale Sprint Fashion System
- 95. Affordability is akey driver for shopping secondhand across consumer cohorts Several motivations underpin the uptick in consumer appetite for resale, including rising prices on the primary market due to trade uncertainty. According to ThredUp, nearly 60 percent of consumers say they will seek more affordable options like shopping secondhand if tariffs increase apparel prices.1 Early signs are already visible: in the first quarter of 2025, as tariff discussions intensified, resale marketplace Depop’s app downloads increased 125 percent over the previous quarter.5 Even so, consumer motivations extend beyond their budgets, as 61 percent of consumers say they would continue to buy or sell products on resale websites even if they had more money to spend,6 for reasons such as the “thrill of the hunt.” Motivations for shopping resale vary across age groups. Younger shoppers place greater value on discovering unique pieces and past-season items, while older shoppers are more motivated by the treasure hunt and sustainability aspects.3 Consumer motivations for shopping resale by age group, % 43 37 42 37 36 46 38 32 53 34 68 58 28 47 47 Below 35 35-55 55 and above Sustainability Uniqueness Luxury access The thrill of the hunt “I turned to secondhand when my closet felt identical to everyone else’s. Now each piece tells a story, and my style feels mine.” “My wardrobe looks twice as expensive because I shop vintage. Scoring a $300 jacket for $40 never gets old!” “Smart spending still gets me nice things. Resale luxury builds my dream wardrobe without the guilt.” “When I thrift, I’m voting against exploitative manufacturing. I rest easier knowing my style isn’t harming workers or ecosystems.” “My friends joke about my ‘thrift superstitions’ — rainy Tuesdays bring the best denim! The magic is never knowing what you’ll find.” Affordability Source: BoF-McKinsey State of Fashion 2026 Consumer Survey. Assimilated consumer quotes from Quilt.AI Social Meaning platform 97 The State of Fashion 2026 08. Resale Sprint Fashion System
- 96. Category demand variesby region and reflects cultural norms, trust and market maturity Top five categories customers purchase on resale platforms, % of consumers US UK China Outerwear 80 Dresses 77 Watches 69 Watches 67 Tops 77 Bags 65 Bottoms 64 Bags 74 Outerwear 56 Tops 63 Outerwear 64 Boots 55 Sneakers 59 Knitwear 62 Sunglasses 52 Different product categories appeal to different resale markets, reflecting cultural norms, the market’s maturity and consumer attitudes. In China, a newer resale market, the top resale categories include asset-like accessories that maintain their value over time. In the UK, where resale culture is broadly penetrated and trend-led, everyday wear and occasion wear for events like weddings dominate. Globally, categories like outerwear that are perceived as durable are popular in resale.3 Watches, jewellery and bags are popular as investment pieces. In China and the US, where despite economic uncertainty consumers are still interested in buying luxury, watches are the first and second most popular resale categories, respectively. Some products in these segments can even gain value over time. For example, the average selling price for Van Cleef & Arpels’ Alhambra collection rose 20 percent between 2021 to 2025 on The RealReal.7 On eBay, global resale prices for Miu Miu’s Arcadie bag climbed 43 percent between January and May 2025.8 Source: BoF-McKinsey State of Fashion 2026 Consumer Survey 98 The State of Fashion 2026 08. Resale Sprint Fashion System
- 97. The RealReal The RealRealuses proprietary AI tools to save time and money on authentication. Its machine learning counterfeit inspection model, Shield, collects data from more than 50 product attributes to identify those at high risk, which are then prioritised for inspection by the most experienced authenticators. Additionally, Vision, its photo- based AI tool, examines product images in minute detail to predict counterfeit likelihood. It considers fine details, such as leather grain and threading, which can be particularly hard for the human eye to accurately assess.13 Resale platforms are reaching an inflection point, as scale and technology unlock profitability Online marketplaces are the engine of resale’s rapid expansion The scale and reach of these online platforms have made resale a mainstream channel. Some marketplaces specialise in luxury and designer goods, such as The RealReal and Vestiaire Collective, while others target the mid-to-mass market, like ThredUp. Some cater to specific product categories, including Rebag for designer handbags, Chrono24 for watches and StockX’s focus on sneakers. The financial viability of resale marketplaces is improving The RealReal achieved EBITDA profitability for the first time in Q4 2023.9 Europe’s Vinted, after years of losses, also reached profitability in 2023 with a net profit of €17.8 million ($20.9 million), before growing 330 percent to reach a net profit of €76.7 million ($89.2 million) in 2024.10 In the first quarter of 2025, Vinted became the biggest retailer by sales volume in the entire apparel market in France.11 These milestones reflect significant momentum in a sector that historically struggled with profitability. The constraint of high inventory costs, the one-of- a-kind nature of products, inefficient reverse logistics for individual items and the authentication burden weighed on margins. While these challenges remain, this dynamic is starting to shift as technology lowers costs and boosts efficiency. Resale marketplaces are reducing costs by bringing more operations in-house. For example, Vinted invested in its own logistics and payments arm and brought servers and security software in-house.12 AI and automation are also streamlining critical processes, from listing to authentication. a. 2020-2022 values are non-adjusted EBITDA Source: Company reports Adjusted EBITDA margins of online resale platforms, 2020-2024, % -18 -15 -15 -2 3 -43 -27 -19 -10 2 -11 -44 -7 13 20 2020 2021 2022 2023 2024 ThredUp The RealReal Vinteda 99 The State of Fashion 2026 08. Resale Sprint Fashion System
- 98. Reselfridges Luxury department storeSelfridges’ resale offering, Reselfridges, is available in stores and online. With a focus on high-end designer brands, archival and rare items, Selfridges leans into its curatorial reputation and sells pieces from customer trade- ins, partnerships with external specialists and concessions. The programme supports the retailer’s goal to make 45 percent of all sales circular by 2030.18 19 Lululemon Like New Lululemon’s “Like New” trade-in programme, in partnership with software platform Archive Resale, enables the brand to keep customers and products in the Lululemon ecosystem. Customers trade in their used Lululemon products in exchange for store credit. The brand hosts events to grow awareness of the programme, such as at film festival South x Southwest in Austin in March 2025.17 While a smaller part of the market, brands and retailers are increasingly participating in resale Brand- and retailer-led resale currently makes up only a fraction of the secondhand market. These players hosted approximately 275,000 active online listings in 2025, while peer-to-peer platform Depop hosted more than 40 million alone.14 15 Participation has risen since 2021, but momentum has slowed over the last year as fewer than one-third of executives cite resale as a priority.16 Motivations for entering resale Heading into 2026, the success of marketplaces should encourage brands to reassess how resale could fit into their ecosystem. Of brands that are embracing resale, two-thirds cite the acquisition of new customers at lower price points as a key incentive, while around one in four cite improved brand control, allowing them to extract greater value from products by keeping them in circulation.16 Resale can also drive store traffic, providing new reasons for customers to visit and browse first-hand products — while also reducing the operational burden of listing and describing resale items online. Resale-as-a-Service (RaaS) providers as enablers Platforms such as Trove, ThredUp and Reflaunt offer tailored solutions that enable brands to deliver resale experiences integrated into existing infrastructure while outsourcing operations. These platforms help overcome common hurdles such as product quality control and authentication (cited by 34 percent of executives as a challenge) and lack of internal expertise (cited by 31 percent).16 5 9 36 124 163 154 147 2023 2024 2009 –2019 Sep. 2025 2022 2021 2020 +308% Number of brands with resale programs in the US, 2009-September 2025 Source: ThredUp, The Recommerce 100 100 The State of Fashion 2026 08. Resale Sprint Fashion System
- 99. Brands and retailersentering resale should tailor the model to their business needs High involvement High control Low involvement Low control PARTNER WITH A PLATFORM USE RESALE-AS-A-SERVICE BUILD IN-HOUSE How it works Benefits Drawbacks Most suited to A brand partners with a third-party resale marketplace, ranging from co-marketing initiatives to deeper collaborations such as consignment models, product buy-backs or shop-in-shop integrations Light-touch operationally and minimal infrastructure investment Access to established marketplaces and large communities of buyers and sellers Limited control over brand experience and customer data Limited revenue generation potential RaaS providers deliver white-labelled, turnkey solutions for resale technology and operations, allowing brands to integrate the offering into their own website or host it on a separate platform Favourable economics due to fixed costs and revenue-share or per-item arrangements Operational expertise and support is outsourced Outsourcing can result in limited customisation and market differentiation Commercial, operational and strategic benefits are filtered through a third-party A brand builds the underlying technology and operates its own platform, including collecting and buying back items, authentication, product display, transactions, returns and logistics Full control of the brand experience and scalable potential Full ownership of customer data and integration into e-commerce processes Upfront investment required can be significant, especially in tech builds Significant running costs and labour dedicated to non-core capabilities Small to mid-sized brands who want a low- cost, fast entry to test appetite for resale Luxury brands that want access to a ready- made audience and high traffic Brands that lack the scale, expertise or tech capabilities to invest heavily in resale Brands with a loyal following seeking to balance speed to market with control Larger brands with significant scale and brand equity Brands that want to make resale a long-term part of their strategy 101 The State of Fashion 2026 08. Resale Sprint Fashion System
- 100. Resale can beseen as a commercial lever as much as a brand play in 2026 Brands remain cautious about cannibalising first-hand sales with secondhand strategies, with one in five executives citing this as a barrier.16 However, resale also has the potential to boost the primary offering: • Brand perception: Resale can reinforce perceptions of quality and durability while emphasising circularity initiatives. Extending the lifespan of products will be an increasingly important consideration as the EU’s incoming Extended Producer Responsibility regulation shifts financial responsibility for end-of-life products onto producers. Already in place in France, fines of up to €7,500 ($8,805) per unit can be issued for non- compliance.20 • Customer acquisition: 43 percent of consumers who first discovered a brand through resale subsequently purchased first-hand items.3 Resale widens access to more price-sensitive consumers, a growing consideration as tariff-driven price increases heighten affordability concerns. • Customer loyalty: Resale can power repeat purchases from a brand’s primary offering. Brands like Balenciaga — which launched resale with RaaS provider Reflaunt in 2022 — encourage customers to trade in old products in exchange for store credit to purchase new items.21 As customers heighten their focus on value, store credits become even more persuasive. Brands have often treated resale as a brand building exercise. Looking ahead, those adopting should consider making it commercially adjacent — for example, setting KPIs such as trade-in conversion, retention and incremental full-price sales — to capitalise on rising demand for value. Discovers brands on resale, then buys them first hand Customer attitudes towards and behaviours in resale, % of customers US UK China Uses resale to discover new brands Associates brands being resold often with trendiness or high demand Uses resale to explore aspirational brands for future purchase Source: BoF-McKinsey State of Fashion 2026 Consumer Survey 36 44 84 59 61 58 33 58 85 66 77 58 102 The State of Fashion 2026 08. Resale Sprint Fashion System
