The State

of Fashion
2025
ACKNOWLEDGEMENTS

The authors would like to thank Lois Buck, Catarina Cawén, Rachel Sandri and Chloe Tait from
McKinsey’s London and Boston offices for their critical roles in delivering this report. We would also
like to thank Abhishek Goel for his significant contribution to the MGFI article again this year.

A special thanks to all members of The Business of Fashion and the McKinsey communities for their
contributions to the research and participation in the BoF-McKinsey State of Fashion 2025 Executive
Survey and the BoF-McKinsey State of Fashion 2025 Consumer Survey, especially the many industry
experts who generously shared their perspectives during interviews. In particular, we would like to thank
Carlos Casado, Michael Kliger, Patrice Louvet, Santiago Poveda, Joe Preston, Nandita Sinha, Nikhil
Thukral, Illya Symonenko, Libby Wadle and Jennifer Wong.

The wider BoF team has also played an instrumental role in creating this report — in particular, Nick
Blunden, Sheena Butler-Young, Anushka Challawala, Cathaleen Chen, Niamh Coombes, Amanda Dargan,
Jael Fowakes, Fred Galley, He Jia, Sarah Kent, Rawan Maki, Daniel-Yaw Miller, Malique Morris, Alex
Negrescu, Anna Rawling, Darcey Sergison, Lillian Sesiguzel, Arunima Sharma, Arnika Thakur, Amy Vien,
Amy Warren, Michelle Wiles, Josephine Wood and Robb Young.

We would like to thank the following McKinsey colleagues for their special contributions to the report
creation and in-depth articles: Amine Abidi, Kari Alldredge, Sarah André, Ugo Apuzzo, Magdalena
Balcerzak, Pamela Brown, Tiffany Burns, Inés Casanovas, Becca Coggins, Sandrine Devillard, Adarsh
Dhingra, David Fuller, Antonio Gonzalo, Brian Gregg, Kenza Haddioui, Holger Harreis, Gerry Hough,
Julian Hügl, Daniel Hui, Patricio Ibáñez, Nikola Jakic, Jonatan Janmark, Sajal Kohli, Franck Laizet, Nikolai
Langguth, Ray Liu, Lucrezia Luti, Clarisse Magnin, Karl-Hendrik Magnus, Siddhant Malhotra, Apurva
Misra, Alexandra Mondalek, Jessica Moulton, Olga Ostromecka, Gizem Ozcelik, Lauren Pak, Emily Reasor,
Roger Roberts, Kelsey Robinson, Amaury Saint Olive, Carlos Sánchez Altable, Alice Scalco, Jennifer
Schmidt, Alexander Silwer, Sven Smit, Nadya Snezhkova, Marie Strawczynski, Rickard Ström, Wiktoria
Szułcik, Corinne Teschner, Alexander Thiel, Martha Torres, Yasufumi Tozuka, Lei Xu, Bruce Xia, Chenan
Xia, Liann Wu, Rebecca Zhang.

We’d also like to thank Marie Victoire de Bascher for the cover illustration.

The State of Fashion 2025 2

CONTENTS

6 Executive Summary 73 Fashion System

Theme 06: The Human Side of Sales
8 Industry Outlook
Theme 07: Marketplaces Disrupted

Theme 08: Sportswear Showdown

16 Global Economy
Theme 01: Trade Reconfigured Theme 09: Inventory Excellence

Theme 02: Asia’s New Growth Engines Theme 10: The Sustainability Collective

39 Consumer Shifts 129 McKinsey Global

Theme 03: Discovery Reinvented Fashion Index
Theme 04: Silver Spenders

Theme 05: Value Shift

The State of Fashion 2025 3

CONTRIBUTORS

IMRAN AMED GEMMA D’AURIA MARC BAIN ANITA BALCHANDANI

Imran Amed is one of the global fashion industry’s Gemma D’Auria is a McKinsey senior partner and The senior technology correspondent at The Anita Balchandani is a senior partner in
leading writers, thinkers and commentators, and leader of the firm’s global Apparel, Fashion Business of Fashion, Marc Bain reports on the McKinsey’s London office. Anita co-leads the
is founder, chief executive and editor-in-chief of & Luxury sector. She has worked extensively in innovations reshaping the global fashion Apparel, Fashion & Luxury sector in EMEA.
The Business of Fashion (BoF), a modern media North America, Europe and the Middle East industry and writes a weekly tech newsletter. She works with global brands and retailers in
company and the authoritative voice of the global supporting retail, fashion and luxury players and In his career as a reporter, including several shaping ambitious growth agendas, driving
fashion and luxury industries. Imran holds an family-owned businesses in shaping bold strategic years as the fashion reporter at Quartz, he has digital transformation and designing winning
MBA from Harvard Business School and a B.Com agendas and driving transformations for higher covered all aspects of the industry, from models for the future. Anita also works
from McGill University. He was born in Canada performance and organisational health. Gemma garment workers to the runway, and in 2021 extensively in the private equity space leading
and holds British and Canadian citizenship. is also a leader of McKinsey’s CEO Excellence received an award in business journalism. diligence and value creation plan support
Previously, Imran was a management consultant initiative and is passionate about supporting the across numerous growth equity transactions.
at McKinsey & Co. leadership journeys of top teams and CEOs.

DAVID BARRELET BRIAN BASKIN COLLEEN BAUM HANNAH CRUMP

David Barrelet is an associate partner in The Business of Fashion executive editor Brian Colleen Baum is a senior partner in McKinsey’s As director, BoF Insights at The Business of
McKinsey’s Munich office, and is part of the Baskin oversees the publication's award- New York office and is a leader of McKinsey’s Fashion, Hannah Crump executes in-depth
leadership of McKinsey’s Apparel, Fashion winning coverage of beauty, retail, technology, retail operations and retail real estate editorial projects and partners with industry
& Luxury sector in EMEA. He works with marketing and other topics. Brian is a veteran initiatives in North America. She advises experts to create data-driven research and
sportswear, fashion and luxury brands and financial journalist, joining BoF from The Wall retailers and fashion brands on growth strategy, analysis for leaders in the global fashion and
retailers on a variety of topics including Street Journal, where as a reporter and editor retail footprint, inventory management and beauty industries. Her career spans over 10
growth strategies, operating model he covered the global energy market, logistics omnichannel fulfilment topics. years in editorial and project management
transformations and M&A. and more. He started his career writing about positions in fashion media and publishing.
healthcare for the Arkansas Democrat-Gazette
and is a graduate of Brown University.

The State of Fashion 2025 4

CONTRIBUTORS

PATRICIA GONZÁLEZ MÉNDEZ JOËLLE GRUNBERG ALEXANDER LI

Patricia González Méndez is an engagement Joëlle Grunberg is a partner in McKinsey’s Alexander Li is part of The Business of
manager in McKinsey’s London office and is New York office and is part of the Apparel, Fashion’s data and advisory team, BoF
part of the Apparel, Fashion & Luxury sector Fashion & Luxury sector in the Americas. She insights. His role as associate director of
in EMEA. She works with fashion and luxury focuses on growth strategy, international advisory entails collaborating with fashion
companies across Europe, on topics such as expansion and commercial transformation. and beauty clients to help them achieve new
e-commerce, strategy, merchandising, value Before re-joining McKinsey, Joëlle served 20 levels of cultural relevance and commercial
creation and M&A. years as a C-suite leader of fashion and success. Alexander comes from a consulting
footwear brands including Wolverine, Boston background with a focus on growth strategies
Brands and Lacoste Americas. in the consumer space.

RAHUL MALIK FELIX RÖLKENS DANIEL ZIPSER

Rahul Malik is the chief growth officer and head Felix Rölkens is a partner in McKinsey’s Daniel Zipser is a senior partner in McKinsey’s
of BoF Insights at The Business of Fashion. As Berlin office, and a co-leader of McKinsey’s Shenzhen office and leads McKinsey’s Apparel,
chief growth officer, he launches and oversees Apparel, Fashion & Luxury sector in EMEA. Fashion & Luxury sector across Asia-Pacific.
new businesses for BoF. As the head of BoF He works with apparel, sportswear and fashion Daniel works with a broad set of companies
Insights, he advises leading fashion, beauty and e-commerce companies in Europe and across Greater China and Asia-Pacific,
luxury clients on answering their most pressing North America on a wide range of topics primarily on sales and marketing topics, with a
strategic questions. Prior to BoF, he was a long- including strategy, operating model and deep understanding of local consumers and
time consultant at Boston Consulting Group. merchandising transformations. retail trends in addition to holistic topics
including organisation, corporate finance and
operations.

The State of Fashion 2025 5

EXECUTIVE SUMMARY

Challenges at Every Turn

Though hard to predict even in the best of times, outlook for 2025 appears to be a continuation of the
the fashion industry is in for a particularly sluggishness seen in 2024: revenue growth is
tumultuous and uncertain 2025. A long-feared expected to stabilise in the low single digits. While
cyclical slowdown has arrived. Consumers, scarred luxury has led in value creation in recent years, the
by the recent period of high inflation, are McKinsey Global Fashion Index forecasts that in
increasingly price sensitive. There is also the 2024, it is non-luxury that will drive the entirety of
surprising rise of dupes, the acceleration of climate the increase in economic profit for the first time
change and the continued reshuffling of global since 2010 (excluding Covid-19).
trade. Regional differences, which came into focus
in 2024, will become even starker in the coming Fashion leaders polled in our annual BoF-
year. McKinsey State of Fashion Executive Survey were
just as pessimistic as last year. Just 20 percent
In short, the negative environment predicted by expect improvements in consumer sentiment in
many in the fashion industry this time a year ago has 2025, while 39 percent see industry conditions
now manifested. There is still growth to be found, worsening.
but economic uncertainty, geographic disparities as
well as shifting customer behaviour and preferences The geographic drivers of revenue and economic
mean seizing it will require navigating a maze of profit are also undergoing historic shifts. In
compounding challenges at every turn. particular, the industry will benefit from falling
inflation and increased tourism in Europe, the
Consequently, 2025 is likely to be a time of resilience of high-net-worth individuals in the US
reckoning for many brands. The upshot is that there and new growth engines in Asia to counteract
is still opportunity to be found for brands that move uncertainty around consumer spending in China,
nimbly and are quick to adapt to upheavals in a which is still recovering from the pandemic.
chaotic marketplace. China will remain the region’s centre of gravity, but
as the country is buffeted by macroeconomic
Sluggish Growth Continues headwinds, brands will pivot focus to other Asian
Judged purely by the topline, the fashion industry’s markets, most notably Japan, Korea and India.

