The State of Fashion 2025: Challenges at every turn

Investment Rating - The report indicates a cautious outlook for the fashion industry in 2025, with revenue growth expected to stabilize in the low single digits, reflecting a sluggish growth environment [28][30]. Core Insights - The fashion industry is facing a tumultuous and uncertain 2025, characterized by a cyclical slowdown, increased price sensitivity among consumers, and significant shifts in global trade dynamics [25][26]. - Despite challenges, opportunities exist for brands that can adapt quickly to market changes and consumer preferences [27][40]. - The McKinsey Global Fashion Index forecasts that non-luxury segments will drive economic profit growth for the first time since 2010, indicating a shift in market dynamics [28]. Industry Outlook - Revenue growth for the fashion industry is projected to remain low, with expectations of modest increases primarily driven by volume rather than price [49][50]. - Fashion executives are prioritizing differentiation strategies, including localization of go-to-market models and broadening price ranges to capture diverse consumer segments [51][52]. - The report highlights the importance of engaging the "Silver Generation" (over 50 years old) as a growing consumer cohort with significant spending power [35][54]. Global Economy - The report notes a significant increase in trade barriers, with a fivefold rise since 2015, impacting sourcing strategies for fashion brands [70]. - Rising costs and geopolitical tensions are prompting brands to diversify their sourcing away from China, with a focus on nearshoring and emerging markets in Asia [68][69]. - Shipping costs have surged dramatically, with a 165% increase in Asia-to-US shipping rates observed recently, further complicating supply chain dynamics [71]. Consumer Shifts - The report identifies a shift in consumer behavior towards value-driven purchasing, with increased interest in resale and off-price segments [31][54]. - AI-powered curation is expected to enhance product discovery for consumers overwhelmed by choices, improving engagement and conversion rates [34][54]. - The growing trend of cost-conscious shopping is likely to persist, influencing brand strategies to demonstrate value effectively [54].