The State of Fashion Report 2026 | 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.​

The State of Fashion 2026 report explores how tariffs, AI, shifting consumer priorities, and workforce transformation are redefining the global fashion landscape. Amid an ongoing low-growth environment, the industry faces intensified tariff turbulence reshaping trade routes and price pressures while accelerating adoption of AI at scale – from creative workflows to customer engagement and shopping behavior. The report highlights the critical need to evolve workforce skills and organizational models to harness AI’s productivity gains without losing fashion’s creative essence.​

Key insights reveal the mid-market fast-growing segment overtaking luxury as the main value creator, driven by consumer demand for value, product elevation, and retail experience innovation. Jewelry and smart eyewear represent high-growth accessory categories, while luxury is undergoing strategic recalibration focusing on craftsmanship and client trust amid affordability challenges and wellness-driven consumer values. Resale markets are sprinting, with brands exploring integrated and platform models to capture secondhand demand.​

In operational terms, efficiency unlock and AI integration are enabling cost management and differentiation, while sustainability emerges as an opportunity for circular business models and environmental initiatives. The report underscores that brands must renegotiate their approach to pricing, assortment, and storytelling to maintain relevance in a complex, volatile environment defined by geopolitical risks, consumer caution, and rapid technological change.

Key insights

-Forty-six percent of executives expect industry conditions to worsen in 2026, an increase of 8 percentage points over 2025.

-Trade disputes rank among fashion leaders’ top three risks, while 76 percent say tariffs will be the biggest issue defining 2026.

-Executives cite artificial intelligence as the biggest opportunity for the industry, surpassing other business priorities like product differentiation and strengthening sustainability.

Read The State of Fashion 2026 Report HERE