The State of Fashion 2025 6

Acting on Opportunities
To reach these consumers, executives told us they
Brands are also reevaluating which consumer
cohorts to pursue. While the fashion industry has
“The old playbook
will localise their go-to-market models, broaden
their price ranges and focus on brand positioning to
historically prioritised younger shoppers, the “Silver
Generation” of over-50 customers is growing as a
is now obsolete; the
capture the attention of shoppers who are proportion of the overall population — and fashion industry will need
increasingly prioritising value. This impulse is also spending. In 2025, brands will benefit from
driving expansion of the resale and off-price courting these oft-overlooked customers. a new formula.”
segments. Brands that do not wish to play in these
categories must demonstrate to customers why Not all brands are equally adept at making these
their products are worth the premium price. pivots. Often, it is newer, “challenger” brands,
unburdened by historic conceptions about products,
One way to achieve this is by improving the stores and customers, that are coming out on top.
shopping experience. Consumers are returning to This is especially true in the sportswear category,
in-store shopping at pre-pandemic levels across where incumbents are competing with a wave of
much of the world, but retailers need to remind smaller, but more innovative players that are
shoppers what they love about the in-store rapidly capturing market share.
experience. That starts with well-trained staff who
are empowered to assist and inspire customers. Next year, ongoing shifts in global trade must also proven less willing than hoped to pay extra for
be monitored and anticipated for their impact on planet-friendly products, making the business case
In the shift back to physical retail, pure-play luxury sourcing. Retailers will accelerate their for sustainability less obvious to executives among
marketplaces have struggled. This coming year may reconfiguration of supply chains to prioritise other competing priorities, the mounting cost of
see mass online marketplaces experience similar nearshoring and manufacturing in geopolitically climate change, and government action to combat
disruption; most have seen their share prices aligned countries. it, mean sustainability must remain at the top of the
plummet from pandemic highs and have struggled agenda. Those who choose to approach
to find an answer to falling demand and rising These supply chains will need to become more agile, sustainability with a long-term mindset even while
customer acquisition costs. with companies making efforts to reduce excess battling short-term problems will be rewarded with
inventory and minimise the risk of shortfalls. more efficient business operations and a
Smart e-commerce players are focusing on new Margin pressures, as well as pressures from competitive advantage.
paths for product discovery. Shoppers who were governments around the world to reduce emissions
once dazzled by the seemingly endless selection and fashion waste, will drive advances in inventory Leaders who move quickly to identify the bright
available at many online retailers now bemoan management. New technology will aid these efforts. spots, whether they are geographic, demographic or
the difficulty of finding what they want. AI-powered technological, will be primed for success, but only if
curation, content and search can help customers Finally, the climate crisis will remain a potent force they’re able to evolve. The old playbook is now
discover brands and products more effectively — across fashion supply chains and in driving obsolete; the industry will need a new formula
and feel more inclined to make a purchase. consumer behaviour. Even though shoppers have for differentiation and growth.

The State of Fashion 2025 7

 Industry Outlook

Industry Outlook
The Market Share
Game Levels Up

The State of Fashion 2025 8

 Industry Outlook

Uncertainty persists as executives enter 2025

with less optimism for the year ahead
For yet another year, the most common sentiment Question: What aspects of the global economy do you expect will be the
among fashion leaders for 2025 was “uncertainty,” greatest risks to growth in the fashion industry in [year]? Select three
%
according to the BoF-McKinsey State of Fashion
2025 Executive Survey. Just 20 percent of
respondents expect conditions to improve from
2023 2024 2025
2024, 41 percent expect conditions to remain the
same and 39 percent expect them to worsen.1 1st
Geopolitical Consumer confidence
Inflation 78 62 and appetite to spend 70
instability
Like last year, there is a divide among executive
expectations, but reasons for concern have changed:
2nd
• Fashion leaders are concerned about consumer Geopolitical
66 Economic
55 Geopolitical
67
instability volatility instability
sentiment, as the economic outlook remains in
flux and sluggish across markets. Seven out of
10 fashion leaders cited consumer confidence 3rd
as the top risk for 2025.1 Supply chain Economic
52 Inflation 51 32
disruptions volatility

• Executives remain concerned about how

geopolitical instability and economic volatility
4th
will impact the fashion landscape in the year Economic
31 Sustainability 29 Inflation 28
volatility
ahead.1 Given changing dynamics and conflicts
in the geopolitical landscape we expect these
risks to stay top of mind. 5th
Energy price Rising interest Supply chain
28 27 22
volatility prices disruptions
• Meanwhile, inflation has been falling further
down the list of executives’ concerns. Around
the world, central banks are lowering interest
rates as inflation cools. In this year’s survey,
executives were nearly half as likely to cite
inflation as a key risk compared last year.1 2 3 4 Source: BoF-McKinsey State of Fashion Executive Survey, 2023, 2024 and 2025

The State of Fashion 2025 9

 Industry Outlook

Fashion industry growth is expected to remain

low, but increase slightly from 2024
Despite these continued challenges, McKinsey Retail sales year-on-year growth by geography and segment,
Fashion Growth Forecasts predicts the global %
fashion market to post low single-digit growth in
2025, reflecting a structural deceleration following N o n - l uxury L uxury
the post-pandemic boom.5 This deceleration,
Europe
coupled with relatively muted consumer
confidence, will force brands to prioritise capturing
13 15 12
market share, rather than reaping the rewards of 9 8
4 1 1 to 3 2 to 4 1 1 to 2 1 to 3
the outsized market growth of the last few years.

49
US
24
10
2 2 2 to 3 3 to 4 5 2 2 to 3 3 to 5

-1

China 40

12 9 12
4 3 to 4 2 to 4

-3 -3 -3 to 0
-6 -10 to -7

2021 2022 2023 2024E 2024E 2025E 2021 2022 2023 2024E 2024E 2025E
H1 H2 H1 H2

Note: Growth rate forecasts are calculated on actuals converted to USD on fixed 2023 exchange rates. Estimates for China reflect macroeconomic context as of end of October 2024 and are highly volatile
Source: McKinsey Fashion Growth Forecasts 2025

The State of Fashion 2025 10

 Industry Outlook

The macroeconomic climate will continue to

challenge growth across regions
Non-luxury growth drivers 2025E Market growth5 Luxury growth drivers 2025E Market growth5

Europe +2-4% +1-3%

2025E GDP • GDP growth is expected to increase slightly to 1.2 percent in 2025, as • Domestic luxury demand is expected to be low, affected by
growth6 rising real wages are anticipated to boost consumption.6 consumer caution in Europe.
+1.2% • Economic uncertainty and geopolitical concerns are keeping • As of May 2024, tax-free shopping in continental Europe had
personal savings rates high, reaching a three-year peak in June 2024.7 recovered to 138 percent of pre-pandemic sales levels – although
Chinese tourist spend was 59 percent of 2019 levels.14
• Appetite to spend is ticking up slightly as disposable personal
incomes rise8 9 and inflation falls.10 • Looking ahead, foreign arrivals to Europe are expected to grow by
8 percent per year from 2024 to 2026, expected to drive market
• Recovery across the continent will be mixed; sluggish growth is still
growth.15
expected in key economies such as Germany and the UK.6

US +3-4% +3-5%
2025E GDP • GDP growth is expected to slow slightly to 2.2 percent in 2025 , while
6
• Aspirational middle- and upper-class consumers’ ability to spend
growth6 the Federal Reserve aims to continue rate cuts in 2025 to boost on luxury is increasing as a result of decreasing inflation, higher
consumption.11 disposable income and a strong real estate market.12
+2.2%
• Consumer purchasing power is rising, buoyed by a strong stock • The growing ultra-high-net-worth individual (UHNWI) population is
market and property sector. In 2024, wage growth outpaced also driving demand: 8 percent growth in 2023 and an expected 5
inflation, while the personal savings rate dipped below pre-pandemic percent compound annual growth rate (CAGR) from 2023 through
levels at 6 percent.8 12 2028.16

China +2-4% -3-0%

2025E GDP • China is experiencing a structural slowdown. While GDP growth is still • Domestic luxury growth is expected to pick up slightly in late 2025
growth6 outpacing global growth, it is expected to decelerate to 4.5 percent thanks to high savings rates (household savings rate at 32 percent),
amid a property market crisis and record-high debt-to-GDP of 288 and the rise of new wealth centres, such as Shenzhen and Wuhan.18
+4.5%
percent.6 13
• Domestic growth will remain below historical levels due to a
• In August 2024, consumer confidence fell to just above 2022 record rebound in international travel and slower growth in UHNWIs
lows.9 It remains uncertain whether government measures will be (expected 8 percent CAGR from 2023 to 2028 vs 13 percent from
sufficient to drive a meaningful boost in sentiment in 2025. 2019 to 2023).16 17

The State of Fashion 2025 11

 Industry Outlook

Fashion executives expect volume, rather than

price, to drive modest growth in 2025
Executives are continuing to focus on sales Question: How much do you expect your like-for- Question: How much do you expect to increase /
growth in the year ahead. Nearly three out of like retail sales volumes on average across all decrease your retail sales prices on average across
products/categories to change next year, if at all? all products/categories next year, if at all?
four fashion leaders are prioritising sales growth
% %
over cost improvements, a slight uptick from the
2024 survey.1 2
2024-2025,
%point change
However, the drivers of growth are shifting. In the
last few years, volume growth has slowed, or even
declined in regions such as the US and Asia- More than 5% -14
25 11
Pacific.5 Now, in a reversal of recent years, leaders
anticipate volumes, rather than price, will fuel
growth.

• Compared to the prior year, the number of 1% to 5% 40 41 -3

executives that expect to increase prices
dropped 17 percentage points (%points).

• Nearly two thirds of executives expect volume No change 16 35 +17

growth in 2025, mostly in the low single digits.1 2

• Consumers are tired of price increases. This is

particularly true for middle- or lower-income
-4% to 0% 12 8 +2
shoppers, who are more sensitive to price
hikes.19 As a result, brands anticipate having less
pricing power, in line with executives’
uncertainty over consumer appetite to spend.
-5% or less 6 5 -1

Source: BoF-McKinsey State of Fashion Executive Survey, 2024 and 2025

The State of Fashion 2025 12

 Industry Outlook

To capture market share, fashion executives

are focusing on differentiation
In pursuit of differentiation: At the top of executives’ priorities this year is Question: What do you think will be the single biggest
finding ways to differentiate, whether through new designs, customer opportunity for the fashion industry in [year]?
experiences or finding new customer niches.1
New
Localisation is one lever fashion brands are leveraging. Half of executives plan 2024 2025
to localise their go-to-market model and value proposition, especially through
pricing, fulfilment channels and assortment. This will help connect with 1st Sustainability objectives and
Differentiation in business
customers in promising emerging markets for growth such as India.1 business integration
strategy through brand
positioning and product
65 percent of executives also plan to alter their assortments to include a variety newness
of options across price points.1 In 2025, it will be important to appeal to a wide
range of consumers to gain share while balancing tight control of inventory. 13% of respondents

Reduced focus on cost improvements: While executives continue to

prioritise advancements in AI and digital innovation, they are less focused on
2nd Leveraging AI in business Expanding use cases of AI
actively mitigating costs. Over 85 percent expect their cost of goods and selling,
decisions and improving and new features
general and administrative costs to grow at a low single-digit rate.1 accuracy

Sustainability takes a backseat: In the past two years, sustainability was a top
9% of respondents
opportunity for industry executives. This year, in an environment where
growth may be constrained, the focus on sustainability has faded into the
background, as executives prioritise other opportunities, such as differentiating 3rd Innovation through Improving economics (e.g.
their brands and offering new designs to capture market share.1 technology and sustainability lower inflation, higher
disposable income) in select
regions (e.g. US, India)

9% of respondents

Source: BoF-McKinsey State of Fashion Executive Survey, 2024 and 2025

The State of Fashion 2025 13

The State of
GLOBAL ECONOMY CONSUMER SHIFTS
01. 02. 03. 04. 05.

Trade Reconfigured Asia’s New Discovery Reinvented Silver Spenders Value Shift
Growth Engines
Global trade is shifting as China’s economic deceleration, Fashion shoppers are Fashion brands have typically Macroeconomic pressures
major economies diversify changing consumer overwhelmed with choice, focused on youth, but in 2025 and rising prices have driven
and source from countries preferences and the return which negatively impacts their they may struggle to grow fashion shoppers to adopt cost-
where they have more political of international travel engagement and conversion sales from younger shoppers conscious behaviours. This is
alignment. This will accelerate are making growth in the rates with brands. However, alone. The “Silver Generation” expected to persist, even as
in the fashion industry in country highly challenging, a new era of brand and product aged over 50 represents a some economies begin showing
2025 due to rising costs, leading international fashion discovery is on the horizon, growing population with a high signs of recovery. This dynamic
evolving trade policies and brands to look to other Asian underpinned by AI-powered share of global spend. Brands is fuelling growth in segments
sustainability targets. As markets. India will be a focus, curation across content that engage these previously with strong value-for-money
a result, fashion brands are particularly for high-street and search. overlooked shoppers while perception, such as resale, off-
likely to double down on players, while Japan’s luxury creating inter-generational price and dupes, among others.
diversifying their sourcing boom is expected to continue appeal will unlock incremental To capture customers’ share
footprint in Asia and lay the into 2025, fuelled by strong growth. of wallet, brands will need to
foundations for nearshoring. international and domestic prove their value.
spend.

x5 63% 50% 72% 70%

There has been a 5x increase 63% of fashion executives 50% of fashion executives see 72% of total US population 70% of consumers plan to
in the number of trade believe APAC mature consumer product discovery wealth is accounted for by continue shopping from
barriers introduced since countries have promising as the key use case for those aged over 55 outlets or off-price retailers
2015, with ~3,000 restrictions growth prospects in 2025 generative AI in 2025 in the next 12 months, even
imposed in 2023 if they have more money to
spend

The State of Fashion 2025 14

Fashion 2025
FASHION SYSTEM
06. 07. 08. 09. 10.

