Fashion forecast 2026: Between caution and course correction

If 2025 was the year the fashion industry learned to live with uncertainty, 2026 is shaping up to be the year it decides what to do with it.

Many of the challenges that have characterized the last 18 months will not simply disappear on January 1st. The uncertainty surrounding tariffs, for example, remains a structural problem. This is particularly true as trade tensions between major economic blocs continue to fluctuate.

Inflation has moderated in parts of Europe and the US compared to its peak in 2022-23, but higher interest rates and housing costs continue to change consumer priorities. The post-pandemic luxury industry boom appears to be finally over. For 2026, the question is no longer whether demand has waned, but rather how brands will adapt to a permanently changed environment.

Slower growth and cautious buying mood

According to management consultancy Bain & Company, the global personal luxury goods market slowed sharply in 2024 and was largely stagnant in 2025. Growth was driven less by volume and more by price increases and a small group of high-spending customers. McKinsey’s latest “State of Fashion” report finds something similar. Less than a third of fashion executives expect strong near-term growth. This is in stark contrast to the optimism following Covid-era reopenings. These signals suggest that 2026 will not be a return to easy growth. But stagnation does not necessarily mean standstill.

discipline

For major fashion groups and retailers, 2026 will likely bring more of the operational discipline that began to take hold this year. Inventory control, once overshadowed by expansion and marketing spending, has come back into focus. In the US and Europe, advertising intensity increased in 2025 as retailers worked through excess inventory. Analysts expect discounts to remain part of the strategy in 2026, albeit in a more targeted and data-driven manner. The days of blanket discount campaigns as a way to increase frequency seem to be numbered. They will be replaced by loyalty-based incentives and more streamlined purchasing planning.

The luxury industry in particular is facing a reckoning. The rapid price inflation of the last five years has met with visible resistance. Some flagship handbags have doubled in price since 2019. In China, consumers have become more selective. Luxury spending there fell year-over-year in 2024 before stabilizing in 2025, according to Bain estimates. Customers prefer tradition, craftsmanship and perceived long-term value over flashy, logo-laden novelties. This shift is also evident elsewhere. In the USA, customer frequency in luxury department stores has not yet returned to pre-pandemic levels. At the same time, second-hand and repair services continue to grow, highlighting a more conscious approach to consumption.

But it is precisely in this reluctance that there is a silver lining on the horizon. Smaller, independent and local brands entered 2025 with fewer reserves. However, many ended the year more resilient than expected. Platforms like Shopify reported steady growth in their merchants’ sales volumes. This is especially true for niche brands with strong direct-to-consumer strategies. Consumers may buy less, but they do so more consciously and often closer to where they live. Data from market research firm Euromonitor shows that local and regional fashion brands gained market share in several European markets in 2024-2025. This was supported by storytelling around origins, production and values.

Resilience and authenticity

Authenticity, once an overused buzzword, has become a measurable differentiator. Consumers are increasingly skeptical about sustainability promises without substance. However, they respond to tangible signals. This includes transparent pricing, visible craftsmanship, repair services and long-lasting products. This is in line with a broader realignment of fashion’s value proposition. Instead of chasing fast-moving innovations, brands are finding favor with fewer but better products. This development benefits smaller manufacturers who were never designed for large production volumes.

Retail is also quietly developing. Brick-and-mortar retailers are no longer expected to do everything. In 2026, its role will shift further towards experience, service and community. Transactions will continue to flow fluidly between online and offline. In Europe, experiential retail formats have demonstrated higher dwell times and conversion rates than traditional store concepts. This is what several retail real estate groups report on the results for 2025. These formats include, for example, in-store studios or cultural programs.

Evolution of retail

So will 2026 just be a continuation of what happened before? In macroeconomic terms, perhaps. The industry will hardly be able to escape volatility, geopolitical risks or cautious consumers in the near future. Strategically, however, it feels different. The excesses of the last few years are being questioned not only by critics, but also by the balance sheets. These include excessive prices, overproduction and too strong a presence on the market.

For fashion brands and retailers willing to listen, 2026 offers an opportunity. They can rebuild trust, sharpen their identity and adjust their ambitions. The growth may be slower, but it could also be healthier. In a market where attention is scarce and loyalty must be earned, doing less but doing so with greater clarity could be the most radical move of all.