- 101. Given the growingdemand for resale and increased price sensitivity, a resale presence is increasingly essential for brands. But in 2026, brands can no longer treat resale as a side initiative. Selecting the right model is a strategic choice that will define the amount of value captured — from brand equity to revenue and loyalty. For some players, marketplace partnerships may suffice. But for those seeking deeper impact, more integrated approaches such as Resale-as-a-Service or in-house investments can allow brands to differentiate their propositions, such as through a brand-curated product selection or expert authentication. Not every category will be equally as attractive from a resale perspective. Deciding where to invest efforts will be particularly important for multi-brand retailers entering resale. Products with strong resale value — such as handbags and outerwear — tend to have a longer life and can generate higher margins. These categories are natural candidates with which to pilot and scale resale. Regional and cultural dynamics should also shape which categories to prioritise, with consumers in the US and China leaning towards big-ticket items and those in the UK more trend-driven everyday wear. Brands should also use their core values to prioritise which products and categories to integrate into resale. Doing so ensures that resale reinforces brand identity and deepens loyalty, rather than becoming a disconnected add-on. Resale can reinforce brand equity and consumer perception in the primary market. It extends reach by attracting new audiences and converting resale buyers into future full-price customers. Strong resale value also signals quality and durability — a “good investment” that sustains trust in a brand’s first-hand products. Many companies amplify this effect by rewarding customers with credit or promotions, creating a loyalty loop that drives repeat purchases and deepens long- term relationships. To capture this value, brands should establish clear commercial KPIs — from trade-in conversion rates to customer retention and incremental full-price sales. Success in resale will require clear strategic choices on model, category focus and scale Choose a resale model to suit scale, ambition and resources 1 Focus on high-value categories that reinforce brand identity 2 Use resale to strengthen first-hand sales and attract new customers 3 EXECUTIVE PRIORITIES 103 The State of Fashion 2026 08. Resale Sprint Fashion System
- 102. BY MALIQUE MORRIS Formost of its 14 years in business, The RealReal was yet another money- losing online retailer with a growth- at-all-costs mentality, despite being a pioneer in luxury resale. In the past year,thecompanyhasturnedprofitable, with its adjusted EBITDA jumping 83 percent year on year in 2024 to $9 million. The RealReal’s road to profitability has been smoothed, in part, by a resale boom as rising luxury prices have sent shoppers looking for more affordable secondhand options. But The RealReal is also more disciplined than it’s ever been, says president and chief executive Rati Sahi Levesque. In recent years, it has changed its commission structure to encourage sellers to consign higher- priced items, instead of flooding its marketplace with lower-priced goods to grow sales. It has also integrated artificial intelligence into its authentication process to improve its ability to catch fakes and reduce operational costs. The RealReal is looking to sustain that momentum, adding more AI capabilities to its operations, launching new tools to acquire more consignors and strengthening its international business. Levesque believes luxury resale’s winning streak isn’t about to end either, despite some younger consumers’ embrace of counterfeits and dupes. “There’s always going to be people who want the real deal, too, and that’s what we do every day,” Levesque says. The RealReal’s Plan to Capitalise on the Luxury Resale Boom Soaring prices for new luxury goods and growing scepticism around their value relative to cost are driving more consumers to resale platforms like The RealReal. President and CEO Rati Sahi Levesque discusses the company’s strategy for continuing its winning streak. 104 The State of Fashion 2026 08. Resale Sprint Fashion System
- 103. The RealReal storein Summit, New Jersey. The RealReal. Low-value items under $100, maybe we’re not the place for those items. Maybe you need to take them somewhere else, because it costs us the same amount to process and authenticate low-value as it does mid- and high-value. Our sweet spot is that mid- to high-value product. The other place that we made changes is we were out buying inventory. We went back to our core consignment [model]. As consumers across income groups confront higher prices, how has their willingness to buy luxury items on the resale market shifted? Most of our products, you can’t find anywhere else. So it’s not a commodity. These are rare items that people are willing to pay for. People want to make sure that they’re getting value. In the primary market, a lot of these brands kept pushing the envelope on pricing. Every year, taking their pricing up pretty significantly. At The RealReal, it’s really about what the consumer will pay for something. We use data to understand how far the consumer is willing to pay for something, and they tell us. We’ll see demand drop, or we’ll see the sell- through go down. Our sell-through is quite high. It’s pretty much [around 75 percent] in 90 days, which is unheard of, because we let the market set the price. It’s not The RealReal sitting here and setting the price, it’s the market, the consumer telling us what they will pay for something. There’s been a rise in younger consumers seeking dupes — less expensive versions of high-end goods — and counterfeits. What has that meant for luxury resale? There’s always going to be a want for authentic goods. The value play is important, but authenticity is important, too. We do it for a lot of different reasons. Authenticity is one, integrity of the product is another, really preserving the history and heritage of the brands, keeping these brands alive. How has the embrace of counterfeits impacted your authentication practices? We are not new to authenticity. We’ve invested a lot of time and dollars and patent technology around it. I sleep well at night because I know no one does more than us to keep fakes off the market. Some of these brands are authenticated three times, by three different authenticators. Then we’re using technology, something called Vision and Shield, to not only authenticate the consignor but also the product. Thisyearwasmarkedbyadestabilising trade that’s forced brands to raise prices. How have tariffs impacted The RealReal’s growth? Resale is having a moment, but there’s a lot of factors that are contributing to that. Tariffs are one of them. The inflationary pressures, all of that. The consumer is just smarter than they’ve ever been, and they’re like, ‘Why wouldn’t I participate in the circular economy?’ Even when they’re buying wedding dresses, they’re now thinking of the secondary market first. When [consumers] shop in the primary market now, they’re thinking about The RealReal. They actually call us and ask us, ‘What holds its resale value? Is it the Louis Vuitton Speedy or is it the Goyard tote bag?’ They want to understand that before they’re even buying in the primary market. The RealReal has been turning a profit in recent years. What have been the biggest profit drivers? We made some systemic changes to our business. We changed our commission structure, for example. The RealReal store in Summit, New Jersey. The RealReal. 105 The State of Fashion 2026 08. Resale Sprint Fashion System
- 104. Bag authentication. TheRealReal. I’ll use handbags as an example. We now can measure, on a pixel level, the handbags, and know if an item is authentic or fake. It’s this piece of hardware that goes in and takes a picture of it at a microscopic level, and then puts it through the right kind of funnel and say, ‘Hey, there’s something wrong with this, at a microscopic level,’ or ‘This has the wrong metal at the zipper. It’s not real.’ How will your use of AI continue to evolve? Now it’s about coverage across all products. It’s also going to be about speed of processing. Some of these items take two or three weeks to process. You can see how now it can take a week to process. Now we’re authenticating all handbags via AI. We have all this data [from our] 40 million members. Knowing your behaviour, you buy a handbag and your typical pattern is, in six months, you’re wanting to move on from that handbag and buy something else. Then we’d ping you and say, ‘Hey, you can trade up now.’ So that’s something called My Closet that we’re launching. In one click, you’ll be able to re- consign it and actually sell high. When is this launching? Our first part of that was ‘re-consign’ that we already launched, and we’re seeing huge engagement there. My Closet will launch early next year. Consumers are asking for it. What if you can say to them, ‘You have $30,000 in your closet, you want to go out and buy this Cartier watch, here’s the two things to consign right now that you’re going to get the most dollars for. Maybe this is the right time to consign those things to go buy your Cartier watch.’ Which regions are driving the most momentum in luxury resale? Which regions are underpenetrated but show a lot of potential? “Most of our products, you can't find anywhere else. So it's not a commodity. These are rare items that people are willing to pay for.” Bag authentication. The RealReal. 106 The State of Fashion 2026 08. Resale Sprint Fashion System
- 105. how easy itis. They like that they can consign all categories, everything, not just one brand. They like the cash versus the site credit. They like the depth of our product and what we sell, because we sell across all categories. That is definitely a competitive advantage for us. Well, we are mostly domestic [in the US] right now. We do sell internationally. So Europe is a big piece of that. The Middle East a bit. As well as Australia. Hong Kong is another one. Northern Europe, Europe in general. So that’s where we’re seeing [interest] outside of the US. We are looking at a cross-border solution right now. We think this could be a big growth driver for us over the years. We sell to a lot of these countries overseas, and now it’s about how we bring in the supply. For example, Japan, we’re now just starting to get products from Japan. We’re also starting to get in product and partnering with [consignors in Japan], with something called an API feed. So they’ll be able to directly post on our site, and we’ll authenticate post-purchase. Customer acquisition costs continue to go up. How is that impacting the online resale market? Where are resellersfindingtheirbestcustomers? It’s about getting smarter around attribution and targeting. What we’ve gotten better at is being able to flag whichbuyersmake the bestconsignors, and how do we target them, and where are they? A lot of the old- school channels, sometimes radio, TV, direct mail, being able to target certain zip codes. If you’re young and you’re fashionable, usually you’re a consignor of ours because you do like to change out your wardrobe every so often, you do have this love for fashion, and that does become important to our ecosystem. So being able to target those people and getting better at it is really where we’re focused. What are some untapped customer acquisition strategies that you’re not investing as much in yet but seem promising? Another place is the affiliate programme. If you’re a closet organiser or a celebrity stylist, you can earn a few extra thousand dollars every month, because you earn a percentage of every sale of your client’s closet. It becomes interesting for them. We’re definitely seeing something there, and we’re building out what that strategy looks like. How do you expect the dynamics in resale to play out in the coming year? Are more brands going to pursue resale on their own, and what does that mean for resale platforms like The RealReal? There’s room for all of it. That said, we’re really focused. We find that our customer and consignor like the simplicity of our service. They like The RealReal store in New York. The RealReal. This interview has been edited and condensed. 107 The State of Fashion 2026 08. Resale Sprint Fashion System
- 106. 09. The ElevationGame The State of Fashion 2026