The Human Marketplaces Disrupted Sportswear Inventory Excellence The Sustainability

Side of Sales Showdown Collective
Differentiating the in-store Following a tumultuous Challenger brands are Inventory remains a challenge Fragmentation and
experience is key to reigniting period for luxury e-commerce forecast to generate over half for the industry with both complexity across the fashion
demand for in-person platforms, online non-luxury of the sportswear segment’s excess stock and stocks- value chain, coupled with
shopping. Brands can achieve marketplaces are facing economic profit in 2024, up outs impacting brands. In consumer reluctance to pay
that by empowering their store challenges of their own. Share from 20 percent in 2020. This 2025, margin pressures and for sustainable products, are
associates to reach their full prices have dropped as much means the battle between sustainability regulation will inherent barriers to reaching
potential, as sales staff have as 98 percent since Covid-19 challengers and incumbents place greater emphasis on end- sustainability goals. But
a central and valuable role peaks due to existential in the growing sportswear to-end planning excellence, with decarbonisation efforts
to play in connecting with business model challenges market will likely intensify. To with brands increasingly falling short of targets and the
customers. The benefits will and disruptions. Non-luxury gain market share, brands will adopting tech tools and climate crisis accelerating,
be sizeable, since customer marketplaces globally must need to develop innovative adjusting their operating model inaction is not an option.
and employee experience are carve out a clear role in the products and use the right to support agile supply chains. The fashion sector must act
inextricably linked. fashion ecosystem to survive. ambassadors and channels to collectively to drive impact.
activate unique brand stories.

75% 77% 57% 2.5-5B 40%

75% of shoppers are likely to The share price of online Challenger sportswear An estimated 2.5 billion to 40% of power in Bangladesh
spend more after receiving fashion marketplaces brands are expected to 5 billion items of excess will be fuelled by renewable
high-quality service from declined 77% on average generate 57% of the stock were produced by the energy by 2041 thanks to
store staff between January 2021 segment’s economic fashion industry in 2023, collective energy initiatives
and September 2024 profit in 2024 worth between $70 billion
and $140 billion in sales

The State of Fashion 2025 15

01. Trade Reconfigured

Container ships at a port. Golero/Getty Images.

Global Economy 01. Trade Reconfigured

01. Trade Reconfigured Global trade is shifting as major economies diversify

and source from countries where they have more political alignment. This
will accelerate in the fashion industry in 2025 due to rising costs, evolving
trade policies and sustainability targets. As a result, fashion brands are likely
to double down on diversifying their sourcing footprint in Asia and lay the
foundations for nearshoring.

KEY INSIGHTS EXECUTIVE PRIORITIES

• Trade barriers and supply disruptions have increased 5x • Regularly assess the sourcing footprint, leveraging
since 2015, with around 3,000 trade restrictions imposed analytics and detailed supplier data to identify priority
in 2023. regions for reconfiguration. Consider both net margin
and cash benefits of nearshoring or diversification.
• US apparel and textile imports are diversifying away from
China at the fastest rate since 2010, down 6 percentage • Collaborate closely with suppliers by establishing
points (%points) in 2023 vs 2019. strategic relationships, prioritising data transparency
and co-investments to jointly build resilient and
• The share of apparel manufacturing foreign direct
productive supply chains.
investment into nearshoring regions has increased
20%points in the last five years for the US and 8%points • Partner with industry stakeholders, such as regulators
for the EU. and manufacturers, engaging in collaborative planning
and setting aligned targets to tackle sustainability
goals at scale.

The State of Fashion 2025 17

Global Economy 01. Trade Reconfigured

Global economies are diversifying sourcing and

reducing the geopolitical distance of trade flows
Up until the early 2020s, global trade revolved Change in goods trade indicators, 2017-2023,
%
around the relationship between the US and China.
In recent years, geopolitical tensions and market
Import concentration Geopolitical distance
shifts, coupled with a change in sourcing economics, measures the breadth of import measures geopolitical alignment
have caused a shift in this dynamic, resulting in a supplier relationships based on the between two trading economies based
“multi-polar” structure where more countries average import Herfindahl-Hirschman on UN General Assembly voting records
participate in global trade. Index across ~15 sectors. as a proxy for position on global issues.

A decrease indicates diversification of A decrease indicates reduced trade

This push to diversify trade flows is happening sourcing. flows between economies that are less
across industries. Between 2017 and 2023, the politically aligned.
share of total US imports from China fell by 5.8
percentage points, with imports in strategic China
-2 -4
industries such as electronics reducing by more
than 20 percent in 2023.1 In the same year, the EU
cut the overall trade deficit with China by 27
percent to diversify supply chains in strategic
US
industries such as electronics and chemicals.2 -10
-18
In parallel, other major economies are also reducing
risk by trading with more geopolitically aligned
countries. These economies, predominantly China, Germany -1
Germany, the UK and the US, have reduced the -6
geopolitical distance of their trade by 4 to 10
percent in the last five years.3
3
UK
-4

Note: Based on latest available monthly data from national sources as of January 2024
Source: McKinsey Global Institute “Geopolitics and the Geometry of Global Trade”, UN Comtrade; Destatis; US Census Bureau; Comex Stat; General Administration of Customs of the PRC; UK Department for
Business & Trade; ASEANstats; IMF World Economic Outlook; CEPII; World Bank; Voeten (2017) and UN Digital Library; McKinsey Global Institute Analysis

The State of Fashion 2025 18

Global Economy 01. Trade Reconfigured

Diversification of apparel and textiles sourcing

will likely continue at pace in the years to come
US apparel and textile imports, Europe apparel and textile imports,d Establishing resilience
% of total value % of total value
Players are increasingly diversifying their sourcing
2023-2030 2023-2030 footprint to create supply chain resilience. The
%point change %point change share of apparel and textiles coming from China
5 5 4 -1 decreased by 6 percentage points (%points)
Rest of worlda 12 14 14 ~0 between 2019 and 2023 for the US and 3%points
12 13 13 ~0 for the EU. The total value of imports from China
Rest of Asia 11 declined by 5 percent on average per year during
12 12 ~0
this period, compared to a less than 1 percent
29 average yearly decline in the previous decade for
Asia Growth 31 33
25 +2 the US.4 Similarly, for the EU, the total value of
marketsb
29 30 imports declined by 2 percent on average per year,
+1
compared to a 1 percent average yearly decline in
12 the previous decade.4
Nearshoringc 20
12 20
14 23 +3 Diversification in Asia
+2
Markets such as India, Vietnam and Bangladesh are
expected to become key sourcing hubs for US and
China 40 European apparel and textiles. Meanwhile, China is
34 34 31 progressively losing cost-competitiveness due to
30 -4 26
-5 rising labour costs, which increased by 38 percent
from 2010 to 2021.5

2019 2023 2030E 2019 2023 2030E Nearshoring

Nearshoring is expected to become an increasingly
a. RoW for the US includes: Africa, EU28, Middle East, Oceania, other Eastern Europe, other Western Europe. For the EU includes: Africa,
North America, Latin America, Middle East, Oceania
relevant sourcing strategy, with US and EU apparel
b. Asia Growth Markets includes: India, Vietnam, Cambodia, Bangladesh and textile imports from nearshoring destinations
c. Nearshoring for the US includes: Mexico, Canada, Latin America. For the EU: North Africa, other Eastern Europe, other Western Europe
d. Includes Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, expected to increase 2%points and 3%points
Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, UK
Source: McKinsey Global Institute, World Trade Service
respectively by 2030.4

The State of Fashion 2025 19

Global Economy 01. Trade Reconfigured

Rising sourcing costs, tariffs and sustainability

targets may accelerate sourcing diversification

>165% 5x 63%
increase in Asia-to-US shipping increase in the number of trade share of fashion brands that need to
costs between Dec. 2023 and Feb. restrictions since 2015, with accelerate emission reduction efforts
2024 due to logistics disruptions6 ~3,000 imposed in 20239 to reach 2030 targets14

The economic and geographic advantages of Mentions of “tariffs” and “trade policies” across Changes in country of production alone can heavily
sourcing regions are shifting, with several emerging apparel company reports and investor influence greenhouse gas emissions. There is wide
markets becoming more cost-competitive due to presentations have increased by more than 50 emissions variance between suppliers, given more
several factors. percent since 2020.10 than 70 percent of fashion industry emissions come
from upstream activities, primarily textile
Increasing labour costs in China are compromising As of May 2023, the EU is planning to impose production.14
manufacturer cost-competitiveness compared to import duties on goods under €150 ($164) from
other Southeast Asian countries such as Vietnam, China, impacting an estimated 2.3 billion items per For example, Pakistan has half the emissions factor
where average hourly labour costs are less than half year.11 in fabric production than China, due to a lower
of those in China.7 share of coal-based energy production.15
Southeast Asian countries are also restricting
Shipping costs have drastically increased across Chinese imports, with tariffs of up to 200 percent As a result, some fashion companies have started to
Asia-to-US shipping routes. There was a 165 on imported textiles.12 invest in the decarbonisation of their footprint, such
percent increase in Asia-to-US east coast route as H&M’s investment in Bangladesh Wind Power
container rates on Feb. 05, 2024, compared to two The US is considering excluding Chinese imports in 2024.16
months prior.6 Meanwhile, shipping prices across from its de minimis import rule, where goods valued
trade routes in the Middle East have increased 5x at less than $800 are duty free.13
from December 2023 to February 2024.8

The State of Fashion 2025 20

Global Economy 01. Trade Reconfigured

Fashion brands will look to Asia growth markets

such as India for manufacturing
Fashion brands initially turned to Vietnam to Top-ranked sourcing hotspots for the next five years, 2019-2023
Share of apparel CPO respondents including country in top three, % %point change
reduce their dependency on China, with the value of
apparel and textile exports from Vietnam
increasing 35 percent between 2015 and 2020.4
Now, other Asian countries such as India and
Bangladesh are also hotspots. In the US, apparel +21
and textile imports from these countries increased India 46
3 percentage points (%points) and 2%points
respectively between 2020 and 2023.4 This trend is
expected to continue as fashion executives rank
Asia growth markets as their top sourcing hotspots
for the next five years and regulatory incentives fuel Vietnam 46 -2
manufacturer capability building in these countries.

India is expected to play a more prominent role.

