Fashion in Transition: What The State of Fashion 2026 Reveals

Tariffs, artificial intelligence, and shifting consumer values are reshaping the global fashion system. The State of Fashion 2026 reveals an industry entering a new phase of structural change.

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For more than a decade, the global fashion industry has operated under a permanent sense of disruption. Yet in 2026, the nature of that disruption has evolved. What once appeared as temporary shocks – pandemics, supply chain breakdowns, geopolitical tensions – are now recognised as symptoms of a deeper transformation.

According to The State of Fashion 2026, the annual report by The Business of Fashion and McKinsey, fashion executives are adjusting to a new reality where instability is no longer the exception but the operating environment. Nearly half of the executives surveyed –46% – expect industry conditions to worsen in 2026, an increase of eight percentage points compared with the previous year.

Behind this cautious outlook lies a convergence of forces reshaping the foundations of fashion: geopolitical trade tensions, rapidly evolving technology, and profound changes in consumer behaviour.

Nearly half of the executives surveyed (46%) expect industry conditions to worsen in 2026, an increase of eight percentage points compared with the previous year.

menswear in a shop — © Logan Weaver via Unsplash

Tariffs Redrawing the Map of Fashion

Trade disputes have become one of the defining issues for the industry. In the report, 76% of executives identify tariffs as the most significant challenge shaping 2026.

Rising duties are forcing brands to rethink global sourcing strategies, reconfigure supply chains, and absorb increasing production costs. For decades, fashion relied on a relatively stable system of globalised manufacturing. That system is now being recalibrated.

Brands are shifting production footprints, diversifying suppliers, and accelerating investments in automation and digital infrastructure. Larger suppliers are pursuing footprint optimisation and efficiency gains, while smaller players face growing pressure to adapt quickly.

Agility, more than scale, is becoming the industry’s new competitive advantage.

Artificial Intelligence Moves From Experiment to Infrastructure

While tariffs dominate the list of risks, artificial intelligence stands out as the industry’s most significant opportunity. Executives now view AI as a strategic priority surpassing even product differentiation and sustainability initiatives. What began as experimentation in data analysis or customer personalisation is rapidly evolving into a fundamental redesign of how fashion companies operate.

Across the industry, workforces are being reshaped. Some roles are becoming AI-centric, while others are shifting toward higher-value creative and analytical work. Fashion companies are increasingly competing for specialised talent capable of integrating AI into design, logistics, marketing, and forecasting systems. Yet the transformation goes beyond internal operations.

AI is also redefining how consumers discover and purchase fashion. Large language models are becoming tools for product search, comparison, and styling advice. Some consumers already use AI assistants as personal wardrobe consultants, asking algorithms what to buy and where to find it.

For brands, this signals a profound shift in digital visibility. Appearing in AI-generated recommendations may soon become as important as traditional search engine rankings.

The Rise of the AI Shopper

The next phase of technological change could push this transformation even further. Emerging “agentic commerce” systems –AI agents capable of autonomously researching products, monitoring prices, and completing purchases– are expected to gain momentum later this decade.

If these technologies scale, brands will need to rethink their digital infrastructure entirely. Product data must become more structured, searchable, and machine-readable to ensure visibility within AI-driven ecosystems.

In other words, the future of fashion discovery may no longer happen on search engines or social media feeds, but through conversations with intelligent systems.

A New Consumer Value System

Technology is only one part of the transformation. Consumer priorities are shifting just as rapidly. More than half of executives in the report identify customer retention as one of the key strategic priorities for 2026. As economic pressures reshape spending habits, shoppers are increasingly focused on value, durability, and emotional relevance.

This shift is particularly visible in the changing hierarchy of fashion segments. The mid-market—brands offering strong design, quality, and experience at accessible price points—is now the fastest-growing area of the industry, overtaking traditional luxury as the main driver of value creation.

Jewellery, for example, has emerged as one of the most resilient categories. Consumers increasingly view it as both a form of self-expression and a long-term investment. Demand is expected to remain strong through 2028, fuelled in part by the rise of self-gifting among both men and women.

Another rapidly expanding category is smart eyewear. Blending fashion design with artificial intelligence and wearable technology, smart frames are projected to become a multi-billion-dollar market over the coming decade.

Wellness and the Changing Meaning of Luxury

At the same time, consumer spending priorities are evolving beyond fashion itself. Increasingly, individuals are directing more of their budgets toward personal wellbeing—health, mental balance, and lifestyle experiences.

This shift reflects a broader cultural recalibration. Fashion brands are beginning to explore wellbeing-adjacent spaces, from community-oriented retail concepts to collaborations with wellness brands. But the deeper opportunity may lie in integrating these values into the core of brand identity.

In this emerging landscape, emotional resonance matters as much as aesthetics.

Luxury at a Turning Point

Luxury fashion is now entering a period of strategic reassessment. After years of price increases that often outpaced improvements in creativity or craftsmanship, many aspirational customers have begun to disengage.

Several major luxury houses have responded by appointing new creative directors and attempting to reinvigorate their brand narratives. Yet rebuilding trust with consumers may require more than aesthetic renewal.

For many brands, the path forward will depend on rediscovering what made luxury meaningful in the first place: craftsmanship, authenticity, and cultural relevance.

A System in Permanent Evolution

Looking ahead, the defining characteristic of fashion in 2026 may not be crisis but adaptation.

For the first time in years, industry leaders appear less surprised by volatility. Instead, they are beginning to accept that constant transformation is simply the new baseline of the global fashion system.

In a flat or slow-growth market, success will belong to companies capable of evolving faster than their competitors—those able to redesign their supply chains, harness technological change, and build genuine connections with increasingly conscious consumers.

The fashion industry has always thrived on reinvention. In 2026, that ability is no longer just a creative strength. It is becoming an economic necessity.