- 107. KEY INSIGHTS EXECUTIVEPRIORITIES 09. The Elevation Game From the value segment up to affordable luxury, fashion brands are moving upmarket. Some want to differentiate from ultra-low- cost competitors, while others aim to capture the former high-end shopper squeezed out by luxury prices. With margins under pressure and competition intensifying in 2026, these elevation strategies will gain new urgency. Product quality and standout experiences could help brands upgrade their positioning. • Value brands such as Bershka and H&M have reduced the share of SKUs in their lowest price tiers in the UK by 15 to 25 percent between 2023 and 2025. • 51 percent of global customers say quality is a key driver in creating a high-end brand perception, the highest of all attributes, while 47 percent cite a strong brand story. • While consumers are becoming more price-conscious, around one-third are still willing to splurge on fashion when they find good reason — such as when products are well-crafted and when consumers are made to feel special and valued. • Redesign product pyramids. Introduce premium “halo” products that signal new positioning and build authority through product excellence. Use higher-priced capsules and collaborations to create excitement without alienating the core customer. • Adjust pricing architecture but avoid overreaching or elevating prices too quickly by committing to long-term discipline. Accompany changes with clear messaging about the elevated proposition, closely monitoring consumer perception. • Reinforce elevated positioning by improving the customer experience across channels and by investing in brand marketing to tell compelling narratives that deepen emotional connections. 109 The State of Fashion 2026 09. The Elevation Game Fashion System
- 108. Across price segments,fashion brands are premiumising in a bid to grow sales Value players are elevating their brands defensively against ultra-low-cost rivals such as Shein and Temu, whose business models remain difficult to undercut, even as policy shifts erode some of their cost advantage. For example, value brands Bershka and H&M have reduced the share of SKUs in their lower price tiers across categories and markets between 2023 and 2025, according to data from EDITED.1 Mid-market players are tapping into the growing demand for “affordable aspiration” from consumers who remain price-sensitive but increasingly prioritise quality and design.2 Zara has pioneered this strategy, taking aim at trend-focused shoppers seeking fashionable designs at more affordable prices than luxury ready-to-wear collections. Premium/bridge and affordable luxury players are seizing the white space created by the increase in luxury prices, which rose 61 percent on average between 2019 and 2025.3 Many aspirational consumers, also squeezed by inflation and seeking more creative inspiration from luxury brands, are opting to spend their disposable income elsewhere. Brands like Ralph Lauren are capitalising on this shift, increasing focus on categories like outerwear and bags, where customers are familiar with paying more.4 Similarly, French affordable luxury giant SMCP has reduced reliance on discounting to support the elevation of its brands, which it outlined as a key priority in 2025.5 Segment definitions Source: Individual company reports, press releases, earnings calls Note: Example prices are based on men’s jeans Note: Aspirational consumers are those spending between €3,000 (approx. $3,494) and €10,000 ($11,647) annually on luxury goods 2 7 32 2019 2022 2025 5 17 20 2019 2022 2025 22 21 26 2019 2022 2025 H&M Group Gap Inc Aritzia Segment Example brands Example price Affordable luxury Coach $160–$320 Premium/bridge Aritzia, COS $100–$160 Mid-market Zara, Gap $40–$100 Value H&M, Uniqlo $20–$40 Discount Primark <$20 Number of references to premiumisation/elevation in earnings calls and company reports, January 2019-September 2025 110 The State of Fashion 2026 09. The Elevation Game Fashion System
- 109. Brand elevation dependson three pillars — price, product and brand experience Price: increasing the share of products in higher price tiers and growing full-price sales Product: improving product quality, durability and relevance Experience: elevating perception through retail stores and brand marketing 31% 51% 47% Price architecture: Drive value perception by shifting more of the assortment into higher price tiers and introducing “hero” products in premium categories, reinforcing stronger brand positioning Discounting: Preserve brand value by scaling back promotions and discounting, ensuring pricing signals remain consistent with an elevated image Channel exposure: Protect brand equity by carefully restricting distribution through outlets and off-price channels, particularly for signature products Quality: Elevate customer perception by investing in higher-grade materials that align product value with rising expectations for price-to-quality balance Design: Strengthen long-term appeal by focussing product development on durability and versatile styling that extends wear and relevance Collaborations: Expand reach into higher- spending segments by partnering with premium brands, leveraging their equity to enhance desirability and brand stature Brand marketing: Build stronger resonance by refining brand voice and narratives, and by actively engaging in cultural conversations where relevant Stores: Differentiate the brand experience by enhancing store formats and visual merchandising E-commerce: Invest in creating editorial content, elevated visuals and improved customer journeys Ambassadors: Amplify cultural impact by partnering with aspirational, brand-aligned influencers of global customers are willing to splurge on fashion, driven by both tangible and emotional factors6 of global customers say quality is a key driver in creating a high-end brand perception, the highest of all attributes2 of global customers say a brand’s story is a key driver in creating a high- end brand perception2 111 The State of Fashion 2026 09. The Elevation Game Fashion System
- 110. 7% 2% 2% 1% 1% 0% 0% 0% 0% -15% 11% 2% 1% 1% 0% 0% 0% 0% 0% -1% -7% 2% 1% 2% 1% 0% 0% 0% 0% -14% -41% 10% 14% 6% 6% 3% 2% 0% 4% 0% -1% -2% 1% 1% 0% 0% 0% 0% 0% 0% -3% -5% -1% 3% 2% -1% 0% 0% 5% -4% Segment average Bershka Abercrombie & Fitch Segment average COS Segment average 0–25 25–50 50–75 75–100 100–125 +225 125–150 150–175 175–200 200–225 Brandsare reducing SKUs for cheaper products and increasing them in higher price brackets Many value brands are retreating from ultra-low- price tiers where players like Shein and Temu increasingly dominate. In the UK, Bershka reduced the share of SKUs priced below £25 ($34) by 15 percent between 2023 and 2025, according to EDITED. H&M made similar moves during this time, reducing the share of bags in this bracket by 25 percent in the UK.1 H&M has been diversifying its offering with premium ranges and capsule lines, such as H&M Premium and the Studio Collection,7 as well as collaborations with designer brands. In the mid-market and premium segments, brands are incrementally increasing core assortments within most price bands. They are also introducing hero products in the higher tiers that create a halo effect that lifts consumer perception of the entire collection. For example, COS released its £1,000 ($1,355) Nappa leather shearling jacket in 2025.8 This is part of a 9 percent increase in the share of outerwear SKUs priced over £175 ($237) between 2023 and 2025 in the UK, according to EDITED.1 Brands should be cautious about raising prices too quickly or steeply, as this can alienate the customer and call into question the balance between quality and value and the brand’s right to play within the price segment. Brands can use consumer research and peer benchmarking to calibrate pricing moves. Price GBP % increase % decrease Change in share of UK SKUs by price brackets, all categories, July 2023 vs. July 2025 Note: Segment averages represent overall SKU % change per price point across a subset of established brands to control for price inflation Source: EDITED Redistributed Value Mid-market Premium/bridge 112 The State of Fashion 2026 09. The Elevation Game Fashion System
- 111. Higher prices demandsuperior quality and refreshed designs Customers are expected to become more cautious with their spending in 2026.6 For those who do splurge, they will be paying special attention to signifiers of value for money, such as craftsmanship, durability and sharp creative direction.2 Brands that raise prices without improving quality or design risk alienating consumers and eroding brand equity. Creative vision will play an outsized role in proving worth. For example, the wave of luxury creative director appointments at mass brands — including Zac Posen at Gap and Jonathan Saunders at & Other Stories9 — has injected a higher-end aesthetic into lower parts of the market. Gap also launched the premium line GapStudio in 2025,10 designed by Posen and featuring items like silk slip dresses and worn by celebrities on the red carpet.11 Collaborations offer another route to import design authority and relevance into accessible price points. Partnerships such as JW Anderson with Uniqlo12 and Victoria Beckham with Mango13 deliver both credibility and access to a more aspirational audience. These collaborations are often positioned as limited editions, which generates desirability and exclusivity among consumers — even in a more price-conscious environment. 43% of global consumers say they care more about quality than ever before, up from 30 percent in 202314 50% of global consumers say exclusivity creates a high-end brand image2 Marks & Spencer Marks & Spencer is elevating the style, fabrics and fit of its fashion offering.15 For example, the brand is leaning into real leather across coats, minidresses, skirts and shoes and is generating excitement by increasing novelty, refreshing two-thirds of its assortment each season while dedicating one-third to core basics.16 Fashion, Home & Beauty sales increased 3.5 percent in the fiscal year 2024 ending March 2025.17 Its premium Autograph range performed particularly strongly, with sales up 47 percent over the same period.17 Uniqlo Uniqlo’s elevation strategy is centred around design authority and quality basics. Its premium essentials, such as its affordable cashmere sweater range, provide an alternative to trend-driven fast fashion. In 2023, the brand launched Uniqlo:C, a sub-label by Clare Waight Keller18 — formerly creative director of Givenchy and Chloé — focused on elevated everyday essentials and outerwear. In 2024, Keller assumed the role of creative director for the entire brand, expanding her remit to include Uniqlo’s core offering. Parent company Fast Retailing’s revenue grew 10.6 percent year on year in the nine months to May 2025, while operating profit expanded to 17.2 percent of revenue.19 113 The State of Fashion 2026 09. The Elevation Game Fashion System
- 112. In August 2025,Zara reopened its Manchester flagship in the UK with a new concept designed in an elevated format.24 The layout includes a series of curated rooms, each dedicated to collections such as Zara Origins, highlighting higher-value product lines. This zoning approach borrows from luxury retail, moving away from the uniform mass-market feel typical of fast fashion. Technology is central to the redesign. Automated product sorting from fitting rooms to online orders, assisted return stations and app integration reduce friction and allow staff to spend more time on high- value customer interactions. Zara’s High-Tech Concept Store Product elevation only works when reinforced holistically across the brand experience Borrowing aesthetic cues from luxury — across campaigns, editorials, photography and retail — can help justify elevated product positioning. For example, COS staged a ready-to-wear runway show at New York Fashion Week in September 2025,20 signalling its ambitions to extend its brand beyond the high street. While not every mass brand has a credible place on fashion week calendars, COS’ design-led aesthetic makes the case. Meanwhile, Zara’s use of famous fashion photographers such as Steven Meisel and Mario Sorrenti21 22 helps position it closer to high-end fashion. Redesigned retail environments can offer similar signals and in-store service adds further weight. Aritzia’s personal style advisor approach to customer service is the backbone of its store experience, offering a high-touch styling journey like luxury department stores, which reinforces its premium positioning.23 The same principles extend online. Websites and apps increasingly reflect elevated positioning through streamlined interfaces, lifestyle-driven storytelling and immersive visuals that replace function-focused user experiences. 76% correlation between a positive store experience and consumers’ perception of a brand as premium2 87% correlation between memorable and creative advertising campaigns and consumers’ perception of a brand as premium2 Zara's Trafford Centre flagship store in Manchester, UK. Zara. Zara’s Trafford Centre flagship store in Manchester, UK. Zara. 114 The State of Fashion 2026 09. The Elevation Game Fashion System