While challenges in production capabilities have
impacted scale to date — India had the highest
percentage of apparel products that failed quality +5
Bangladesh 43
standards in 2023 — these pressures may start to
ease.17 The Indian government has invested around
$2.5 billion in Production-Linked-Incentives and
reforms to Quality Control Orders, while foreign
investment has increased 3x since 2019.18 19 20 Indonesia 22 +11
Bangladesh, despite being a favoured sourcing
location in recent years, has experienced increased
political and climate disruptions, leading to brands
shifting up to 40 percent of orders in the second
half of 2024 to other markets in the region.21
Source: McKinsey Apparel CPO Survey, 2023

The State of Fashion 2025 21

Global Economy 01. Trade Reconfigured

Renewed interest in nearshoring is leading to

increased capacity and improved capabilities
While mentions of nearshoring in corporate presentations increased 20-fold Apparel and textile manufacturing foreign direct investments,
between 2018 and 2022,3 the share of imports to Europe and the US from % of total
nearshoring countries has remained flat since 2019.4 This is due to the limited
Farshoring Nearshoringa
manufacturing capacity and capabilities of local suppliers, with lower labour
productivity meaning total landed cost remains higher than other regions — US Europeb
despite competitive labour rates, lower shipping costs and tariff advantages. %point %point
However, these challenges are likely to be addressed going forward. change change
Capacity and capability building

• Investments: The share of apparel foreign direct investment into

nearshoring manufacturing has increased by 20 percentage points
(%points) for the US and 8%points for Europe in the last five years.20
• Government incentives: The Americas Act — a bipartisan bill in the US —
if enacted would dedicate $14 billion to apparel subsidies and investments
in nearshoring.22 The EU Strategy for Sustainable Textiles laid out several
initiatives to reduce environmental impact in 2023, which may be
addressed through nearshoring.
Cost-competitiveness +20 49 +8
37 41
• Productivity: Local manufacturers and Asian companies with facilities in
17
Central America are investing in vertical integration of textile
manufacturing and fabric supply to improve productivity, while China’s
2015-2019 2020-2024 2015-2019 2020-2024
shifting workforce demographics are causing its productivity advantage to
slowly decline.

• Speed to market: As the pace of trend cycles accelerates, nearshoring a. Nearshoring for the US includes: Latin America, North America. For the EU: North Africa, other
Eastern Europe, other Western Europe
could benefit company bottom lines by potentially leading to 3-5x faster b. Includes: Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark,
Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg,
lead times, higher net margins and lower inventory levels.23 24 Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, UK
Source: McKinsey Analysis, fDi Intelligence

The State of Fashion 2025 22

Global Economy 01. Trade Reconfigured

Latin America is emerging as a key nearshoring

hub for the US, as is Turkey for Europe
LATIN AMERICA TURKEY
65 percent of US fashion companies Turkey’s share of global textile
say they increased sourcing from production has doubled over the
USMCA members in 2023, especially past two decades. In 2023, its
Mexico — up from 40 percent in 2020 share of textile and apparel exports
— owing to advantageous trade to Europe reached 6 percent,
agreements for textiles and apparel25 surpassing Vietnam.4
and increased US investments.20
More than 25 percent of European
Mexico-US shipping routes have cost brands listed Turkey as a crucial
and speed advantages compared to sourcing location, according to
China, costing around $5,000 for a supply chain compliance company
single container vs $18,000 and Qima.25 Brands such as Inditex,
taking 5-10 days vs 60 days in China, Shein H&M, Boohoo and Asos have large
the latter of which has doubled due to sourcing footprints in Turkey.30
supply chain disruptions.24 Columbia Shein is partnering with
~1,000 manufacturers in
In late 2023, Columbia Turkey as part of a wider
Advantages include increased
The value of apparel and textile announced plans to shift global push to bring supply chain traceability and
exports from Guatemala to the US has production from Asia and production closer to its reduced order-to-fulfilment times,
increased 10 percent from 2020 to double production in key consumer markets.29 from 150 to 170 days in Asia-Pacific
Central America over the
2023.4 While manufacturing in the to under 50 days in Turkey, with an
next three to five years.26
country costs around 5 to 10 percent average of 7 days in transit.23
more than in Vietnam, shipping times Kipas Textiles
are around 3x faster.26 SAE-A
The Turkish manufacturer is
The vertically integrated
investing in innovation and
South Korean apparel
sustainability to increase
manufacturer has invested
competitiveness and attract
more than $150 million in its
brands looking to nearshore
Latin America expansion.27 28
production to Europe.23

The State of Fashion 2025 23

Global Economy 01. Trade Reconfigured

Flexible supply chains and close supplier

relationships will be critical to success
EXECUTIVE PRIORITIES

Regularly assess and optimise Develop strategic relationships Shape trade flows with industry
sourcing footprint with manufacturers and suppliers stakeholders

Regularly perform footprint assessments to Rethink the approach to manufacturers and Proactively shape the future of apparel and
identify priority regions for reconfiguration suppliers, with an emphasis on developing long- textile trade flows by engaging manufacturers,
based on manufacturing costs and term strategic partnerships to increase the regulators and sustainability bodies to align on
capabilities, considering potential supply efficiency and resilience of supply chains. industry targets and co-invest in
chain disruptions that may impact both Historically, fashion brands and suppliers have decarbonisation projects at scale.
(e.g. conflicts, climate change). been more cautious in making joint investments
compared to other industries, given the highly Work closely with manufacturers and upstream
Leverage analytics to examine cost competitive nature of the apparel market. suppliers to achieve sustainability goals and
breakdowns, improve unit costs and However, the increased disruption and volatility reduce apparel emissions. This remains a
conceive more competitive sourcing in brands’ sourcing footprints requires more competitive imperative for suppliers and fashion
processes with both existing and new effective and closer collaboration to ensure brands are unable tackle these issues alone.
vendors. This may require detailed supplier efficient operations.
information to model costs based on a Adopt a collaborative planning process to align
range of inputs and trade agreements. Adopt digital solutions to enable efficiency and on short- and long-term business objectives,
collaboration. To unlock the full value of these mutual targets and strategic plans, which can
Assess cost competitiveness on a net tools, fashion brands and manufacturers will formalise industry affiliations and arrangements.
margin basis when making sourcing need to not only embrace digital tools across Multiple brands, suppliers and regulators can
decisions, taking into account not just their value chain, but also prioritise process also partner to launch large-scale sourcing
input costs but final margin and cash redesign, data quality enhancement and the excellence programmes.
benefits from faster speed-to-market and integration of planning systems to provide
increased supply chain flexibility. visibility for all parties across the value chain.

Develop an understanding of supply chain

disruptions across the footprint, actively
managing and minimising the implications
on their operations, such as cost and
speed-to-market.

The State of Fashion 2025 24

02. Asia’s New
Growth Engines

Dior show in Mumbai. Dior/Thomas Chéne/Gupta Niveditaa.

Global Economy 02. Asia’s New Growth Engines

02. Asia’s New Growth Engines China’s economic deceleration, changing

consumer preferences and the return of international travel are making growth
in the country highly challenging, leading international fashion brands to look
to other Asian markets. India will be a focus, particularly for high-street players,
while Japan’s luxury boom is expected to continue into 2025, fuelled by strong
international and domestic spend.

KEY INSIGHTS EXECUTIVE PRIORITIES

• Fashion executives are increasingly positive about Asian • Increase localisation of the go-to-market model to
growth prospects outside of China, especially in India resonate with local consumer preferences and cultural
and mature APAC markets (e.g. Japan and Korea), for norms, catering to nuances in each Asian market.
which executives show 54 percentage point positive
net sentiment. • Build regional omnichannel capabilities in both owned
and third-party channels to meet the growing demands
• India’s strong growth is rendering it a key global fashion of shoppers and their rising purchasing power.
market, particularly in the mid-market segment, which
is expected to grow around 12 to 17 percent in 2025
compared to the projected low single-digit growth of
the global fashion market.

• Japan’s luxury market grew 25 to 30 percent in the first

half of 2024, driven by ongoing currency weakness and
a surge in tourism. Tourism spend is expected to grow
from $36 billion in 2023 to nearly $100 billion in 2030.

The State of Fashion 2025 26

Global Economy 02. Asia’s New Growth Engines

As China’s sizeable GDP growth slows,

so will its fashion market’s growth

3 points 36 points
After years of impressive growth, China’s economy
is now worth $18 trillion1 and its apparel market is
the second largest in the world.2 In 2025, the IMF
projects China’s economy will grow by 4.5 percent,
outpacing global GDP growth of around 3 percent.3 projected decrease in percentage decrease in Chinese consumer
points in China’s annual GDP growth confidence index points from
While still higher than global GDP growth, China’s rate from 2019 to 2029 by the IMF3 January 2022 to July 20244
projected growth rate reflects a deceleration from
the previous decade, which averaged around 7
percent growth per year from 2013 to 2019. The
economic slowdown is expected to continue in the
medium term, with the IMF forecasting GDP
growth to fall to 3.3 percent by 2029, due to aging
consumers and slower productivity growth.3

The slowdown is affecting retail sales. Apparel sales

increased only 1.3 percent in the first half of 2024
compared to the same period a year prior. This
growth is about half that of 2019 levels (around 3
percent).4

Additionally, leading macroeconomic indicators of

consumer spending point towards a muted 2025.
Consumer confidence and residential property
transactions have neared all-time lows,2 while
Chinese debt-to-GDP ratio increased to a historic
high of 288 percent at the end of 2023.5

Fashion shopper. Edward Berthelot/Getty Images.

People walk outside in Shanghai. DuKai photographer/Getty Images.

The State of Fashion 2025 27

Global Economy 02. Asia’s New Growth Engines

This deceleration, coupled with changing

consumer preferences, is challenging growth
In the non-luxury segment, domestic brands have been taking share Non-luxury apparel market in China, sales of top 20
domestic vs international brands, 2013-2023,
• Domestic brands grew their share versus international brands by 6 % %point change
percentage points (%points) between 2013 and 2023.6 As of 2023, over 50
percent of Chinese consumers preferred domestic brands, a 35%point
increase from 2011.7
Domestic 53 +6
59
• Even market leaders such as Uniqlo have recently cited challenges in China,
such as lower consumer appetite and a need for more localised products.8
• Foreign sports and outdoor brands continue to thrive while focusing on -6
International 47 41
localisation and a strong association with quality. Lululemon and Amer
Sports, owner of Arc’teryx, saw double-digit growth in China in the first
quarter of 2024.9 10 11 2013 2023
Source: McKinsey analysis, September 2024
In the luxury segment, consumer shifts are driving a slowdown
Chinese consumers’ spend on personal luxury goods in
• Despite brands such as Prada Group and Hermès posting double-digit mainland China domestic vs international, 2023-2025,
% %point change
growth in Asia (excl. Japan) in the first half of 2024, China luxury growth
slowed to an estimated negative 3 percent from 12 percent in 2023.6 12 13
• China’s recent consumer and government condemnation of wealth
flaunting, or “luxury shame,” is driving demand for “quieter” and more Domestic 40
60 53-58 -12-17
affordable products, such small leather goods, while brands such as Ralph 70
Lauren have a bullish outlook.14 15 16 83

• Government stimulus measures are expected to support luxury demand,

but this may not translate to domestic sales. Chinese luxury spend abroad is International 60
40 42-47 +12-17
projected to increase 12 to 17%points from 2023 to 2025,17 though as of 30
May 2024, spending by Chinese shoppers was still below 2019 levels in key 17
luxury markets.18 2019 2021 2023 2024E 2025E
Source: McKinsey Global Institute, expert interviews, McKinsey analysis, September 2024

The State of Fashion 2025 28

Global Economy 02. Asia’s New Growth Engines

Fashion executives have a positive outlook for

other Asian countries, particularly India and Japan
Fashion executive sentiment on Asia is Fashion executive sentiment towards market growth prospects in 2025 vs 2024,
overwhelmingly positive about growth prospects in %
India and both mature and emerging APAC
countries. One in five respondents in the BoF- Overall sentiment
McKinsey State of Fashion 2025 Executive Survey (net intent)
mentioned India as a focus market for 2025.19 Promising Same Unpromising

Among luxury executives, overall sentiment for

China 27 27 45 -18
mature APAC regions, such as Japan and Korea, is
even higher (+63 percent), with one in four fashion
executives mentioning Japan as a focus market in
the year ahead.19

APAC emerging countries, such as Indonesia and India 67 20 13 +54

Thailand, are also gaining prominence on the global
fashion stage, due to growing fashion hubs like
Bangkok and the rise of Southeast Asian global
influencers.20 While many of these emerging
Other APAC mature 63 29 9
markets across Asia remain small in scale for now, (e.g. Japan, Korea) +54
executives are convinced of their growth prospects
going forward. 58 percent of executives believe
other APAC emerging regions will offer promising
prospects in 2025.19 Other APAC
emerging (e.g. 58 29 14 +44
Thailand, Indonesia)

