The State of Fashion Report 2025 | McKinsey & Company and BoF Insights

The State of Fashion report is an annual industry outlook from The Business of Fashion and McKinsey that analyses how a cyclical slowdown, geopolitical shocks and shifting consumer behavior are reshaping global fashion. Drawing on executive and consumer surveys plus the McKinsey Global Fashion Index, it combines macroeconomic forecasts with segment-level insights to help brands stress-test strategy, investment and operating models for the year ahead.​

Key themes for 2025 include sluggish, low single‑digit growth and heightened regional divergence, with non‑luxury driving most profit gains while China softens and new “growth engines” emerge across Asia. Consumers are far more price‑sensitive and value‑oriented, fuelling the rise of dupes, resale and off‑price, while forcing brands to widen price ladders and clearly justify any premium positioning. The report also highlights a reset in digital: online marketplaces face existential business model pressure, AI‑driven discovery and curation become critical to cut through assortment overload, and physical retail regains importance as brands rethink in‑store experience and the “human side” of sales.​

On the operating side, the report underscores accelerating trade reconfiguration, with nearshoring and “friend‑shoring” gaining momentum as companies seek resilience and shorter lead times amid logistics and tariff uncertainty. Inventory excellence and margin protection move to the top of the agenda, with brands reducing overstock, tightening buy decisions and deploying data and AI across planning, pricing and returns. Finally, while many executives are temporarily de‑prioritizing sustainability versus more immediate growth imperatives, the report argues that regulation, climate risk and financing innovations are converging to make collective, system‑level action on decarbonization and waste an unavoidable strategic priority.

Key insights

– In 2025, 80 percent of executives expect no improvement in the global fashion industry.

– Sustainability has fallen off the agenda, with only 18 percent of fashion executives citing it as a top three risk for growth in 2025, down from 29 percent in 2024.

– Lack of consumer confidence and appetite to spend was cited by 70 percent of fashion executives as the biggest concern for the year ahead.

Read The State of Fashion 2025 Report HERE