- 113. Fashion brands shouldpractise discipline in rolling out their elevation strategies Build a product pyramid informed by consumer insights, balancing core assortments for the existing customer base with premium tiers aimed at capturing “splurge” purchases and recruiting more aspirational audiences. Invest in material quality, craftsmanship and fit. Ensure consistency across the assortment to build credibility and trust with customers, which can translate into pricing power. Introduce halo products in categories such as outerwear and leather goods that lift the perception of the entire brand. Hire recognised creative talent to inject creativity and originality, or use capsule collections and designer collaborations to import design authority and generate excitement. Redesign product pyramids to signal elevated positioning 1 Plan a multi-year brand elevation roadmap, emphasising gradual progress across multiple seasons over one-off drops or store renovations. Use a combination of internal sales data and social listening tools to gauge price sensitivity across categories and define the brand’s price ceiling. Place smaller-volume orders to limit overstock risk and reduce reliance on discounting to protect brand equity. Adjust pricing architecture over a long-term horizon 2 Roll out the elevation strategy across the full brand experience — from communications to in-store environments. This means placing emphasis on elevated brand storytelling and cultural relevance while ensuring store design, visual merchandising and service standards signal the same aspirational positioning. Online, brands can reinforce these cues through improved visuals, editorial content and frictionless user journeys that feel both premium and intuitive. Higher-touch experiences more commonly found in luxury — such as personalised clienteling or exclusive community activations — can also build advocacy and deepen customers’ emotional connections. Reinforce positioning across the brand experience 3 EXECUTIVE PRIORITIES 115 The State of Fashion 2026 09. The Elevation Game Fashion System
- 114. BY CATHALEEN CHEN DanielHerrmann doesn’t want to talk about elevation strategies — at least not explicitly. The managing director of H&M- owned COS believes elevation is a matter of perception, and true elevation comes from the customer experiencing the products you create. It’s a notable stance for someone who has presided over an unexpected retail success story, with COS landing among Lyst’s top 10 hottest brands in 2025 seemingly out of nowhere. Since taking the helm in April 2024, Herrmann has steered the brand through a moment in which it has emerged as a darling of the “quiet luxury” movement, capturing customers trading down from higher- end labels while maintaining its accessible price points. The brand has managed to stake out coveted territory between mass market and luxury — what Herrmann calls a “bridge” — by staying consistent to its minimalist aesthetic and focussing obsessively on value, whether that's a £19 cotton t-shirt or a £1,000 investment piece. It has also pushed a refined, aspirational image with its marketing, staging a buzzy runway show in September atNewYork Fashion Week. Herrmann discusses how COS approaches brand positioning without chasing trends, why the brand thinks in terms of ageless style rather than demographic segments and how product remains the ultimate vehicle for storytelling. COS Is Building a Bridge Between Mass Market and Luxury The H&M-owned brand has become one of the understated stars of the “quiet luxury” universe, drawing in both customers in search of sophisticated design and those looking for value. Managing director Daniel Herrmann discusses how COS strikes its high-low balance. 116 The State of Fashion 2026 09. The Elevation Game Fashion System
- 115. COS launched in2007 to serve an older customer base than H&M. The point was always to be more minimal, to be more refined. How has this point of view evolved or shifted? I wouldn’t say that the brand point of view necessarily changed. Besides the aesthetics, which is obviously one important thing, we make sure that the entire universe within COS lives and fits together. We also developed within the brand point of view more of a narrative or a storytelling perspective, where we would like most of our storytelling to centre around what we call relevant fashion moments that we select and pick out that feel authentic to COS, like showing up at New York Fashion Week, or around craftsmanship, which is about the style and quality of the product. In your strategy, or in your intentions, was elevating COS ever an explicit objective? Both yes and no. It’s a little bit dangerous as a brand to go after a word that you don’t own yourself, because I feel true elevation comes from the one experiencing what you’re trying to create. Our hope is that we can deliver on something that feels elevated, but it’s more important, I feel, to talk about the quality and execution than us producing something that someone else should express as being elevated. Ithinkit’smoreimportantto,asabrand, discuss how you actually show up. As young customers — Millennials and Gen Z — discover the brand, how haveyoubeenabletoensurethatCOS’ identity resonates with them as well as existing segments of customers? We tend to look at ourselves as more ageless, to be honest. We don’t look so much at our customers depending on age. We look at it much more [as] we are tapping into a style that is very genuine to COS, which is what we talked about before, being centred around something that is more timeless, centred around really quality materials and also of course really sustainably sourced materials. I think we’re not trying to show up differently. We’re trying to be the brand we are, no matter what age the person is experiencing us. I think our positioning in this is much more focused on delivering what we feel is authentic to COS than trying to slice ourselves into different parts for different segments. What does COS’ brand storytelling look like? We always go back to, ‘How can we Inside a COS store in Seoul. COS. Inside a COS store in Seoul. COS. 117 The State of Fashion 2026 09. The Elevation Game Fashion System
- 116. A COS storein Mexico City. COS. amplify and use the perspectives of relevant fashion movements, of craftmanship and innovation, in our communication and how we actually reach out?’ Then we do that in producing shows. We go back to New York Fashion Week in the Fall, and then for the Spring season we are a bit more playful in where we go. So, ultimately, product is COS’ biggest vehicle for storytelling? It’s so easy to talk about the ambition of generating elevation, but unless you have a product actually meeting that feeling, everything you do becomes unnecessary in a way. What we are doing [to widen] our position in the market is to be very, very considerate in our price architecture of things. We like to talk about our positioning as this bridge between luxury and more mass- market players, and really giving more people from the mass market the opportunity to experience COS. We have the cotton t-shirt for £19, which we feel is a competitive price for many of the customers buying from mass market today, so giving them a chance to start experiencing COS on a price point they are more familiar with is an important strategic choice for us. A COS store in Mexico City. COS. 118 The State of Fashion 2026 09. The Elevation Game Fashion System 118
- 117. Can you saymore about COS’ overall approach to pricing architecture? Value is so important to us. No matter if the price is £1,000 or if it’s £20, we always focus on value, because that’s the proof that we’re trying to build something that you feel is elevated. We look at our price architecture in three modules, which is entry price range, a more regular price point and investment pieces. What role do brick-and-mortar stores play in COS’s strategy? Retail is really important to us. It’s more than just transactional spaces, because it’s actually a way for us to create extensions of COS where you can feel cultural relevance by us working together with local artists. We did something with Sophie Ashby not too long ago where she helped us to actually bring art in store in selected ones across Europe, and of course, it’s also an extension of our aesthetics and our own point of view. We also work with more experiential formats. Usually these are more short-term activations. We had a pop- up in Seoul where both customers and also press could come and learn and understand, and see and feel more about what the collection is about and how it was made. We also use the retail experience to test and learn in new places with pop-ups. I just came back from Paris where we opened a pop-up on the Champs Elysée to see if that’s a place where people would resonate with COS, and see how we would actually be perceived in a prestigious place like that street. Then, of course, just opening up COS to new markets, trying to find new COS customers and really taking COS out to new places. After this call I’m on a flight to India where we opened our first store in Delhi yesterday. Many customers today are redefining what luxury looks like, including many high-spending shoppers trading down in reaction to tremendous price hikes in the traditional luxury sector. How have you observed these trends and how has COS adapted to these shifts? We’ve seen the trend of moving away from being logo- and status-driven to really also homing in and focussing on value. That’s a trend we see within luxury, that luxury brands are also now moving into value in both product and experience. We feel that’s really suitable for us, because we’ve tried to become this bridge between mass and luxury. We know that a lot of consumers today, they’re not either-or. They move fluently between all segments of the market. It’s also why price architecture is a consequence of that too, where we both can showcase the really high-end while at the same time we can also onboard new customers from the high street and allow them to hopefully experience COS and over time buy more from the range that we offer. It’s an important answer to how we see the market is flowing. Do you think that quiet luxury has more legs to it? When COS started we have always had this aesthetic. It’s not something we grew into with the trends in the market. It’s always been our starting point. Then, of course, that has been more of a macro trend that’s been really clear and significant within the market over the last period of time. We think it’snotatrend.It’ssomething that will live on as a style for people, I don’t know for how long but for a long time, and us tapping into that interest is of course both good for us because it’s authentic but also resonates with customers yesterday, but also for the years to come. “It's so easy to talk about the ambition of generating elevation, but unless you have a product actually meeting that feeling, everything you do becomes unnecessary in a way.” This interview has been edited and condensed. 119 The State of Fashion 2026 09. The Elevation Game Fashion System
- 118. 10. Luxury Recalibrated TheState of Fashion 2026
- 119. KEY INSIGHTS EXECUTIVEPRIORITIES 10. Luxury Recalibrated The luxury slowdown is prompting a phase of strategic renewal. Brands are reducing their reliance on price-led growth and refocussing on creativity and craftsmanship to rebuild client trust. This recalibration calls for brands to balance the needs of distinct customer segments and integrate product, storytelling and client experience into a cohesive expression of brand value. • Luxury’s great reset is underway. Nine of the largest 15 luxury brands appointed new creative directors in the 12 months since September 2024, while four also appointed a new chief executive. • The top reported attribute that ultra-high-net-worth customers say epitomises luxury is "expertise and quality.” • Gen Z and Millennial customers cite exclusivity as a driver for increased luxury spend, 11 percentage points above the average. • Translate new creative energy into sustained commercial impact with aligned marketing, merchandising and store concepts. • Prioritise rebuilding client trust by taking responsibility for practices in the full value chain and delivering on ethical commitments, while reinforcing brand narratives around craft and artisanship. • Put customer experience first, using next- generation clienteling and integrated data to elevate service, connect channels and drive traffic in stores and online. 121 The State of Fashion 2026 10. Luxury Recalibrated Fashion System