Note: Overall sentiment calculated as % with positive sentiment minus % with negative sentiment
Source: BoF-McKinsey State of Fashion 2025 Executive Survey

The State of Fashion 2025 29

Global Economy 02. Asia’s New Growth Engines

India is poised to become a key fashion market due

to a strong mid-market and potential in luxury
India is expected to become the fourth largest economy in 2025, growing at 7 Retail sales year-on-year growth by geography and segment, 2025E,
percent year on year, outpacing all other economies.21 22 This puts India on track %
to become the world’s third-largest consumer market by 2027.23
Non-luxury
Non-luxury: Strong growth is fuelled by the middle class and digitisation24

• There are 430 million people in India’s middle class — greater than the
middle classes of the US and Western Europe combined. It is expected to 12 to 17
reach 1 billion by 2050, largely from tier-two and -three cities.25
• Indian fashion customers are increasingly trend-focused. Digitisation is
accelerating this shift, as is the large share of young consumers in the
3 to 4 2 to 4 2 to 4
country. People under the age of 35 make up 66 percent of India’s
population, amounting to over 808 million people.26
Luxury: High growth is fuelled by demographic and structural tailwinds24

• India’s population of ultra-high-net-worth individuals (UHNWI), with over Luxury

$30 million in assets, is expected to grow 50 percent from 2023 to 2028,
15 to 20
making it the fastest-growing UHNWI population in the world.27

• Aspirational customers, who make up about half of global luxury sales,28 are
expected to grow from 60 million in 2023 to 100 million in 2027.29
• As of October 2023, international purchases over INR 700,000 ($8,400) 3 to 5
are taxed at 20 percent,30 encouraging domestic spending. 1 to 3

• New luxury malls and department stores, such as the Jio World Plaza and
-3 to 0
Galeries Lafayette, are increasing luxury real estate in tier-one cities.31
India US Europe China

Source: McKinsey Fashion Growth Forecasts 2025

The State of Fashion 2025 30

Global Economy 02. Asia’s New Growth Engines

Fashion brands looking to succeed in India need

to consider its unique obstacles and nuances
Number of international brands that launched or plan to launch in India, Key considerations for fashion brands entering India
2023-2025
Infrastructure challenges
Non-luxury Luxury High-quality retail real estate remains limited, especially in tier-two and tier-
11 24 three cities, impacting physical expansion, especially for luxury brands. Last-
3 5 mile delivery also remains difficult, requiring international companies to make
significant investments to offer seamless customer experiences.
8
Partner selection and operating model
While brands such as Uniqlo have found success entering India on their own,
9 19
finding the right local partner continues to be instrumental for international
4 brands operating in India. A local partner can define the right operating model
2
2 and go-to-market strategy, accounting for complex regional nuances.
2023 actuals 2024 actuals 2024 and 2023-2025 Local consumer dynamics
to datea 2025 planned total
Indian culture heavily influences fashion and can vary widely by region. Indian
shoppers tend to spend more on jewellery (44 vs 13 percent global average) and
Sample fashion brands planning to expand in India, 2025
less on apparel (40 vs 52 percent).6 Local brands with expertise in traditional
wear tend to dominate in apparel, increasingly so with the rise of local fast-
India is one of the top 10-15 markets in Mango’s growth strategy. The
Mango brand has stated it plans to increase its store count in India from 110 to 120 fashion players. In 2023, nine of the top 20 apparel brands were domestic.6
in the coming years.32 That said, increasing openness to Western silhouettes is making markets such
as the sizeable wedding industry attractive to international brands.35
Decathlon believes India is a “pivotal market.” It plans to grow its store
Decathlon count in India from 110 to 190 and invest $111 million in the market over Regulatory requirements
the next five years.33
Regulatory requirements, such as local sourcing rules, plus high regional taxes,
continue to act as barriers in the market. However, some new policy changes for
Bulgari is planning to expand both its online and offline presence in India by
Bulgari growing its store count from 12 stores in 6 cities to more than 20 in more
foreign brands allow 100 percent foreign direct investment in single-brand
than 12 cities, plus a potential e-commerce partnership with retailer Ethos.34 retail and selling via e-commerce prior to having physical locations.36

a. Analysis until September 2024

Note: Non-exhaustive; includes planned launches in 2024 and 2025 that are yet to occur
Source: McKinsey analysis, September 2024

The State of Fashion 2025 31

Global Economy 02. Asia’s New Growth Engines

The yen’s weakness made Japan a major

international shopping destination in 2024
Japan’s luxury fashion market, estimated at $20-25 Recovery rate for tax-free shopping spend in Japan compared to 2019,a
%
billion at the end of 2023, was up 25 to 30 percent
year on year at constant exchange rates for the first
half of 2024.24 Players including LVMH,
Richemont and Hermès saw double-digit sales 350
growth in the country, surpassing pre-pandemic 327
levels.12 37 38 Even fashion brands that saw overall
sales decline during the second quarter of 2024, 300
such as Kering (-11 percent) and Ferragamo (-13
percent), delivered healthy topline growth in Japan
of around 27 percent and 10 percent, respectively.39 250 232
225
A core driver of this strength is the yen’s
depreciation, with the currency hitting a 38-year
200 185
low against the dollar in July 2024.40 This attracted
luxury shoppers from around the world, fuelling
record-high duty-free sales in department stores.41
150

2-3x
Unlike other markets, Japan’s tourism has made a 121
complete recovery from the pandemic. The country 98
had 17.7 million visitors in the first half of 2024, a 100
66 percent increase from 2023 and 7 percent from recovery in tax-
2019,42 with 25 percent from South Korea, 17 free spend vs 2019
percent from China, 17 percent from Taiwan and 8 50
percent from the US.43

0
Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024

a. Recovery rate defined as current period sales in store divided by 2019 sales in store, like-for-like
Source: Global Blue

The State of Fashion 2025 32

Global Economy 02. Asia’s New Growth Engines

International and domestic luxury spend continue

to propel the market in Japan
The Japanese luxury market is expected to grow Luxury fashion market year-on-year growth by geography, 2025E,
%
between 8 and 12 percent in 2025, maintaining its
position as a top luxury shopping destination in the
years to come.24 Brands such as Hermès are 8 to 12
opening more stores in Japan after seeing double-
digit growth, while emerging brands including
Gemmyo, Ganni and Studio Nicholson opened their
first stores in the country in the last year.44

In the near term, positive price dynamics will

continue to fuel inbound tourism, though this trend
will rely on the trajectory of the yen and the Bank of
Japan’s monetary policy. The Japan Tourism
Agency expects annual tourism spend to reach
around $100 billion by 2030,45 far surpassing 3 to 5
2023’s record of $36 billion.46

Domestic demand is also robust, with Japanese

1 to 3
customers making up a significant portion of luxury
sales.47 The country remains one of the world's
largest economies and is home to the second-
largest number of UHNWIs in Asia, a group
expected to grow by more than 12 percent from
2023 to 2028.29

-3 to 0

Japan US Europe China

Source: McKinsey Fashion Growth Forecasts 2025

The State of Fashion 2025 33

Global Economy 02. Asia’s New Growth Engines

A go-to-market fashion strategy that accounts

for local nuances is crucial to success in Asia
EXECUTIVE PRIORITIES

Curate a localised go-to-market approach that Develop strong omnichannel propositions,

resonates with customers and culture leveraging both owned and third-party channels

Tailor international brand product portfolios and supply chains to better Invest in developing integrated in-store and online propositions, adjusting
serve local markets, as fashion tastes and trend dynamics significantly for nuances in Asian markets:
differ between Asian and Western markets (and within Asian countries
themselves): • In China, consider direct-to-consumer and owned online propositions.
Owned online channels have gained significant traction since 2020
• Cater to local consumer preferences by creating special collections, due to declining offline traffic and rising customer acquisition costs in
altering product dimensions and adjusting pricing architecture. e-commerce marketplaces. Additionally, Chinese consumers value
However, brands will need to ensure that styles do not diverge too shopping direct-to-consumer for the personalisation it can offer — 69
far from their international offerings, otherwise they risk diluting percent of Chinese consumers value personalisation, according to a
global brand image. McKinsey survey.48

• Evaluate opportunities to localise elements of the supply chain to • In India, partner with local online marketplaces. Limited real estate
increase agility and speed-to-market to compete with local players. availability and last-mile logistics, especially in tier-two and -three
This will be particularly relevant in India, where local brands have cities, make partnering with local online marketplaces key to reaching
strong market share. High apparel import taxes and difficulties in consumers. E-commerce retailers like Flipkart-owned Myntra have
last-mile delivery can also be challenging for international brands become a key partner to international brands in India. H&M, for
without strong local capabilities. example, sells on the platform in India, while in all other markets it only
sells through owned channels.
• Adapt marketing messaging and partner with local influencers to
reach consumers in relevant channels. To achieve the right balance • In Japan, offer hyper-personalised retail services where appropriate.
between global and local elements, companies should consider This approach is key to enticing local customers, particularly in luxury,
building local teams in focus markets, particularly in branding, where concierge-style strategies known as gaisho target VIP shoppers.
marketing and communications functions where strategies can vary Department store groups such as Daimaru Matsuzakaya report gaisho
considerably by region. sales increased 7 percent in the first half of 2023 to account for nearly
one third of all sales.49

The State of Fashion 2025 34

Global Economy 02. Asia’s New Growth Engines

Myntra: An Online Gateway

way
to India’s Fashion Markett
Myntra’s CEO Nandita Sinha is helping brands reach
millions of India’s young, aspirational and trend-conscious
consumers with rising income levels. The mid-market
fashion e-tailer is doubling down on creating influencer-led
content, scaling its premium offerings and encouraging
s.
global brands to leverage the country’s sourcing capabilities.
BY ARNIKA THAKUR

Brands are pulling out all the stops to capture product recommendations. “[Indian] Gen-Zs are infrastructure in the market, she says. “We are just
millions of hyper-connected and trend-conscious very, very conscious of global trends and they want starting off. Only 12 percent of fashion in India is
Millennial and Gen-Z customers in India, a cohort to adopt [them] really fast,” says Nandita Sinha, bought online …There are 75 million Gen-Z
that offers fashion companies an opportunity to who became Myntra’s chief executive in 2022 after customers [in India] and we have 16 million of them
explore newer growth markets in Asia. In the centre more than eight years at parent Flipkart Group, a on our platform, so we have a whole way to go.”
of it is fashion e-commerce giant Myntra. The company owned by Walmart. By harnessing data- But to win market share, partner brands must not
mass-market and premium platform is an backed consumer insights, trialling social assume consumers in India are monolithic, she
increasingly important online retail channel for commerce and securing A-list Bollywood celebrity advises. “It’s important to have the right local
global brands such as H&M, Mango and Ralph ambassadors, Sinha has helped Myntra attract partner to be able to navigate through the many
Lauren, as well as local players such as Masaba and more than 60 million monthly active users. Indias that exist.”
Rohit Bal. Based in Bengaluru, the “Silicon Valley of E-commerce platforms like Myntra are key to
India,” the company uses artificial intelligence and driving growth in India because they help brands
other technologies to offer styling services and overcome the shortage of suitable physical retail

