The State of Fashion 2026: When the Rules Change

A new reality
As fashion executives look ahead to 2026, they see a completely changed reality. New US tariffs have shifted trade flows and are forcing brands and suppliers to adapt quickly. Consumers are seeking added value and shifting their spending to priorities such as health and well-being. At the same time, the rapid rise of AI is radically changing the technological landscape.

While the ongoing changes may seem daunting, they are part of broader, long-term shifts. McKinsey and The Business of Fashion have been tracking global economic shocks, changing consumer preferences, and developments within the fashion system since 2016. Since their first publication, during the Brexit vote and Donald Trump’s election, they have examined the impact of a pandemic, global supply chain disruptions, and sustainability, among other things.

Where uncertainty used to set the tone, “challenging” is now the keyword. For many executives, tariffs are the biggest obstacle, with 46% expecting conditions to deteriorate in 2026 (compared to 39% in 2025). North America is considered unattractive or very unattractive by 36%, twice as many as last year.

Nevertheless, there is also optimism: 25% of respondents see improvements, and sentiment toward China is improving: 28% view the market there as unattractive, compared to 41% in 2025. Agility is becoming the key to success in a sector where trade, consumer behavior, and technology are constantly changing.

AI as a strategic necessity
With turbulent conditions such as fluctuating costs, supply chain disruptions, and slow growth putting pressure on the fashion industry’s economic model, AI is shifting from a competitive advantage to a business necessity.

To capitalize on this technological shift, companies must redesign processes and compete for AI talent—looking beyond the fashion ecosystem—while retaining the essential creativity that makes fashion unique. Leaders must transition to a review of their organizational structure: some functions will become more AI-focused, shifting roles toward more creative and analytical high-value tasks. And while still in its early stages, agentic AI is also changing how people work and collaborate, requiring new strategies to leverage this.

AI is also changing the way people shop. Consumers are turning to large language models to search for products, compare offers, and get personalized advice. Some are already using AI as a style and wardrobe advisor, making brand presence in AI chatbot results the new form of SEO.

New customer priorities, new competitors
Customer loyalty is becoming an important front line in the battle for buyers, with more than half of executives seeing retention strategies as a key issue in 2026.

To retain customers—and attract new ones—brands will have to offer what consumers are looking for: value. While luxury brands raised prices without corresponding improvements in quality or creativity, design-oriented mid-market brands have improved their products and shopping experiences. The mid-market segment is now the fastest growing segment, replacing luxury as the most important value generator.

Jewelry is also flourishing as luxury brands raise their prices more rapidly. Strong demand is expected through 2028, driven by consumers seeking sustainable investments, self-expression, and a rising trend of self-gifting among both men and women. Meanwhile, smart eyewear — the combination of fashion and technology — is the fastest-growing accessory category, with more product launches expected in 2026.

Re-inventing
To restore growth, the luxury sector is now undergoing a period of re-inventing, with several major fashion houses appointing new creative directors in the period up to September 2025. But that may not be enough. High prices remain a major obstacle for buyers, while more and more potential luxury customers are focusing on well-being: body, mind, and health.
Ultimately, 2026 will be another year of disruption for fashion companies. In a flat market, only those companies that capture the hearts and minds of customers will grow and gain market share.

The 10 fashion industry themes that will set the agenda in 2026:

• Tariff turbulence – American tariffs are increasing costs worldwide. Agility is crucial for brands and suppliers.
• Workforce rewired – Technology and AI are redefining work. Retraining and attracting talent are essential.
• The AI shopper – Autonomous AI agents are changing how consumers shop. Digital marketing and API-driven content are becoming decisive.
• Jewellery sparkles – The category continues to grow thanks to sustainable investments, self-expression and self-gifting.
• Smart frames – AI-enabled wearables will redefine the market. Product launches and collaborations with technology leaders are accelerating adoption.
• The wellbeing era – Consumers are seeking emotional connections with brands and expect greater integration of wellbeing into brand offerings.
• Efficiency unlocked – New technology increases productivity and reduces costs, freeing up resources for growth and innovation.
• The Resale sprint – Second-hand fashion is gaining ground. Brands need to develop their own resale strategies to enhance value and brand perception.
• The elevation game – From mid-market to affordable luxury: brands are moving upmarket to differentiate themselves and win back former high-end customers.
• Luxury recalibrated – Luxury brands are reducing their dependence on price and refocusing on creativity, craftsmanship and the integration of product, storytelling and customer experience.