- 120. Luxury brand performancehas become more polarised amid the sector’s slowdown Over the past three years, luxury volume growth has softened, with brands increasingly relying on price increases to maintain top-line performance. Between 2023 and 2025, around 80 percent of luxury market growth is estimated to have stemmed from price increases rather than volume gains — a lever that cannot be relied on indefinitely.1 At the same time, competition for share of wallet has intensified as customers redistribute discretionary spending across a wider range of categories, including travel and wellness. Aspirational shoppers — those spending between €3,000 (approx. $3,494) and €10,000 ($11,647) annually on luxury goods — have cut spending on luxury goods amid price increases and a more challenging economic backdrop, with an estimated 35 percent of aspirational luxury customers pulling back on or delaying luxury spend.2 Brand performance has become more polarised amid this shift: The range of EBITA margins among the middle 50 percent of performers (analysed to exclude outliers) has increased more than 2.5 percentage points since 2021.3 Brands that outperformed did so by focussing on more resilient parts of the market, such as hard luxury categories like jewellery and ultra-high-net-worth customers. Revenue change for top luxury brands, 2023 vs 2024, % -30 -20 -10 0 10 20 -40 40 50 60 70 80 90 30 Global megabrands (>$3bn revenues) Established brands ($300m–$3bn revenues) Emerging brands (<$300m revenues) Note: Grouped by 2024 reported revenues Source: Annual reports and company filings, Morgan Stanley, CapitalIQ, press reports 122 The State of Fashion 2026 10. Luxury Recalibrated Fashion System
- 121. Brands are turningto creative reboots to reignite customer demand Luxury’s creative refresh Over the past decade of rapid growth, many luxury brands have widened their customer bases — at times, trading exclusivity for broader reach. This has accelerated customer desire for greater creativity and differentiation, which is most pronounced among younger customers: 81 percent of customers under the age of 35 cite design and creativity as their primary purchase driver.6 In response to this and slowing sales, luxury houses replaced their creative directors at an unprecedented rate over the last year. The highly anticipated Spring/Summer 2026 season The Spring/Summer 2026 fashion show season was an early test of brands’ new creative directions, with designers at houses from Chanel and Dior to Balenciaga and Loewe showing their debut womenswear collections. Online audiences praised Jonathan Anderson’s Dior for its modern reinterpretation of heritage motifs and sculptural silhouettes and described Matthieu Blazy’s solar-system adorned Chanel runway as symbolic of the brand’s new era, according to social listening analysis. Meanwhile, audiences viewed former Proenza Schouler designers Jack McCollough and Lazaro Hernandez’s debut at Loewe as an energetic and playful reinterpretation of the brand’s craft heritage through the collection’s bold colours, frayed elements and transparent shoes.4 Brands have started to capitalise on this initial buzz by accelerating their go-to- market calendars, making their collections available the same week the lookbook is released. The next challenge to fully translate this into commercial impact is to ensure aligned marketing, merchandising and store concepts. #1 show was Jonathan Anderson’s Dior during Paris Fashion Week Spring/Summer 2026, by UGC share of voice on social media4 9 of 15 of the largest luxury brands appointed new creative directors in the 12 months until September 2025, with four also appointing a new chief executive5 Loewe Spring/Summer 2026 runway. Spotlight/Launchmetrics. 123 The State of Fashion 2026 10. Luxury Recalibrated Fashion System
- 122. Rebuilding customer trustis an essential part of the sector’s recalibration Luxury’s value equation has come under pressure from repeated price increases and recent labour investigations, leaving customers questioning if luxury goods are worth the high price tags. Rebuilding value perception has become a strategic imperative as brands reset for growth, partly achieved by taking more control over practices across the full value chain to ensure their integrity. Some brands are attempting to gain oversight of their entire value chains and protect craftmanship. For example, Dior created a new industrial division in late 2024 to centralise oversight of suppliers and workshops to strengthen quality control and preserve artisanal know-how.7 Leading houses are also aiming to improve value perception by investing in their manufacturers, developing talent in-house or vertically integrating production to preserve rare artisanal skills. Most recently in June 2025, Prada acquired a 10 percent stake in Italian leather group Rino Mastrotto, strengthening its control over leather production.8 Meanwhile, brands like Van Cleef & Arpels and Bulgari are opening their jewellery schools to the public to showcase in-house craftmanship skills and inspire a new generation of customers — a growing engagement tactic across the industry.9 #1 attribute that epitomises luxury is ”expertise and quality,” according to ultra-high-net- worth customers4 67% of consumers say trust in a brand translates into long-term loyalty and advocacy10 Artisan constructing a luxury bag. Rapeepong Puttakumwong/Getty Images. 124 The State of Fashion 2026 10. Luxury Recalibrated Fashion System
- 123. Regional differences inpurchase drivers reveal unique formulas to capture high spenders Factors that would encourage ultra-high-net-worth individuals to buy more from a luxury brand in 2026, Top three reasons Source: Altiant UHNW Survey, October 2025. N=300, includes US, UK, China -2 7 -9 -4 -4 -1 2 7 -5 -5 -1 -12 -6 2 -6 -2 15 6 15 7 -5 UK US China %point difference vs overall average Higher product quality and craftsmanship More creativity and innovation in design Greater exclusivity Stronger sustainability and ethical practices Better in-store service and environment More recognition as a VIP Stronger pre-and post- purchase services (tailoring, repair, etc.) Overall average (% of total) 52 45 42 37 34 31 21 In China, ultra-high-net-worth customers continue to prize exclusivity and innovation, gravitating towards brands that balance recognisable heritage design codes with creativity. Luxury is seen as an expression of taste and individuality, where exclusivity can be signalled by showcasing access to exceptional design and brand iconography. When asked about associations with luxury, respondents in the US and UK emphasised attributes such as quality, durability, elegance and affluence. By contrast, Chinese consumers cited specific brand names twice as often.6 In the US and UK markets, strengthening clienteling and store experiences through AI or digital tools can be a key source of competitive advantage. For example, such tools can be used to personalise web interfaces to customers’ purchasing and browsing history to maximise engagement, or can guide sales advisors to more effectively prepare for in-store visits. While use in luxury is nascent, brands like Saks Fifth Avenue have started to use AI to personalise editorial content and product recommendations on their websites.11 1. 2. 3. 4. 5. 6. 7. 125 The State of Fashion 2026 10. Luxury Recalibrated Fashion System
- 124. Younger cohorts placegreater emphasis on luxury as a marker of identity and status Attributes most associated with luxury by ultra-high-net-worth customers, Top seven themes per generation Boomers and Silent Gen. Gen X Gen Z and Millennials Quality & craftmanship Premium & exclusive Affluence & wealth Unique Indulgent & extravagant Elegant & timeless Innovation & design Quality & craftmanship Premium & exclusive Affluence & wealth Elegant & timeless Unique Indulgent & extravagant Personal status & identity Premium & exclusive Quality & craftmanship Elegant & timeless Unique Innovation & design Affluence & wealth Personal status & identity 1st 7th Premium quality and craftmanship are key for all customers, but there are slight differences between generations on other associations with luxury. Redefining wealth and luxury Gen Z and Millennials are reshaping expectations of luxury brands. Younger customers use luxury purchases to signal status, image and self-definition more than older cohorts and are less likely to link luxury to wealth, redefining luxury beyond affluence.12 This is linked to luxury’s widening scope to include experiences, and is reinforced by resale’s rise, which weakens luxury’s link to wealth. The evolving meaning of exclusivity Gen Z and Millennial customers cite exclusivity as a driver for increased luxury spend, 11 percentage points above the average.6 Yet as luxury continues to grow its customer base and the notion of exclusivity evolves, brands must foster desirability through storytelling, personalisation and product distinction rather than limited access alone. Younger cohorts are gaining spending power Gen Z spending is growing twice as fast as that of previous generations. It is expected to surpass Baby Boomer spending by 2029, fuelled by $15 trillion to $20 trillion in wealth transferred from Baby Boomers to Millennials and Gen Z.13 14 Source: Altiant UHNW Survey, October 2025. N=300 (US, UK, China) 126 The State of Fashion 2026 10. Luxury Recalibrated Fashion System
- 125. Support creative instinctwith customer insight and analytics. Use client insights to focus artistic instincts, not replace them. Balance the art of risk-taking with a deep understanding of brand heritage and audience reception to create work that feels daring and fresh but lands with customers. View marketing and stores as further opportunities to differentiate creatively from competitors. The most compelling creative reboots will drive early buzz, sustain momentum through consistent marketing narratives and convert it into measurable improvements to store and web traffic, engagement and sales. Luxury brands must harness creativity and focus on clienteling to unlock the next wave of growth EXECUTIVE PRIORITIES Translate creative energy into sustained commercial impact 1 As transparency becomes a baseline expectation and regulatory pressure increases, responsibility in sourcing and labour is central to rebuilding trust. Whether vertically integrated or not, brands must own responsibility for the entire value chain — from raw materials and sourcing through to the finished product. Prioritising traceability and fair labour practices signals genuine integrity to customers and enables tighter control over production quality and working conditions, and enables brands to secure (and where required, rebuild) their reputations. Customers want proof of exceptional materials and human skill visible in the product. Brands should anchor brand stories in craft and product quality. They might also invite customers behind the scenes in production with atelier visits, open workshops or storytelling to help restore value perception and strengthen emotional connection. Prioritise rebuilding client trust 2 Empower advisors to deliver more personal, high-touch service both online and in store, pairing investment in clienteling tools with ongoing training and incentivising digital fluency. Data must also flow seamlessly across stores, e-commerce and social channels, creating a single, unified view of each client to enable: • Tailored outreach, such as notifying a leather goods client that a new handbag has dropped ahead of their birthday or anniversary. • E-commerce personalisation, such as adapting product listing pages to unique preferences to maximise engagement and conversion. • Exceptional in-store experience, such as client advisors using AI tools to more effectively prepare for appointments. Improve the client retail experience across channels 3 127 The State of Fashion 2026 10. Luxury Recalibrated Fashion System
- 126. McKinsey Global Fashion Index TheState of Fashion 2026
- 127. KEY INSIGHTS McKinsey GlobalFashion Index After a record 2023, the industry’s economic profit declined in 2024 as luxury’s slowdown outweighed strong growth in the mid-market and value/discount segments. The mid-market emerged as the largest contributor to economic profit and reclaimed the top spot on the Super Winners list for the first time since 2017. • Economic profit (EP) fell 12 percent in 2024 from record- high levels in 2023. In 2025, the industry is expected to rebound modestly with 2 percent growth. • The industry’s performance remains well above pre- pandemic levels, with average EP from 2021 to 2025 expected to be more than 2.5 times higher than from 2015 to 2019. • After years of strong performance, the luxury segment’s EP fell for the first time since 2016 (excluding Covid-19). • Mid-market and value/discount players are seeing the strongest performance, with their combined share of EP expected to reach a record high in 2025. • 40 percent of value/discount players are combining margin expansion with above-average revenue growth. Among the strongest performers are off-price retailers, benefiting from a rise in cost- conscious shopping behaviours. • Intensified competition eroded the top 10 brands’ share of industry value, dropping 2 percentage points in 2024 and projected to drop a further 3 percentage points in 2025. • Mid-market player Inditex now leads the Super Winners list, delivering record-high EP based on 2024 full-year performance. 129 The State of Fashion 2026 McKinsey Global Fashion Index