The State of Fashion 2025 35

Global Economy 02. Asia’s New Growth Engines

What is it about India that makes brands come to India, we help them class. What that means is that luxury “India is a unique
it such an attractive growth engine build their brand in the country and bridge-to-luxury brands are going
for international fashion brands [through] joint marketing activities. to find a place in the market. We have country which
in 2025? an app-in-app — Myntra Luxe — has both
India continues to defy the odds of the What is the proportion of traditional where we partner with different
global economy’s growth rates. [India Indian and Indo-Western fusion brands, like The Collective (Aditya sourcing as well
also has an aspirational] young wear sales on Myntra, compared to Birla Group’s multi-brand luxury as consumption
customer base, which is growing, and that of western wear, and what does retail chain across in India), which are
they will continue to grow their this mean for international brands? exclusively available on our platform. capacity.”
consumption basket. Traditional wear is bigger but
western wear is fast-growing and it's Some of the big opportunities in the
India is a unique country which has leading in terms of growth in the luxury market are in accessories,
both sourcing as well as consumption womenswear segment. People are especially the watches category.
capacity. So, this is where the value celebrating all Indian festivals, Brands in that category, like Tissot,
for international brands becomes weddings have become grander, are growing. Luxury fragrances are
extremely lucrative, where they can which is fuelling the consumption of growing at twice the pace of the
reach out to this large base of traditional wear as a premium, normal market.
customers in a manner that taps into celebratory category. Runway Icons,
the supply potential of the country as our premium [traditional] wear What kind of growth rates are other
well. There are three factors [that are [online destination], grew almost 100 fashion segments seeing? Which
driving growth for brands]: rising percent in 2023. But we are seeing categories are outperforming and
incomes, younger customers and growth in customers adopting why?
internet penetration. western wear. [In terms of Footwear and accessories continue to
international brands], Mango did a grow ahead of the market. Apparel
Where does Myntra fit into this special Diwali collection last year, has seen a little post-Covid jump in
growth picture? where they used western silhouettes consumption as people came back to
E-commerce is an important vector of with elements of celebration … That’s the office and started travelling again.
access for the country. [Myntra] where we are seeing this work. Things have stabilised a little bit, but
continues to be the largest platform we will see growth in that segment
for international [fashion brands How does Myntra plan to capitalise next year. The large driving force of
with] … almost 60 million consumers on the high-end fashion opportunity that growth is going to come from
coming to us every month. Six million as international luxury brands seek Gen-Z customers, who are seeking
of them come to us every day. to expand their presence in India? new trends at affordable prices.
Premiumisation will continue to grow Trend-forward merchandise … is
We [also] offer something called and [there is] growth in consumption probably the fastest-growing market
Myntra Marketing Services; when in the affluent and the upper-affluent today in the country and platforms

The State of Fashion 2025 36

Global Economy 02. Asia’s New Growth Engines

Jio World Mall in Mumbai, India. Shutterstock.

that build on that are going to be key international trends. videos. Almost 10 percent of our [social media and collaborations with
in the next few years. Mass-premium Gen-Zs are moving away from monthly active users are engaging influencers]. We will create content
and DTC brands are leading the traditional media and looking at with these, and they have higher with almost 40,000 micro-
growth for apparel. International influencers and styling. When you retention and higher spend. influencers as we go forward, which
brands continue to grow [faster] than look at online catalogue images, Gen- will help us reach tier-two, tier-three
the [overall] category, too. Z’s feedback is [they] want to see the We are using image search very cities, the younger generation, etc. We
full outfit [to see how to style the item effectively for Gen-Z and we’ve also will double down on reaching out to
What are some of the fashion being featured rather than just shots started what we call the Glam Clan, Gen-Z customers through FWD.
shopping behaviours that define of that item]. Catalogues have to where we invite Myntra customers, Products like cargo pants, for
India’s Gen-Z consumers? become inspiring rather than just who post reviews and photographs on example, which are topical and
Gen-Z consumers here are very about product images. our platform, to become influencers. trendy, we’d see those blow up
different from Millennial shoppers, through FWD. Then we take them to
but they are not different from their This is what we tapped into as we How are social commerce, short our customers through micro-
international counterparts. Their built FWD [Myntra’s immersive format videos and collaborations influencers. That’s what we will
purchase frequency is 30 to 40 shopping app-in-app]. We have with micro-influencers helping you continue to build on.
percent more than their Millennial something called Myntra Minis, reach more young consumers,
counterparts, which is what we see [which features] short, snackable especially in smaller cities?
globally. Second, they are inspired by content, short styling and product This year we have doubled down on

The State of Fashion 2025 37

Global Economy 02. Asia’s New Growth Engines

“For the size of the country, What India-specific challenges and

opportunities should brands be
influencer-led content, which is our
content discovery piece. That has
there are limited high- aware of as they enter the market? been a big success for us. We’ve seen
quality tier-one malls, which Global fashion brands encounter
challenges like limited retail
almost six million consumers who
interact with Myntra Minis.
are expanding but not infrastructure, high import duties and
enough [compared to the] operational complexities in India. The second piece is assistance. This
is where things like MyFashionGPT
rate at which consumption For the size of the country, there are (which enables users to discover
is increasing.” limited high-quality tier-one malls,
which are expanding but not enough
related product options) come
into play. Our AI-powered styling
[compared to the] rate at which assistant My Stylist helps consumers
consumption is increasing. The style products they buy. Maya is
second is supply: the more localised our AI-driven, conversational, real-
the supply the better it is for value time commerce bot assistant.
delivery to the customer. We’ve seen almost two million users
interact with these. This is where
Third, India is many Indias [meaning we see higher conversions, higher
it’s a highly diverse market]. Fourth is revenue per user and higher return
brand building. There are brands rates of these customers.
which have an international legacy,
some of that will rub off on India, but There are other core vectors where
you continuously have to build on the we use AI, like size and fit. That brings
brand. down our return rates and there’s
higher conversion [so it] really is a
Myntra is experimenting with very hard-working example of how AI
AI-led product discovery and is helping business.
curation. How is this impacting
conversion rates? What are some
of the other technological
innovations you’ve trialled?
If you look at the two big pillars of
fashion experience, the first is
inspiration — which is where social
commerce comes into play. We do it
through different formats, like This interview has been edited and condensed.

The State of Fashion 2025 38

03. Discovery Reinvented

Woman searching on a laptop. Izusek/Getty Images.

Consumer Shifts 03. Discovery Reinvented

03. Discovery Reinvented Fashion shoppers are overwhelmed

with choice, which negatively impacts their engagement and conversion rates
with brands. However, a new era of brand and product discovery is on the
horizon, underpinned by AI-powered curation across content and search.

KEY INSIGHTS EXECUTIVE PRIORITIES

• 50 percent of fashion executives see product discovery • Build AI foundations, identifying relevant tech partners
as the key use case for generative AI in 2025. and infrastructure for AI deployment whilst ensuring
product content is optimised for AI search.
• 82 percent of customers want AI to assist in reducing the
time they spend researching what to buy. • Prioritise use cases with the highest value, applying
a test-and-learn approach to consistently deliver
• The latest AI model of GPT-4o from OpenAI is 15 to 20 accurate results and enhance customer experience
percent more accurate than its predecessors, exhibiting before scaling.
fewer hallucinations.
• Implement guidelines for internal teams on the
appropriate use and communication of AI, ensuring
model output retains brand tone of voice and values.

The State of Fashion 2025 40

Consumer Shifts 03. Discovery Reinvented

Choice paralysis is negatively impacting customer

experience; brands are struggling to address it

74% 80%
of customers report walking away of customers say dissatisfaction
from online purchases due to the with online search is a barrier
volume of choice1 to purchase3

The volume of choice is working against fashion Search remains the primary mode of online product
brands, negatively affecting conversion as shoppers discovery. 69 percent of customers state they go
increasingly abandon carts. directly to a retailer's search bar when shopping
online. However, 80 percent are dissatisfied with
In response, some retailers have reduced the size of
the search experience and leave the site as a result.
their offering to increase relevancy and reduce
41 percent cite irrelevant results as a main barrier
choice paralysis. Asos, for example, announced it
to shopping.3
will offer fewer but more relevant brands to
customers, reducing stock intake by 30 percent Fashion brands are starting to address the
year on year in the first quarter of 2024, and is challenges by using generative AI. While promising,
planning a further 16 percent reduction in stock by these efforts are a work in progress. Revolve has
the end of 2024.2 reported significant increases in customer
engagement from its experiments with generative
AI-powered search. Kering, on the other hand,
introduced Madeline, a ChatGPT-powered
shopping assistant, in 2023 on KNXT, a site it uses
to test digital innovations, only to later disable the
feature.4

Online
Google Shopping search. BoFfashion
team. retailers. Companies.

The State of Fashion 2025 41

Consumer Shifts 03. Discovery Reinvented

Reinventing product discovery will be a key focus

area for fashion players in 2025
Generative AI use cases with the Customer product discovery and search is the top-ranked use case for generative AI in 2025, according
most potential in 2025, according to fashion executives.5 This is thanks to:
to fashion executives,
% Growing customer demand for AI-powered shopping experiences
79 percent of customers surveyed by Google say they would find it helpful for AI to understand their
specific needs and recommend products. 82 percent say they want AI to reduce their time spent
Product discovery and
customer search
50 researching what to buy.6 To address this, 84 percent of organisations say hyper-personalised experiences
across customer touchpoints are a priority for the next 12 months.3
Marketing (e.g.
personalised Increased competitiveness in quality and cost
45
communications) Intense competition among technology players such as Google, Meta and OpenAI has driven significant
Product design improvements in model quality while decreasing their cost-to-deploy. Google DeepMind’s latest AI model,
and other 41 Gemini, will offer AI overviews featuring refined recommendations, multi-step reasoning, planning and
creative processes multi-modal capabilities. In October 2024, the company introduced a new shopping experience centred on
AI features such as a personalised shopping feed and guides that summarise relevant product information.7
Curated product 39 Meta has also upgraded its open-source AI model, Llama 3.1, with monthly users increasing 10x from
recommendations January to July 2024.8
Digital shopping (e.g. Greater accuracy of AI tools
live/social commerce) 33
Competition has also driven accuracy improvements. For example, OpenAI's GPT-4o is 15 to 20 percent
more accurate than previous models, generating fewer hallucinations across a range of tasks.9 Similarly,
Back-end supply chain start-ups such as Anthropic are entering the space with models such as Claude 3.5 Sonnet, demonstrating
33
and logistics greater accuracy compared to incumbent models.10
Emerging commercial success stories
Store operations and
17 While experiments have produced mixed results, some brands have started to realise the impact of AI
customer experience
investments on product discovery and their bottom lines. Zalando credited an 18 percent year-on-year
Front-end logistics (e.g.
increase in profitability in the second quarter of 2024 in part to the roll-out of several generative AI
15 features aimed at lowering costs and increasing customer engagement, including a ChatGPT-powered
automated returns)
shopping assistant, personalised product recommendations and curated content.11
Source: BoF-McKinsey State of Fashion 2025 Executive Survey

The State of Fashion 2025 42

Consumer Shifts 03. Discovery Reinvented

This new era will provide customers with

increased curation across search and content
INDUSTRY SHIFTS FROM TO EXAMPLES
EXPECTED IN 2025

Contextual searches that recognise a Daydream

Emerging AI challengers A long, linear list of search shopper’s intent, producing a refined
offering new levels of results, ranked by a list of highly personalised
curation in product search non-personalised algorithm recommendations Constructor
in fashion

Tech-forward, multi-brand Non-personalised content and “One-stop” shopping experience for Zalando
retailers investing in AI- traditional search functionality product discovery, with real-time
driven personalised search that uses basic filters such as product recommendations and
and content colour and size frictionless search Alibaba

Social commerce Curated content based on Integrated social commerce enabling

previous interactions with TikTok
redefining end-to-end, on-platform journeys
product discovery products and brands, from discovery to checkout, with
independent from the shopping content driven Pinterest
and purchase
journey by predictive models

The State of Fashion 2025 43

Consumer Shifts 03. Discovery Reinvented

Emerging AI challengers are redefining product

search for the fashion industry
AI-POWERED SHOPPING PLATFORMS AI-POWERED DISCOVERY PARTNERS

>2,000 99% 20x

brands and retailers onboarded for of user images uploaded to Capsule increase in return on investment
Daydream’s pre-beta launch in launch week matched with for some brands when using
shoppable links Constructor’s AI product search15

