Key takeaways from the State of Fashion
Rising costs, better supply chain transparency – and sustainability back on the industry’s list of priorities. Here, we share three findings most relevant to our slice of the textile industry, learned from Business of Fashion’s and McKinsey’s annual report The State of Fashion.
Every year, The Business of Fashion and McKinsey& Company map the forces reshaping the global fashion landscape and identify the ten themes expected to set the agenda for the coming year.
For 2026, the report paints a picture of an industry continuing to reel from the pressure of trade disruptions, rising costs and unceasing volatility. The reality, however, isn’t as bleak as it may sound. When surveyed about where they see the strongest opportunities, executives cite AI as key, followed by business priorities like product differentiation and strengthening sustainability. For a circular textile company, the latter is one reason to hold onto a positive outlook on the year ahead.
Takeaway 1: Sustainability re-emerges as one of fashion’s biggest opportunities
After a few years of slipping down the industry’s priority list, sustainability is back in the industry’s top three opportunities for growth. Executives are once again looking to sustainable practices as an opportunity to improve operations and meet consumer expectations. Circular business models, and approaches including resale and longer-lasting products, are highlighted as areas where they see the biggest potential to create value.
This shift mirrors broader consumer attitudes. More than 80 percent of shoppers say ‘value for money’ is one of the most important factors in their purchase decisions. 75 percent prefer designs that feel unique and creative, and 71 percent say jewelry is a way to express their personality, illustrating a wider desire for products that last, hold meaning and offer stronger long-term value.
For fashion leaders, these attitudes underscore a familiar truth. Cutting waste lowers costs, extending product life strengthens trust, and choosing future-proof materials is a business necessity in the long term.
Takeaway 2: Rising costs and tariffs push brands toward more transparent supply chains
In an era defined by economic turbulence, supply chain stability has become a strategic priority. The financial strain created by new US tariffs is reshaping global supply chains at speed. In spring 2025, the average tariff on apparel and footwear imports to the US jumped from 13 to 54 percent before settling at 36 percent later in the year. The impact is significant, with an estimated twenty-seven billion dollars added to import costs globally if volumes remain unchanged.
These pressures are now central to the industry agenda. 76 percent of fashion executives say trade disruptions and rising duties will shape the industry in 2026. The shift is already visible in sourcing patterns. Imports from Cambodia to the US have risen 42 percent since 2019, while imports from China have fallen by 30 percent.
To navigate this new landscape, companies are reassessing where and how they source and produce materials and finished garments – looking for supply chains that offer more control, stability and – in effect – traceability.
The reasons are simple. Tariffs increase financial risk, and brands and companies with heavy reliance on production or sourcing from countries hit with high tariffs will need to reassess the way they plan, secure materials, and produce garments, in order to stay competitive.
Takeaway 3: Differentiation and product newness take center stage
For fashion companies, customer behavior is becoming harder and harder to predict. The remedy is spelled differentiation, product newness and opting for a distinctive value proposition rooted in creativity and innovation. This ranks as the second-highest opportunity in the report, reflecting a more competitive landscape.
Long gone are the days when fashion companies were only competing within their own region or category. Now, competition spans global players, constant downward pressure on price – and even a fast-growing second-hand market.
According to the report, differentiation doesn’t only come from aesthetics but from how long a product lasts, how well it’s made and how many seasons it can stay in style. Our translation? Choice of material, transparency across the supply chain – and fibers designed for circularity – will all help strengthen product newness.
Download the report in full here
Photo courtesy: Illustration by Vratislav Pecka for Business of Fashion