- 128. Following double-digit growthin 2023, economic profit declined 12 percent year on year in 2024 a. For companies with fiscal year ending before June, FY-1 is used Source: McKinsey Global Fashion Index Total economic profit (EP) development,a Index (2010=100) 100 103 111 104 92 79 64 88 107 94 -70 225 214 244 215 220 2011 2012 2013 2014 2015 2016 2017 2010 2019 2020 2021 2022 2023 2024 2025E 2018 3 7 -5 -12 -14 -19 37 22 -13 -175 422 -5 14 -12 2 Year-on-year economic profit change, % 11.6 11.6 11.6 11.5 11.2 10.9 10.6 10.7 11.1 10.6 6.5 12.5 12.2 12.7 12.5 12.2 Estimate The McKinsey Global Fashion Index (MGFI) uses data from 400 public companies to track performance across the fashion industry’s five key segments. To enable like-for-like comparisons, the segment a company is placed in remains consistent over time. The MGFI measures financial growth and value creation through economic profit (EP), calculated as the difference between a company’s adjusted operating profit (minus taxes) and its cost of capital (invested capital multiplied by the weighted average cost of capital). EP also reflects value created over time, allowing the index to gauge how much a company invests to generate its results. Following a year of record-high EP in 2023, industry revenue growth slowed to just 1 percent in 2024, outpaced by a 3 percent rise in operating costs. This was largely due to rising marketing spend as brands competed for more value- conscious consumers. As a result, EBITA margins compressed by 0.3 percentage points (%points). At the same time, the share of invested capital over revenue increased from 71.8 percent to 74.2 percent. Coupled with a higher cost of capital amid rising interest rates, this weighed further on overall EP. EBITA margin, % 130 The State of Fashion 2026 McKinsey Global Fashion Index
- 129. Despite the slowdown,the industry remains structurally stronger than pre-pandemic Since 2019, the fashion industry’s EP has increased significantly, stabilising well above pre-pandemic levels — averaging over 2.5 times higher between 2021 and 2025 (estimated) than from 2015 to 2019. This has been driven by an improvement in operational and capital efficiencies that lowered costs, while players that had previously weighed on performance exited the industry. Comparing the pre- and post-pandemic period reveals the following dynamics: • Average revenue growth has improved modestly, with the greatest increases seen in the affordable luxury and mid-market segments — the latter supported by a higher drop-out rate of underperformers during the pandemic (relative to other segments). • Average operating margins have expanded by 1.5%points, reflecting improvements across segments. The luxury segment has seen the largest gain, with margins up 3.5%points between the two periods, driven by strong pricing-led growth from 2021 to 2023. As EP is highly sensitive to margin gains, these improvements have resulted in disproportionate value creation. • Average capital intensity decreased almost 5%points, bringing down capital charges. This has been supported across segments by a shift to more capital-light models (such as online channels and fewer new stores). The uplift in EP was broad-based: Luxury, premium/bridge and mid-market segments each contributed approximately one-third to EP growth between the two periods, while the value/discount segment grew modestly, already operating with a lean structure. Industry revenue compound annual growth rate, % 4.0 4.8 2021-2025E 2015-2019 +0.8%points 7.9 9.3 2021-2025E 2015-2019 +1.5%points 77.7 73.0 2021-2025E 2015-2019 -4.7%points Industry average operating margin,a b % Industry average capital intensity (invested capital / revenue), % a. Net operating profit less adjusted taxes (NOPLAT) margin b. Differences are calculated using unrounded figures; values shown in the chart may not match exactly due to rounding Source: McKinsey Global Fashion Index McKinsey Global Fashion Index
- 130. Luxury As expected, luxury’sEP declined in 2024 as brands eased back on price hikes that have weakened demand.1 The number of value destroyers in the segment reached its highest point post Covid-19, including Kering whose EP decline weighed heavily on the segment, alongside LVMH. The scale of the downturn is set to slow in 2025 with several creative leadership changes. Recovery is not expected to be immediate, typically taking at least two to three collections for brands to stabilise under new leadership.2 Premium/bridge Nike’s EP dropped by 60 percent, affecting the segment overall. Excluding this impact, the segment posted an 18 percent increase in EP in 2024. Fast- growing sportswear players such as On, Asics and Anta Sports are supporting this growth, fuelled by strong demand in Asia — particularly China where outdoor sportswear sales have doubled over the last five years,3 even as luxury contends with regional headwinds.4 5 6 This strong momentum is continuing through 2025, with Asics on track to break into the top 25 performers based on EP, after being outside the top 100 in 2021. Luxury and premium/bridge segments weighed on industry performance in 2024 Total economic profit (EP) development 2023-2025E, Index (2010=100) 48 38 38 2023 2024 2025E -22% +2% 5 6 8 2023 2024 2025E +10% +36% 102 65 59 2023 2024 2025E -36% -9% 59 46 42 48 48 48 51 46 48 Premium/bridgec Affordable luxuryb Luxurya a. Example luxury companies: LVMH, Hermès, Richemont b. Example affordable luxury companies: Tapestry, Ralph Lauren Corporation, Canada Goose c. Example premium/bridge companies: Nike Inc., Lululemon, Aritzia Source: McKinsey Global Fashion Index Value creator: A company that generates positive economic profit Value destroyer: A company that generates negative economic profit X Share of value creators, % Share of value creators >50 percent 132 The State of Fashion 2026 McKinsey Global Fashion Index
- 131. The mid-market andvalue/discount segments recorded the largest gains in EP in 2024, and their combined share of EP reached its highest level since 2016 (excluding Covid-19). This momentum is expected to continue through 2025. Mid-market Among mid-market performers, Gap delivered the largest increase in EP in 2024 as transformation efforts began to yield results.7 Next also posted double-digit EP growth, driven by strong international performance that exceeded expectations and growth in third-party platforms.8 Inditex maintained strong performance from an already high base. However, growth among other players meant segment results excluding Inditex slightly outpaced total mid-market growth in 2024. Value/discount In the value/discount segment, the share of value creators rose to a multi-year high, driven by cost- conscious shopping behaviours. This trend is expected to continue through 2025, with 27 percent of consumers now shopping at lower-priced retailers than they typically would.9 The share of value creators in the value/discount segment is has reached a multi-year high Total economic profit (EP) development 2023-2025E, Index (2010=100) 29 34 37 2023 2024 2025E +19% +6% 32 41 44 2023 2024 2025E +28% +6% 60 73 78 2023 2024 2025E +21% +7% 55 54 57 47 63 60 55 53 56 Value/discountb Mid-market (excl. Inditex) Mid-marketa a. Example mid-market companies: Inditex, H&M Group, Gap Inc. b. Example value/discount companies: The TJX Companies Inc., Ross Stores, Shimamura Co. Ltd Source: McKinsey Global Fashion Index X Share of value creators, % Share of value creators >50 percent 133 The State of Fashion 2026 McKinsey Global Fashion Index
- 132. 3 4 56 7 8 9 10 11 12 13 14 2 16 17 18 19 20 21 22 23 24 25 26 15 -3.2 EP growth in value/discount and mid-market segments is supported by operating margin gains The mid-market segment delivered its highest EBITA margin since 2010. Contributing to this are several mid-market players that have invested in elevating their brand propositions and are now seeing tangible returns. Gap grew its operating margin by 3.6%points10 in 2024 in its first year under the creative leadership of Zac Posen,11 while Inditex improved operating margins by more than 0.5%points.12 Through 2025, margins in both the value/discount and mid-market segments are expected to remain stable, while affordable luxury and premium/bridge will see modest improvements but remain below their historical peak. Zooming in on the premium/bridge segment, Nike’s margins fell below the segment average for the first time in 2024, which lowered overall segment performance. At the upper end of the market, while luxury continues to lead in EBITA margins, the decline from 2023 was steeper than expected, with margins falling 3.2%points. This trend is projected to continue through 2025, with margins dipping to 20.6 percent, narrowing luxury’s lead against other segments. EBITA margin by value segment, % Luxury Mid-market Premium/bridge Value/discount Affordable luxury 2024 2023 2010–2024 margin range 2023–2024 margin evolution Source: McKinsey Global Fashion Index Excluding Inditex, the mid-market’s EBITA margin was 9.0 percent (+0.8%points vs 2023) -0.2 -0.2 0.9 1.0 x 2023–2024 margin %point change 22.1 11.0 10.5 10.4 11.4 x 134 The State of Fashion 2026 McKinsey Global Fashion Index
- 133. A higher shareof value/discount players combine margin and sales growth versus other segments a. Like-for-like comparison on companies with EBITA and revenue data available 2023-2025E b. Revenue CAGR based on weighted industry average Source: McKinsey Global Fashion Index Company archetype by value segment, 2023-2025E,a b % of companies per archetype 14 23 23 Value / discount 26 16 21 37 Mid-market 28 15 22 40 Premium /bridge 13 17 43 26 Affordable luxury 15 0 46 38 Luxury 34 Company archetype Profitable growers Increased EBITA margin, above industry average revenue CAGR Margin expanders Increased EBITA margin, below industry average revenue CAGR Topline accelerators Above industry average revenue CAGR, declining EBITA margin or EBITA margin below zero Performance dilutors Declining EBITA margin or EBITA margin below zero, below industry average revenue CAGR Brands in the value/discount segment are combining their margin gains with above-average revenue growth. These margin improvements are not driven solely by topline expansion: Value/discount players achieved a decline in SG&A as a share of revenue from 2023 to 2024 and are operating with the leanest inventory levels — 15 percent of revenue versus the 21 percent industry average. Off-price retailers are among the strongest performers, gaining share from traditional department stores as consumer price sensitivity persists. TJX and Ross Stores saw EP improve by 8 percent and 13 percent year on year in 2024, respectively. Looking ahead, off-price retailers are expected to maintain momentum, with analysts suggesting that sourcing excess inventory from other retailers could help insulate them from tariffs and sustain performance.13 By contrast, luxury and affordable luxury segments have a higher share of topline accelerators, reflecting already elevated margins now facing downward pressure. 135 The State of Fashion 2026 McKinsey Global Fashion Index
- 134. The share ofthe industry’s value created by the top 10 performers is softening This shift reflects a relative weakening in performance among several established leaders alongside gains by challengers — a trend that is especially pronounced in sportswear. In a continuation of the pattern noted in last year’s report, sportswear challengers achieved a 25 percent year-on-year increase in EP, contrasting sharply with a 48 percent decline among sportswear incumbents. After increasing in 2024, industry value destruction is expected to ease in 2025, as over half of value destroyers reduce their losses. Fashion companies’ contribution to industry economic profit (EP), % Source: McKinsey Global Fashion Index 25 47 -52 2010-2019 Average 89 20 33 -242 2020 64 18 45 -28 2021 79 17 36 -33 2022 79 80 32 -26 2023 77 17 37 -31 2024 74 18 36 -28 2025E 94 -70 225 214 244 215 220 15 Top 10 companies by EP 10-20 companies by EP Value destroyers Value creators excl. top 20 136 The State of Fashion 2026 McKinsey Global Fashion Index
- 135. The mid-market topsthe 2024 Super Winners list with record-high EP Top 20 players by economic profit (EP), 2024,a USD (millions) 5,544 5,514 4,217 3,591 2,359 1,691 1,686 1,581 1,473 1,402 844 780 694 677 644 632 595 495 489 463 LVMH Hermès TJX Richemont Fast Retailing Nike Ross Lululemon Anta Sports Inditex Dick’s Sporting Goods Next Pandora Tapestry Chow Tai Fook Crocs Bosideng International Ralph Lauren H&M Group Deckers Change in rank vs 2023 +1 -1 +1 +1 +1 +1 -4 +1 +2 Unchanged +2 Unchanged Unchanged +31 +1 +3 +6 +3 Unchanged +14 In 2024, mid-market players drove the largest share of the industry’s value, contributing 34 percent of total EP — the highest since 2010 (excluding Covid-19). This was led by Inditex, which achieved a record-high result, topping the Super Winners list. • More than half of the Super Winners saw higher capital charges weigh on EP, reflecting increased investment in technology. In 2025, the negative impact on EP is expected to ease for most companies as they begin to reap the benefits of these investments. • Intense competition at the lower end of the list saw Moncler and Dillard’s drop from the list, while Bosideng International, Ralph Lauren and H&M Group joined the list, the latter two supported by elevated product offerings. • Jewellery players delivered strong results, including Pandora and Chow Tai Fook (which became a Super Winner for the first time). Richemont’s performance was buoyed by its jewellery maisons, which posted a 4 percent increase in operating profit despite declines in other divisions.14 a. For companies with fiscal year ending before June, FY-1 is used Source: McKinsey Global Fashion Index New entrants vs 2023 137 The State of Fashion 2026 McKinsey Global Fashion Index