Brands and retailers have recognised the power of Consumers are using multiple modes of search, Increased appetite among brands and retailers to
optimising search to solve for consumers’ such as image recognition, to identify looks they enhance the online customer experience has
increasingly contextual and colloquial search terms, want to shop. The likes of Google and Amazon sparked interest in AI partnerships with players
leveraging natural language prompts to curate a leverage this technology, while new start-ups such such as Lily AI, Bloomreach, Vantage Discovery,
shortlist of relevant options. as Y Combinator-backed Capsule are focusing on Constructor and others.
perfecting these alternative search methods for
Daydream leverages generative AI, machine Constructor’s B2B platform enables brands and
fashion discovery.
learning and computer vision to deliver highly retailers to embed AI in product search. Valued at
personalised search results using natural language Capsule’s on-demand product discovery platform $550 million, it has tripled revenues since 2022.14
and image recognition with detailed product includes a unique product index, based on over Constructor partners with brands such as Under
catalogues. Daydream has raised $50 million in 20,000 scraped data points per day. The app works Armour and Birkenstock to deliver personalised
seed funding and closed partnerships with brands similarly to the music app Shazam, using computer search experiences and has powered more than 100
such as Alo Yoga, Jimmy Choo and Dôen, among vision and deep learning to identify similar styles to billion customer interactions in the first six months
others, with the objective of launching a beta those uploaded by users.13 since launch.
version in Autumn 2024.12

The State of Fashion 2025 44

Consumer Shifts 03. Discovery Reinvented

Multi-brand retailers with vast product data are

driving change in content curation
TAOBAO AND TMALL, ALIBABA GROUP ZALANDO

30% >7M
improvement in click-through new users since Zalando acquired
rate with personalised content lifestyle publication Highsnobiety as
on Wenwen part of its shift towards enhanced
content curation19
Alibaba set up a “digital tech” firm under its Zalando is investing in generative AI to become
e-commerce unit TTG in August 2024.16 a “one-stop” destination for customers, spanning
both product discovery and inspiration as well as
Search: Taobao and Tmall Group (TTG)
seamless search.
introduced Wenwen, a large language model
chatbot that provides personalised Search: Zalando’s AI assistant, which leverages
recommendations to consumer queries using ChatGPT technology, has been used by over
multi-modal outputs such as text, image, video and 500,000 customers since its launch in 2023. It
audio, and is the first fully integrated AI leverages data from ongoing interactions with
e-commerce user application in China. Wenwen users to refine and improve output and accuracy
was used more than 1.5 billion times in one month over time.18
during the 11.11 shopping festival in 2023.17
Content: Zalando Stories use generative AI
Content: The platform’s curated content and to show curated content to users based on real-
personalised short inspiration videos has improved time data. Similarly, Trend Spotter, a B2B tool,
its click-through rate. identifies emerging trends on Zalando across
six fashion capitals, enabling brands to create
styles and content that resonate with real-time
customer preferences. Zalando fashion assistant on a smartphone. BoF team.

The State of Fashion 2025 45

Consumer Shifts 03. Discovery Reinvented

Social media will continue to change the way

shoppers discover and purchase fashion
Social commerce market, Brand discovery through social media is now equally as common as through search engines, with 38
USD (billions)
percent and 37 percent of customers using the discovery methods, respectively.20 While in-app shopping
on social media is a core part of the e-commerce market in China — short video app Douyin has a 15
US UK
percent e-commerce market share and saw total transaction volume grow by 256 percent in 20232 1 22 —
social commerce has yet to pick up pace in the US and Europe.

8 However, social media’s growing role in discovery may finally unlock its potential in the West in 2025. The
2023 76
social commerce market in the US and UK is expected to almost double by 2027.23 This is due to:
• Predictive algorithms: The TikTok algorithm is distinct in its focus on content discovery with the
+38% +31% “For You” page predicting what users will enjoy based on their individual preferences, enabling them to
explore new brands and products.

• Content tools: TikTok Shop has launched a suite of generative AI creative solutions for brands to
produce quality content faster, enhancing commercial prospects for brands.24
2025E 105 13
• Integrated shopping journeys: TikTok Shop had 33 million users in the US in 2023, up 40 percent
since 2022.25 It is estimated that approximately 43 percent of users will purchase through the platform
by 2027.26 Following its launch on TikTok Shop, brand Princess Polly generated a 350 percent
+24% +58% increase in purchase value and a 5x increase in purchase frequency through targeted search, with 60
percent of customers new to the brand.27

Pinterest credits its AI investments in in-app commerce for making the platform more shoppable,
including features such as AI Collage, which enables shoppers to curate shoppable content. On Pinterest,
2027E 130 23 posts with shoppable products are 300 percent more likely to generate engagement. It also plans to invest
in a dynamic AI ad solution that will allow brands to optimise adverts in real time, prioritising users and
products with the highest return.28

Source: Statista, Euromonitor, McKinsey analysis

The State of Fashion 2025 46

Consumer Shifts 03. Discovery Reinvented

Fashion players should adopt a value-focused

approach to AI-enabled discovery
EXECUTIVE PRIORITIES

Build AI foundations Prioritise value and accuracy, then scale Manage risks and ethics

Embed AI literacy in the hiring criteria for Apply a prioritisation framework to identify the Implement AI best practice frameworks to guide
adjacent roles, such as in marketing discovery and search use cases with the teams through the appropriate use and
functions, in relation to customer experience highest value based on customer insights. communication of AI in content and search to
and brand perception. Upskill the existing Employ a test-and-learn approach, starting with gain customer trust.
workforce on the appropriate use of AI. use cases that perform specific tasks with
consistently accurate results before scaling Consistently monitor how AI models are
Establish a technology backbone (including more broadly across a larger customer base or developed and trained, incorporating broader
tech stack and infrastructure) that provides set of activities. data sets that consider all customers. Monitor
flexibility to adopt and scale search and search accuracy and model output through
discovery use cases. Assess on an ongoing basis the trade-offs human validation and A/B testing to ensure
retailers may need to make between showing resonance with customers. Balance changes with
Identify relevant tech partners for cost- customers the most relevant products to brand tone of voice, prioritising authenticity and
effective generative AI deployment or build improve conversion and monetising search avoiding rigid algorithm-driven outputs.
in-house capabilities through acquisition. results by allowing brands to sponsor listings.
Ensure product data is optimised for AI
search, identifying relevant product features
and attributes, for both organic search and
content-led discovery.

The State of Fashion 2025 47

04. Silver Spenders

Jane Fonda on L'Oréal Paris runway. Kristy Sparow/Stringer/Getty Images.

Consumer Shifts 04. Silver Spenders

04. Silver Spenders Fashion brands have typically focused on youth, but in
2025 they may struggle to grow sales from younger shoppers alone. The “Silver
Generation” aged over 50 represents a growing population with a high share of
global spend. Brands that engage these previously overlooked shoppers while
creating inter-generational appeal will unlock incremental growth.

KEY INSIGHTS EXECUTIVE PRIORITIES

• In 2025, people aged 50 and older will drive 48 percent • Rethink the approach to traditional marketing
of incremental growth in global spending. segmentation, leveraging data insights to identify
customer segments that share similar values.
• In China, the number of people over 50 will grow 5
percentage points from 2020 to 2025 to reach 38 • Assess the universal appeal of the product range,
percent of the total population. investing in technologies or materials that improve
functionality or more versatile product designs with
• Those aged 55 and over in the US accounted for 72 variations of core styles that appeal to different
percent of the population’s wealth in 2024. generations.

• Establish KPIs to ensure the long-term ROI of mature

customers is considered across inter-generational
marketing and channel strategies.

The State of Fashion 2025 49

Consumer Shifts 04. Silver Spenders

It will be increasingly difficult for fashion brands

to drive growth from younger generations alone
Younger consumers are more financially When it comes to apparel, Gen-Z is the least Competition for younger shoppers’ wallets
squeezed than other cohorts loyal consumer cohort will increase, despite existing saturation

73% 50% 80%

of US Gen-Z consumers report of US Gen-Z consumers prefer to of Gen-Z consumers feel overwhelmed
changing spending habits because explore and shop new brands vs only by their exposure to brands6
of increased prices1 33 percent for those aged 50+5

More than half of Gen-Z consumers are worried Gen-Z consumers prefer to shop across multiple Young consumers feel overwhelmed by the volume
about their financial situation in the year ahead.2 In brands, often in search of the latest trends. On of brands they are targeted by. 80 percent of Gen-Z
response, young shoppers in the US are changing average, only 29 percent of their wardrobe is from shoppers say they feel they are exposed to more
their spending habits, including around 40 percent the same brand, compared to 52 percent for those brands and adverts than any other generation.6
spending less on clothing.1 In the UK, 70 percent aged 50 and above.5
Yet Gen-Z and Millennials remain the prime focus
of Gen-Z are prioritising affordability when
buying clothes.3 Younger shoppers in the US are 15 percentage for many fashion brands. In 2025, approximately
points (%points) more likely to explore different 60 percent of fashion executives plan to double
Gen-Z also uses credit more than other brands compared to older generations. Similarly, down on these consumer groups, which are twice as
generations. In the US, 15 percent of Gen-Z credit Gen-Z in the US and China are both 9%points less likely to be targeted than older generations; 29
card users had maxed-out borrowing in the first likely to care about the brand of clothing they buy if percent of executives say they plan to target Gen-X
quarter of 2024, more than any other generation.4 they like the style.5 and 14 percent say they plan to target Baby
Boomers.7
The share of Gen-Z consumers in the US and China
who reported switching to cheaper fashion brands
in the last 12 months was 10%points higher than
older generations.5

The State of Fashion 2025 50

Consumer Shifts 04. Silver Spenders

Meanwhile, there is a growing “Silver Generation”

cohort of fashion customers
Longer life expectancies and declining birth rates Population by age cohort,
are pushing the global population of people older Millions
than 50 to grow faster than any other cohort.8 In US China
2020, the Silver Generation aged over 50
332 338 368 1,411 1,409 1,290
represented 25 percent of the global population. By
70yr+ 11% 13% 8% 10%
2050, they are set to represent more than a third.9 18% 23%
25%
This trend is starker in advanced economies. In the 50-69yr 25% 24% 28%
24%
US, the share of the population aged over 50 will 29%
reach 37 percent in 2025, growing to 42 percent by
2050. More than half of the population will be aged 20-49yr 39% 40% 43%
41%
37%
over 50 in China and in the EU5a by 2050.9 33%

Even emerging markets with relatively young 0-19yr 25% 24% 24% 22%
21%
15%
populations will see their older cohorts grow. In
India, for example, consumers aged over 50 will 2020 2025E 2050E 2020 2025E 2050E
grow from 20 percent in 2020 to 34 percent in
EU5 a
India
2050.9
325 328 316 1,396 1,455 1,670
4% 5% 10%
70yr+ 15% 17%
16%
25% 17%
24%
50-69yr 27% 27%
25%
45% 46%
41%
20-49yr 37% 36%
32%

35% 33%
24%
0-19yr 21% 20% 18%
a. EU5 includes France, Germany, Italy, Spain and the UK
Source: World Bank Global Data Population estimates and projections 2020 2025E 2050E 2020 2025E 2050E

The State of Fashion 2025 51

Consumer Shifts 04. Silver Spenders

The Silver Generation is disproportionately

wealthier and spends more on fashion
Greater share of wealth Total global incremental consumer spending in 2024 and 2025 by age,
USD
Thanks to years of accumulated wealth and steady incomes, older generations
have more disposable cash to splurge on fashion. Those aged 55 and over in the
US accounted for 72 percent of wealth in early 2024 — and that share is
1,550B
increasing each year.10 In the UK, the median total wealth belongs to those in
their early 60s, whose wealth is almost 9x those in their early 30s.11
990B
More resilience
As a result, older generations tend to be more resilient during times of 647B
economic uncertainty. For example, less than 20 percent of Silver Generation
customers in the US, EU5a and China say they tracked their spending in 2024,
compared to more than 30 percent of Gen-Z.12 61.1T

Higher spending
People aged 50 and above represented 38 percent of total global spend in 2024
and will drive 48 percent of global spending growth, 60 percent of growth in 57.9T
China and the US and 79 percent in the EU5 in 2025.a Even in emerging
markets such as India that have relatively smaller older population shares,
those aged over 50 will drive 30 percent of 2025 spending growth.13

