Editor’s Note
This article, based on a report by McKinsey & Company and Business of Fashion, outlines a cautious outlook for the global fashion industry, projecting low single-digit growth. It highlights key opportunities in AI, jewelry, the mid-market segment, and the resale sector.
The UK’s fashion media outlet, Business of Fashion (BoF), in collaboration with McKinsey & Company, has released its annual outlook and challenge assessment, ‘The State of Fashion 2026’.
The theme is ‘When Rules Change’. In the foreword, McKinsey stated that while fashion leaders have overcome uncertainty, challenges such as economic volatility, evolving consumer priorities, and rapid technological innovation mean that greater agility and stronger capabilities will be required to succeed next year.
It also noted that while persistent disruption may feel overwhelming, it is actually part of a broader wave of change. The report added that fashion leaders are now accepting constant change as the new standard.
According to the report, the fashion environment is expected to worsen in the new year. In a survey of fashion leaders, 46% of respondents expected it to deteriorate, a 7 percentage point increase from last year’s 39%. In North America, 36% were not hopeful or very not hopeful, double the result from last year’s survey.
Based on its own analysis, McKinsey forecasts that the global fashion market growth rate will remain in the low single digits next year. The US, in particular, is expected to fall short of even 2025 projections. However, luxury goods are expected to see a modest uptick across the market, with China also projected to grow by 2-4%.
This report evaluated AI as a new opportunity for the fashion industry and highlighted the high growth in the mid-market, jewelry and eyewear, and resale.
Regarding AI, over 35% of fashion executives reported already using it in various areas such as online customer service, image creation, copywriting, consumer search, and product discovery. Many fashion companies stated they have realized productivity improvements in marketing and sales functions through generative AI.
Furthermore, while luxury has stumbled due to aggressive price increases without product innovation, the mid-market has risen rapidly. Jewelry, which has been conservatively managing prices, grew more than four times faster than apparel, making it the fastest-growing segment in fashion. In other accessory segments, smart eyewear blending fashion and technology is having a breakthrough year, with new products expected to be launched in the new year.
Resale is expected to grow at a rate 2-3 times faster than the primary market. Analysis suggests that resale is not cannibalizing direct sales; instead, consumers are using resale to explore aspirational brands for future purchases.
The top 10 agendas for the fashion industry next year, as selected by the McKinsey report, are as follows:
1. Tariff turbulence
2. Workforce rewired
3. AI shopper
4. Jewelry sparks
5. Smart frames
6. The well-being era
7. Efficiency unlocked
8. Resale sprint
9. The elevation game
10. Luxury recalibrated