- 136. Looking ahead, amodest uptick in valuations signals cautious optimism from investors -70 11 12 13 14 15 16 17 18 19 20 21 45 10 2017 2018 2019 2020 2021 2022 2023 2024 2025E 2016 2014 2013 2012 2011 2010 2015 Total economic profit (EP) development, Index (2010=100) 100 109 117 122 126 130 131 138 149 146 76 181 193 207 204 215 EBITAc index (2010=100) EP is expected to recover modestly in 2025, driven by revenue growth and a moderate improvement in capital intensity, which together will offset slight margin declines. Valuations are projected to edge higher — up 0.3x over 2024. Valuations in luxury remain more heavily weighted toward future profit expectations than in other segments (60 percent versus the 49 percent industry average), suggesting that investors are pricing in long-term growth potential, likely supported by the creative reset. The greatest improvement in valuation is seen in affordable luxury, where multiples increased from 11.4x to 15.6x in 2024, driven by Tapestry and Ralph Lauren. Tapestry has substantially outperformed the market — with its stock price up 158 percent year on year as of October 2025.15 The company has been buoyed by Coach, which has successfully attracted younger audiences, adding 4.6 million new customers in North America in the last fiscal year, the majority of whom were Gen Z and Millennials.16 Overall, valuation momentum points to a measuredly positive outlook for the industry, as investors position for relatively stable performance and gradual long-term value creation. Estimate a. Enterprise value (EV). 2025 value is for calendar year, the rest fiscal years of companies b. EV/EBITA is a financial ratio that compares a company's enterprise value (EV) to its earnings before interest, taxes and amortisation (EBITA), used to evaluate a company's valuation and profitability c. Earnings before interest, taxes and amortisation Source: McKinsey Global Fashion Index EVa/EBITAb 138 The State of Fashion 2026 McKinsey Global Fashion Index
- 137. 139 The State ofFashion 2026
- 138. INDUSTRY OUTLOOK 1. BoF-McKinseyState of Fashion 2026 Executive Survey 2. BoF-McKinsey State of Fashion 2025 Executive Survey 3. BoF-McKinsey State of Fashion 2024 Executive Survey 4. McKinsey Growth Fashion Forecasts 2026 5. Associated Press, “US consumer confidence rebounds after months of tariff anxiety, The Guardian, May 27 2025 6. McKinsey Growth Fashion Forecasts 2025 7. Robert Williams, “The Great Fashion Reset | Can Designer Revamps Save Fashion?”, The Business of Fashion, September 02, 2025 8. International Monetary Fund, October 2025 9. European Central Bank 10. McKinsey Value Intelligence and Oxford Economics 11. BoF-McKinsey Consumer Sentiment Survey, 2023-2025 (based on respondents in France, Germany, Italy, Spain and the United Kingdom) 12. “An update on US consumer sentiment: Settling for a tepid holiday season”, McKinsey & Company, August 29, 2025 13. Trading Economics, United States Unemployment Rate, October 2025 14. “US Consumer Confidence Declines Again in September”, The Conference Board, September 30, 2025 15. “Mid-year update: Five surprises from China’s consumer market”, McKinsey & Company, August 13, 2025 16. Big One Consumer Analytics 3.0, August 2025 YTD growth rate 17. Euromonitor (as of September 2025) 18. Adrienne Klasa, “Luxury brands hit by drop in tourist spending in Europe and Japan”, Financial Times, August 04, 2025 19. Hermès half-year financial report, Hermès, June 2025 20. Richemont results Q1 ended June 20, 2025 , Richemont, July 2025 21. LVMH results H1 2025, LVMH, July 2025 22. Robert Frank, “The wealth of the top 1% reaches a record $52 trillion”, CNBC, October 03, 2025 23. Maliha Shoaib, “How to win back the aspirational customer”, Vogue Business, January 13, 2025 24. James Cook, “Luxury in motion: U.S. luxury retail persists in the face of uncertainty”, JLL, 2025 25. MGI Insights China macro model; McKinsey Global Institute analysis 26. World Tourism Organization (UN Tourism) 27. Altiant UHNW Survey, October 2025 (n=300, includes US, UK, China) 28. C, Oliveras, “Fashion’s Struggles with AI Hinder Global Trade Progress”, Modaes, September 18, 2025 TARIFF TURBULENCE 1. “Purchased in America, 2023”, US Department of Commerce 2. McKinsey Global Institute analysis 3. BoF-McKinsey State of Fashion 2026 Executive Survey 4. Consumer Price Index for All Urban Consumers: Apparel in U.S. City Average, US Bureau of Labor statistics 5. Antone Gonsalves, “Nike fights $1B tariff hit with sourcing shifts, price hikes”, Supply Chain Dive, July 02, 2025 6. Laure Guilbault, “Hermès’s sales growth slows to 7% in Q1”, Vogue Business, April 17, 2025 7. “Ralph Lauren to Raise Prices as Luxury Shoppers Keep Spending ”, The Wall Street Journal, May 22, 2025 8. McKinsey Consumer Sentiment Online Survey (Q1 2025) 9. BoF-McKinsey State of Fashion 2026 Consumer Survey 10. “Walmart asks China suppliers for price cuts on Trump tariffs, Bloomberg News reports”, Reuters, March 06, 2025 11. Arriana McLymore and Anuja Bharat Mistry, “Levi Strauss limits selection for holiday shopping season due to tariffs”, Reuters, July 11, 2025 12. Francesco Guarascio and Casey Hall, “Exclusive: Shein to set up huge Vietnam warehouse in US tariff hedge, sources say”, May 16, 2025 13. International Trade Center 14. Ananta Agarwal, “India‘s Gokaldas eyes EU growth, Africa expansion to counter Trump’s tariffs”, Reuters, September 18, 2025 WORKFORCE REWIRED 1. Yale, “Evaluating the Impact of AI on the Labor Market: Current State of Affairs”, The Budget Lab at Yale, October 01, 2025 2, McKinsey Global Institute research on automation (unpublished) 3. “Superagency in the workplace: Empowering people to unlock AI’s full potential”, McKinsey & Company, January, 2025 (retail specific survey data not published) 4. Helen Reid, “Zalando uses AI to speed up marketing campaigns, cut costs”, Reuters, May 7, 2025 5. “7 Ways Nike is Using AI”, Digital Defynd, 2025 6. “A new future of work: the race to deploy AI and raise skills in Europe and beyond”, McKinsey Global Institute Analysis, May 21, 2024 7. “Generative AI and the Future of Work in America”, McKinsey Global Institute Analysis, July 26, 2023 8. Euromonitor data on retail market size by channel, 2022 - 2029 7. McKinsey & Company research, The Consumer Enterprise of the Future (unpublished) 10. “How to Shift Organizational Culture to Embrace AI”, Gartner 11. BoF - McKinsey State of Fashion 2026 Executive Survey 12. “o9 Solutions Partners With Pandora to Transform Its Integrated Planning Capabilities”, o9 Digital Brain, November 20, 2025 13. Laure Guilbault, “Zegna rolls out AI-powered luxury clienteling”, Vogue Business, April 19, 2025 14. Maghan McDowell, “Inside LVMH’s AI Factory”. Vogue Business, July 09, 2025 THE AI SHOPPER 1. 1. McKinsey ConsumerWise Survey, September, 2025 2. StatCounter (Data on search engine and AI-engine market shares), September, 2025 3. Danny Goodwin, “Google now sees more than 5 trillion searches per year”, Search Engine Land, March 03, 2025 4. Emma Roth, “OpenAI says ChatGPT users send over 2.5 billion prompts every day”, The Verge, July 21, 2025 5. McKinsey GenAI Search survey, July 2025 6. Vivek Pandya, “Adobe: Generative AI-powered shopping rises with traffic to U.S. retail sites up 4,700%.”, Adobe for Business, August 21, 2025 7. SimilarWeb, September 2025 8. Roger Dooley, “AI Search Results More Trusted Than Ads: What CMOs Need To Know”, Forbes, March 10, 2025 9. Profound GEO Platform 10. Liz Flora, “‘GEO’ Is Beauty’s New ‘SEO’”, The Business of Fashion, August 26, 2025 11. “Buy it in ChatGPT: Instant Checkout and the Agentic Commerce Protocol”, Open AI, September 26, 2025 END NOTES 140 The State of Fashion 2026
- 139. 12. “Amazon’s new‘Buy for Me’ feature helps customers find and buy products from other brands’ sites”, Amazon, April 03, 2025 13. McKinsey internal research on “Future of AI-led discovery” 14. Christopher Mims, “Cutting-Edge AI Was Supposed to Get Cheaper. It’s More Expensive Than Ever.”, Wall Street Journal, August 29, 2025 15. “The agentic commerce opportunity: How AI agents are ushering in a new era for consumers and merchants”, McKinsey & Company, October, 2025 16. Euromonitor data on global B2C retail market size, September, 2025 17. GlobalData data on global B2C retail market size, September, 2025 JEWELLERY SPARKLES 1.Euromonitor jewellery sales data, 2019-2028 2. McKinsey consumer jewellery survey, September 2025 3. McKinsey analysis and triangulations, based on AWDC; De Beers Diamond Insight Reports; Paul Zimnisky Diamond Analytics; Expert Interviews 4. “Vogue Business 2025 China Hard Luxury Trends Report”, Vogue Business, July 10, 2025 5. Ming Liu, “Why China’s Gold Jewellers Are the Envy of Global Brands”, The Business of Fashion, April 29, 2025 6. “Kering Reports Revenue Decline in Q1 2025, but Pomellato and Qeelin Shine in Jewellery Segment”, Diamond World, April 30, 2025 7. Julienna Law, “Gold boost: China’s Gen Z seek alternative investments”, Jing Daily, April 04, 2024 8. “DeBeers Spotlight on Diamonds 2024 presentation”, De Beers Group, November 27, 2024 8. Neha Arora, “De Beers sees India as a bright spot, notes early recovery signs in US ”, Reuters, January 29, 2025 10. “Selling Jewellery to Gen Z: Opportunities and Challenges”, Euromonitor International, January, 2024 11. “Wise up to Women”, Nielsen, March, 2020 12. “2024 Silver Jewelry Sales Results”, The Silver Institute, March, 2025 13. Laure Guilbault, “Louis Vuitton seizes the men’s jewellery opportunity”, Vogue Business, January 09, 2025 14. “Luxury’s Untapped Opportunity in Men’s Jewellery”, FashnFly, August 25, 2025 15. Jamila Stewart, “In Los Angeles, David Yurman and Michael B. Jordan Unveiled the Brand’s First High-Jewelry Men’s Collection”, Vogue, February 01, 2024 16. Phil Rosen, “Diamond markets are tumbling because Americans love lab-grown stones”, Business Insider Nederland, September 05, 2023 17. “How Small Jewellery Brands Are Seizing The Moment”, FashnFly, June 05, 2025 18. Amy Francombe, “What does Gen Z want from jewellery?”, Vogue Business, July 29, 2025 19. Nadine Ghosn Hamburger Ring 20. Francesca Fearon, “GIA redefines lab-grown diamonds amid troubled market”, Financial Times, September 05, 2025 21. “Lab-Grown Diamonds – Transforming the Global Diamond Landscape”, Aranca, May 16, 2025 22. “How the Diamond Industry Lost its Sparkle”, Financial Times, July 22, 2025 23. McKinsey Lab Grown diamond sentiment survey, July, 2024 24. “The Diamond Industry is at an Inflection Point”, McKinsey & Company, November 26, 2024 25. “Gen z and Millennials now account for two-thirds of global diamond jewellery demand as sales reach record high”, De Beers Group, September 13, 2018 26. “Signet and De Beers collaborate to highlight the unique attributes of natural diamonds to a new generation of U.S. Couples”, Signet Jewelers, May 22, 2024 ALEXIS NASARD INTERVIEW 1. Gemma A. Williams, “Luxury’s China Priorities in the Year of the Snake”, The Business of Fashion, January 29, 2025 SMART FRAMES 1. Euromonitor sales data on wearables and eyewear, 2019-2028 2. Frederick Stanbrell, “The Future of Smart Rings”, IDC, October 23, 2024 3. “ŌURA Surpasses 5.5 Million Rings Sold and Doubles Revenue for the Second Year in a Row, Empowering Millions to Live Better, Longer”, Business Wire, September 22, 2025 4. “Essilorluxottica (ESLOF) (Q4 2024) Earnings Call Highlights”, Yahoo Finance, February 13, 2025 5. “Essilorluxottica to boost production capacity for smart glasses”, Reuters, February 13, 2025 6. Flora Tang, “Global Smart Glasses Shipments Soared 110% YoY in H1 2025, With Meta Capturing Over 70% Share”, Counterpoint research, August 12, 2025 7. “Smart glasses look better this time round”, Financial Times, August 15, 2025 8. Anna Fuller, “Voice AI Statistics for 2025: Adoption, accuracy, and growth trends”, Big Sur AI, August 10, 2025 9. “Google to Partner With Warby Parker, Kering Eyewear and Gentle Monster for Development of Smart Eyewear; Commits to Equity Investment in Warby Parker”, Vision Monday, May 21, 2025 10. “Snap to Launch New Lightweight, Immersive Specs in 2026”, Snap Inc, June 10, 2025 11. “Introducing Galaxy XR: Opening New Worlds”, Samsung Newsroom U.S., October 21, 2025 12. Emma Roth, “Amazon drivers could be wearing AR glasses with a built-in display next year”, The Verge, September 10, 2025 13. Desktop search on different e-com sites (e.g. Best Buy, Ebay) 14. Elisa Anzolin, Juby Babu, “EssilorLuxottica shares jump after reports that Meta bought 3% stake”, Reuters, July 09, 2025 15. Alban Kacher, Pauline Foret, “Ray-Ban maker EssilorLuxottica misses sales expectations as China slows”, Reuters, October 17, 2024 16. Ben Jiang, “Xiaomi’s first AI-powered eyewear brings smartphone firm into ‘war of hundreds of glasses’”, SMCP, June 26, 2025 17. Ziad Asghar, “A world’s first on-glass GenAI demonstration: Qualcomm’s vision for the future of smart glasses”, Qualcomm, June 10, 2025 18. “Applied Materials Collaborating with Google to Advance Next-Generation AR Computing Platforms”, Applies Materials, January 09, 2024 19. “Lumus and SCHOTT Strengthen Manufacturing Partnership to Meet the Growing Global Market Demand for Optical AR Glasses”, Schott, January 30, 2024 20. Gary Peeters, “Swatch develops own OS for smartwatches”, Retail Detail, March 27, 2025 THE WELLBEING ERA 1. Marc Bain, “How ‘Dopamine Culture’ Rewired Fashion”, The Business of Fashion, July 23, 2025 2. BoF-McKinsey State of Fashion 2026 Consumer Survey 3. BoF-McKinsey State of Fashion 2026 Executive Survey 4. Katarína Šimčíková, “New TikTok Data Reveals: Videos Over 60 Seconds Get 43% More Reach”, Ecommerce Bridge, March 19, 2025 5. “Branding Statistics”, CapitalOne Shopping Research, April 28, 2025 6. “The $2 trillion global wellness market gets a millennial and Gen Z glow-up”, McKinsey & Company, May 29, 2025 7. “Sporting Goods 2025—The new balancing act: Turning uncertainty into opportunity”, McKinsey & Company, March 141 The State of Fashion 2026
- 140. 4, 2025 8. “The$2 trillion global wellness market gets a millennial and Gen Z glow-up”, McKinsey & Company, May 29, 2025 9. “2024 Global Wellness Economy Monitor”, Global Wellness Insititute, November 5, 2024 10. “The $2 trillion global wellness market gets a millennial and Gen Z glow-up”, McKinsey & Company, May 29, 2025 11. “NIQ Report Reveals 2025 Global Health & Wellness Trends”, NIQ, May 28, 2025 12. McKinsey & Company Future of Wellness 2025 13. “How Can Brands Play in Modern Third Spaces”, Dentsu, May, 2025 14. “Kith Ivy”, Kith, September 08, 2025 15. Alo Wellness Club 16. The Reset by Alo Moves x Waldorf Astoria Los Cabos Pedregal EFFICIENCY UNLOCKED 1. “State of U.S. Tariffs: September, 4 2025”, The Budget Lab at Yale, September 04, 2025 2. Martino Carrera, “What to Watch: Luxury Brands Seen Facing Further Scrutiny in the Wake of Supply Chain Scandals”, WWD, September 03, 2025 3. BoF-McKinsey State of Fashion 2026 Consumer Survey 4. McKinsey Global Fashion Index 2026 5. BoF-McKinsey State of Fashion 2026 Executive Survey 6. “Seizing the agentic AI advantage”, McKinsey & Company, June 13, 2025 7. David Moin, “Tapestry Advances ‘Digital Twinning’ Through Adobe Collaboration”, WWD, January 15, 2025 8. Bethanie Ryder, “Tapestry uses Gen AI to supercharge digital twin design”, Jing Daily, February 02, 2025 9. “Shein Opens Its Supply Network to Fashion Brands to Boost Growth”, Bloomberg News, September 18, 2025 10. “Meet Phia: The free AI shopping tool that instantly finds you the best price on fashion, founded by Phoebe Gates and Sophia Kianni”, PR Newswire, April 24, 2025 11. “Companies Selling Consumer Products in the EU (Particularly Clothing, Apparel, and Footwear Companies) Beware: The New ESPR Rules on Unsold Consumer Products Have Now Entered into Force”, Crowell, September 06, 2024 12. Vicky Yuan, “A Closer Look at California‘s Recently Passed Responsible Textile Recovery Act of 2024”, Holland & Knight, October 17, 2024 13. Noumán Khalid, “Tired of Missing Out? Nike‘s SNKRS Reserve Might Be the Answer”, The Sole Supplier, August 26, 2025 RESALE SPRINT 1. “ThredUp’s 2025 Resale Report”, ThredUp, March, 2025 2. Katrina Northrop, “In China’s tough economy, secondhand luxury is very much in fashion”, The Washington Post, August 16, 2025 3. BoF-McKinsey State of Fashion 2026 Consumer Survey 4. Queennie Yang, “Report: China’s Luxury Resale Market to Reach $33 Billion by 2025”, The Business of Fashion, November 25, 2021 5. Lei Takanashi, “Resale Welcomes a Wave of ‘Tariff- ied’ New Customers”, The Business of Fashion, May 09, 2025 6. “The State of Fashion 2025”, The Business of Fashion, McKinsey & Company, November 11, 2025 7. Madeline Berg, “These 5 luxury goods are smart investments, according to data from The RealReal”, Business Insider, September 13, 2025 8. “eBay Unveils Fall 2025 Fashion Trends & Top Luxury Brands”, Franetic, August 21, 2025 9. “The RealReal Announces Fourth Quarter and Full Year 2023 Results”, The RealReal, February 29, 2024 10. “Vinted delivers strong, profitable growth, while investing in Vinted Go and Vinted Pay”, Vinted, April 29, 2025 11. Marion Deslandes, “Baromètre IFM: Vinted, Amazon et Kiabi en tête des ventes en volume au premier trimestre”, Fashion Network, April 30, 2025 12. “The business of second-hand clothing is booming”, The Economist, February 27, 2025 13. “The Technology Behind Luxury Authentication: AI and Expert Collaboration”, The RealReal, January 16, 2025 14. ”The Recommerce 100”, ThredUp, September, 2025 15. “Facts and figures”, Depop newsroom 16. BoF-McKinsey State of Fashion 2026 Executive Survey 17. Lululemon Like New 18. Sarah Kent, “Selfridges Wants to Make Nearly Half its Sales Circular by 2030”, September 02, 2025 19. “How Selfridges is leading the charge when it comes to circular fashion”, British Vogue, June 02, 2025 20. Bertrand CLERMONT- GENEVI, “Tout ce qu’il faut savoir sur la REP textile et l’écocontribution à Refashion”, C!mag , March 06, 2024 21. Sarah Kent, “Luxury’s Big Resale Experiment Is Just Getting Started”, The Business of Fashion, September 30, 2022 THE ELEVATION GAME 1. EDITED SKU concentration 2023-2024 across value, mid-market and premium/ bridge brands 2. BoF-McKinsey State of Fashion Consumer Survey 2026 3. Madelein Schulz, “Luxury is too expensive. What should brands do?”, Vogue Business, January 13, 2025 4. Brian Baskin, “Ralph Lauren’s Next Chapter: Do More With More”, The Business of Fashion, September 16, 2025 5. Olivier Guyot, “Maje’s Elina Kousourna: “We need to succeed in instilling pride among our teams in selling at full price“”, Fashion Network, September 30, 2025 6. McKinsey Consumer Sentiment Pulse Q3 2025 7. Harriet Davey, “We Tried On The Entire New H&M Studio Collection – And It’s Too Good Not To Show You”, Grazia Daily, August 25, 2025 8. Jessica Salter, “We’ve Officially Entered The Era Of The £1K High-Street Coat”, Vogue, February 8, 2025 9. Sandra Halliday, “Jonathan Saunders is named & Other Stories creative chief”, Fashion Network, April 03, 2025 10. Cathaleen Chen, “Why Gap Is Going Premium”, Business of Fashion, April 1, 2025 11. Marc Karimzadeh, “Timothée Chalamet Delivers Cool in Custom GapStudio by Zac Posen”, CFDA, February 26, 2025 12. Julia Harvey, “JW Anderson X Uniqlo’s New Collection Is Full Of Clothes You’ll Actually Want To Wear”, Grazia Daily, January 16, 2025 13. Alice Cary, Joy Montgomery, “Shop Mango X Victoria Beckham: What To Buy From Spring’s Hottest High-Street Collab”, Vogue, April 23, 2024 14. CRC Consumer Insights & Advisory Services Team, “The Evolution of Value in 2025: What Today’s Consumers Really Care About”, Cleveland Research Company 15. “M&S Achieves Best-Ever Style Perceptions As It Launches AW25 Collections”, M&S Press Release, September 18, 2025 16. Jess Cartner-Morley, “Bold and ‘brat’: Marks & Spencer bets on womenswear to revive autumn fortunes”, The Guardian, September 17, 2025 17. “Full-year Results for M&S For the 52 Weeks Ended 29 March 2025”, M&S Press Release, May 21, 2025 18. “Clare Waight Keller Is Uniqlo’s New Creative Director”, British Vogue, September 03, 2024 19. “Consolidated Business Performance”, Fast Retailing , July 10, 2025 20. Chloe Mac Donnell, “Cos takes centre stage at New York fashion week and Gwyneth Paltrow rebrands”, The 142 The State of Fashion 2026
- 141. Guardian, September 15,2025 21. “Steven Meisel Gathered the Biggest Names in Modeling for Zara’s 50th Anniversary”, W Magazine, May 16, 2025 22. “Casual Looks: ZARA Spring Summer 2021 Collection”, D Scene, April 02, 2021 23. Cathaleen Chen, “Aritzia: Redefining Shopping One Store at a Time”, The Business of Fashion, January 29, 2025 24. Georgia Wright, “In pictures: Zara debuts new high-tech store concept in Manchester”, Retail Gazette, August 08, 2025 LUXURY RECALIBRATED 1. McKinsey and Company and Business of Fashion. State of Luxury 2025 report 2. Pamela N. Danziger, “More ‘True,’ Less Aspirational Luxury Is The Next Priority For Luxury Brands”, Forbes, July 14, 2025 3. Company annual reports and filings; McKinsey analysis 4. Social listening analysis by BoF Insights and Quilt AI, October, 2025 5. Press releases; Desktop research 6. Altiant UHNW Survey, October 2025 (n=300, includes US, UK, China) 7. Lily Templeton, “Dior Creates New Industrial Department, Taps EssilorLuxottica Veteran as Chief Production Officer”, WWD, November 27, 2024 8. “Prada group strengthens the partnership with Rino Mastrotto group through strategic equity investment”, Prada Group Press Release, June 05, 2025 9. L’ÉCOLE, School of Jewelry Arts supported by Van Cleef & Arpels 10. “2023 Edelman Trust Barometer, Special Report: The Collapse of the Purchase Funnel TOP 10”, Edelman, 2023 11. Madeleine Schulz, “Inside Saks Global’s personalisation strategy”, Vogue Business, August 14, 2025 12. Howard Ruben, “Gen Z luxury consumers value experience over product: report”, Fashion Dive, July 02, 2024 13. McKinsey and Company State of the Consumer 2025 report 14. McKinsey Global Institute (MGI) wealth research MCKINSEY GLOBAL FASHION INDEX (MGFI) 1. Adrienne Klasa, “Luxury brands ease off on price rises as shoppers push back”, Financial Times, July 23, 2025 2. Lara Ewen, “Kering suffers steep losses amid leadership and creative changes”, Fashion Dive, July 29, 2025 3. Daniel Zipser, “Mid-year update: Five surprises from China’s consumer market”, McKinsey & Company, August 13, 2025 4. “On Results for the Second Quarter and Six-Month Period Ended June 30, 2025”, On, August 12, 2025 5. “Asics Results for the First Quarter and the Three Months Ended March 31, 2025”, Asics, May 15, 2025 6. “Anta Annual Report 2024”, Anta Sports Products Limited, 2025 7. The Gap Inc. Annual Report 2024 8. Next Annual Report and Accounts 2025 9. McKinsey Consumer Sentiment Pulse Q3 2025 10. The Gap Inc. Form 10-K for the fiscal year ended February 1, 2025 11. Cathaleen Chen, “The Gap comeback that might actually be working”, CNN, October 02, 2024 12. Inditex Group Annual Report 2024 13. Sasha Rogelberg, “T.J. Maxx and Marshalls can ‘insulate’ themselves from tariffs because their business model is scooping up other retailers’ unsold inventory”, Fortune, May 22, 2025 14. Richemont Annual Report 2025 15. Yahoo Finance, share price as of October 27, 2025 16. Melissa Repko, “Coach is serving up coffee with handbags as it looks to build on Gen Z success”, CNBC, July 29, 2025 143 The State of Fashion 2026
- 142. The Business ofFashion is a next-generation media company recognised around the world for its authoritative, analytical point of view on the global fashion industry. Serving members in more than 125 countries, BoF combines independent, agenda-setting journalism with practical business advice, online learning, career-building tools and immersive events and experiences designed to open, inform and connect the global fashion community. Nick Blunden President [email protected] Johanna Stout Chief Business Officer [email protected] Liam Johnson Senior Account Manager [email protected] FOR COMMERCIAL ENQUIRIES: FOR PRESS ENQUIRIES: Imran Amed Founder, CEO & Editor-in-Chief [email protected] Vikram Alexei Kansara Editorial Director [email protected] Brian Baskin Executive Editor [email protected] FOR EDITORIAL ENQUIRIES: BoF Insights is The Business of Fashion’s data and advisory team, combining the analytical rigour of a strategy consultancy with the cultural intuition of a creative agency. Harnessing BoF’s unique left-brain and right-brain perspective as well as its unrivalled industry understanding and access, BoF Insights partners with leading fashion and beauty clients to help them sustainably grow their brands and businesses for the long term. BoF Insights recently launched BoF Insights Brand Pulse, a new tool to measure, benchmark and understand fashion brand performance in the age of TikTok, Instagram and AI search, powered by Quilt.AI. FOR BoF INSIGHTS ENQUIRIES: Amanda Dargan Head of AI Tools & Strategy, BoF Insights [email protected] Matthew Cullen Chief Commercial Officer [email protected] Rawan Maki Head of Advisory, BoF Insights [email protected]
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