• The Silver Generation represents a greater share of total fashion spend than
younger shoppers, with those aged 59 and over representing 37 percent of 2024 Age Age Age 2025E
2023 retail apparel spend in the US compared to 23 percent for Millennials. 0-19 20-49 50+
Similarly, per capita spend on clothing was 21 percent higher for those aged
59 and over compared to Millennials and Gen-Z in the US in 2023.14
of total 32% 42% 26%
• This in part reflects the shifting attitudes of this cohort who increasingly population
defy age-related stereotypes. Half of women in their 50s saying they are
now more style-conscious than when they were in their 20s.15 of total 20% 31% 49%
a. EU5 includes France, Germany, Italy, Spain and the UK spend
Source: World Bank Data Lab Projections

The State of Fashion 2025 52

Consumer Shifts 04. Silver Spenders

Fashion brands need to address the needs of the

Silver Generation in order to capture their spend
Experiences matter Fashion preferences of Silver Generation consumers,
Silver Generation customers spend less time %point difference vs younger consumersa
shopping for clothes than the average shopper: 17
US EU China Less likely to agree More likely to agree
percentage points (%points) less in the US and -40 -35 -30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30
36%points less in the EU. Since they are engaged in
activities like dining out and travel, brands that
Engagement I can spend hours
create out-of-home experiences are likely to shopping for clothes
capture their attention.5
Identity Fashion is a significant
They are not trend-driven part of my identity

The Silver Generation cares about individual style

Trends I must have the latest
but less about trends, 20%points and 16%points on-trend styles

less than the average in the US and EU. As a result,

Style I like to create my own style
they tend to be more brand loyal and shop from a independent of trends

smaller repertoire of brands.5

Comfort I am willing to sacrifice
comfort for style
Functionality comes first
They prioritise functionality (23%points and Functionality I look for functionality
over style
29%points above the average in the US and EU)
and comfort (21%points and 8%points) over style. Versatility It is important that my
wardrobe is versatile
Brands with timeless designs and identities are
therefore more likely to resonate with this cohort.5 Price I tend to pay full price for
clothes
Value is more important than price
The Silver Generation in the EU prioritises value Value I go out of my way to find
the best value for money
25%points above the average. They want versatile
products that serve different occasions. Since they Brand I have favourite brands I
tend to buy every year
are not necessarily driven by trends, they are more
likely to buy on discount or via off-price channels.5 Quality I would rather invest in
one high quality item
a. Younger consumers are those under the age of 30
Source: BoF-McKinsey State of Fashion 2025 Consumer Survey

The State of Fashion 2025 53

Consumer Shifts 04. Silver Spenders

Knowing where and how the Silver Generation

discovers and shops for fashion is crucial
They are slower to embrace omnichannel Fashion purchase channel preference,
The Silver Generation is equally as likely to shop in store as online, but is less %point difference vs younger consumersa
likely to embrace omnichannel shopping. Silver Generation shoppers in the US
and EU are 15 percentage points (%points) and 14%points less likely to check US EU China
product reviews online before visiting a store, respectively.5 Brands should use
In multi-brand 6
a sufficient breadth of relevant marketing channels to reach them.
physical store 17
Stores are a key destination for discovery 9
The Silver Generation is 12%points and 25%points more likely to seek
On multi-brand 11
inspiration in store in the US and EU, respectively. They are independent 19
e-commerce
shoppers and less likely to engage sales assistants. Brands that optimise retail -1
space are likely to see increased conversion. Meanwhile, in China 47 percent of
In a department 5
the cohort uses social media such as WeChat to discover fashion.5
store -6
Multi-brand retail is preferred 7
The Silver Generation has a clear preference for multi-brand retailers, In brand’s own -26
17%points above the average in the EU.5 Fashion players should review their physical store -13
presence across retailers to expand their reach. Contrary to common -2
perception, the Silver Generation is no more inclined to shop in department In brand’s -18
stores, except in China. online store -26
Resale is low on the agenda -3
On resale /
In part driven by their lack of sentiment towards sustainability in fashion, the -7
secondhand website
Silver Generation is 7 to 17%points less likely to engage with non-traditional -6
fashion channels, such as resale. In the US, the cohort is 18%points less likely to -17
buy brands with sustainability credentials than the average shopper.5 This On social media -16
indicates brands should emphasise quality over other product attributes. (e.g. TikTok) -28
-13

a. Younger consumers are those under the age of 30

Source: BoF-McKinsey State of Fashion 2025 Consumer Survey

The State of Fashion 2025 54

Consumer Shifts 04. Silver Spenders

Inter-generational appeal is achievable with

branding, marketing and product assortment

Image Captions to be added

New Balance advert. New Balance. J.Crew catalogue image. Laura Jane Coulson/J.Crew. Uniqlo store. Mike Kemp/Getty Images.

BRANDING MARKETING PRODUCT ASSORTMENT

New Balance has undergone a multi-year brand After filing for bankruptcy in May 2020, J.Crew has Uniqlo’s LifeWear range is designed to incorporate
transformation, reclaiming its “dad shoe” as a turned around its brand by attracting a new functional, high-quality everyday pieces and have
fashion-forward, inter-generational brand. generation of customers. As a result, J.Crew is inter-generational appeal. Uniqlo reported a 17.8
expected to achieve record sales in 2024.19 percent revenue increase in May 2024, crediting
By reviving retro styles from the 70s, 80s and 90s, LifeWear as a key pillar of international growth. 21
and collaborating with streetwear icons like Aimé J.Crew aims to offer a timeless, consistent
Leon Dore, Joe Freshgoods and Salehe Bembury, assortment, usually only making small tweaks to Much of the collection is versatile by design: 90
as well as celebrities such as Jack Harlow, New core styles to stay relevant and broaden audience percent of the current assortment has a simple
Balance has successfully reasserted its relevance appeal. Its marketing highlights the longevity of design or minimal pattern, with “timeless” tones.
across generations. products whilst showcasing their versatility, such as Uniqlo differentiates its timeless classics by using
through “Design Try-On” videos on social media technical features that provide functionality, such
These efforts have successfully attracted both that appeal to a younger audience. as its Heattech, Puffertech and Airism technologies.
Millennials and Gen-Z while retaining appeal
among older generations through a focus on Responding to consumer demand, J.Crew Uniqlo has entered long-term partnerships with
nostalgia. More than 40 percent of consumers relaunched its iconic physical catalogue in 2024 designers such as JW Anderson and Christophe
across age groups from 18 to 55 and over favour the after seven years out of circulation, evoking Lemaire, and recently named Clare Waight Keller
brand.16 17 18 nostalgia and showing that print can still work in creative director, which helps it to gain relevance
fashion.20 In the US, for example, those under the with a younger, fashion-forward demographic while
age of 30 are just as likely to source inspiration from retaining the same timeless, uncomplicated designs.
magazines as those over the age of 50.5 22 23

The State of Fashion 2025 55

Consumer Shifts 04. Silver Spenders

Brands that tailor their marketing, channel and

product strategies will be positioned to win
EXECUTIVE PRIORITIES

Rethink customer segmentation Diversify the product portfolio Define a data-driven channel strategy

Move away from age-defined customer Consider how the assortment appeals across Adapt KPIs to ensure the long-term ROI of mature
segments. Leverage data to identify the values generations. To create products with both customers is considered when it comes to
and preferences that unite customers across younger and older shoppers in mind, brands allocating marketing budgets and channel
age groups and use this to inform marketing might introduce more fluid variants of core strategy. Once Silver Generation shoppers have
strategy and communications. Whilst the Silver lines. To attract older customers, they might bought from a brand, they tend to be more loyal,
Generation is broadly channel agnostic about focus on offering new technical features or so brands might focus on measuring retention
whether they shop in store or online, brands innovative materials that cater to their unique metrics for these shoppers rather than new
with consistent value-based communications preferences, such as comfort and functionality. customers acquired.
that show up across channels will likely stay
front of mind. Physical print remains key for marketing to the
Silver Generation, as do meaningful in-store
experiences, while social media channels such as
Facebook and WeChat are more popular among
customers aged over 50.

The State of Fashion 2025 56

Consumer Shifts 04. Silver Spenders

J.Crew: How to Build

ild
an ‘Ageless’ Brand
As the four-decade-old American retailer projects
ojects to
hit record sales this year, CEO Libby Wadle unpacks
verse its
how she and her design team were able to reverse
stomers
existential conundrum and win back core customers
who had become alienated over the years.

BY CATHALEEN CHEN

When J.Crew emerged from bankruptcy in 2020, fashion stratosphere but in doing so, alienated retailer around without drastically overhauling the
the American brand known for cable knit many loyal customers, who lamented what they business model or abandoning its preppy roots.
crewnecks and slim-fitting suits was at an perceived as declining quality and a trend-chasing
existential crossroads. mentality. In 2024, J.Crew Group, which also owns Madewell,
is projected to hit sales of $3 billion, a record high.
After years of financial uncertainty, the company It was this identity crisis that Libby Wadle inherited Wadle unpacks how her team was able to pull it off
was finally solvent with a new owner. But from a when she was named CEO of J.Crew Group four — and the importance of never losing sight of the
customer perspective, the retailer was still on shaky years ago. Through a steady, balanced product core customer.
ground. The fashion-forward Jenna Lyons, who strategy and savvy adaptation to post-pandemic
served as J.Crew’s creative director from 2008 to consumer behaviour, Wadle, who had been with the
2017, may have catapulted the brand into the company since 2004, has successfully turned the

The State of Fashion 2025 57

Consumer Shifts 04. Silver Spenders

You’ve been at the helm of J.Crew’s We really are at our best when we Ten years ago, J.Crew really “It's also very
turnaround for the past four years, lead with great creative and we lead struggled with balancing a fashion-
what was your strategy going into it? with great design. We're seeing forward offering under Lyons while important not to
When I took the role, it was momentum now when we release still serving its older customers who get so blinded by
November 2020, it was certainly collections for both our new fashion have shopped with the brand for
a tumultuous time. There was a lot to but also our classics and our years. How have you been able doing exactly
do, but I didn’t have a laid-out evolved classics. to address this issue of balance what the
strategy in place. I feel like there’s in assortment?
been a lot of learning. There’s been The other real pillar for us is the A primary issue that I’d observed customer thinks
a lot of takeaways from our core experience. That touches our retail coming in was really our need to get they want. You
customers, but also understanding stores, it touches our digital back to a creative and design-forward
about what it takes to meaningfully experience. Then the catalogue, approach to the brand that also also need to
bring new people into the brand, and which we relaunched this fall. embraced our heritage and our inspire and
what that right mix really is for us. classics, and really finding that
What does J.Crew’s customer sweet spot. delight them.”
We are clear on our mission today, makeup look like today?
which is about building a brand that Our core customer really puts style We are not a trendy brand. We are a
really embodies multi-generational first, and they're fairly ageless in brand that is ultimately rooted in
style, and continuing to evolve to demographic. That said, many are in heritage and classics. Some of those
meet the needs of all of those their 30s, 40s and 50s, and they’ve pieces are evolved, they feel modern,
customers. I think we are at our best likely grown up with J.Crew. These and some actually remain quite
when we do that really well. are our best customers. They're our traditional. Balance is critical to
multi-generational customers and making sure you’re not alienating
What major actions went into they’re bringing their kids to the your core customer, and then you’re
getting J.Crew into the shape that it brand, too. exciting a newer customer who might
is today? come in.
The first order of business was It’s also very important not to get so
making sure we felt really good about blinded by doing exactly what the So, we’re seeing a lovely balance of
our creative direction. Having customer thinks they want. You also people connecting and coming back
[womenswear head of design] need to inspire and delight them, so into the brand, and then we're seeing
Olympia [Gayot] newly onboard, that's where the creative component a really nice rate of acquisition
and us really getting reacquainted and the magic that we’ve been able coming in under age 30. It's the
with the brand together again, then to bring back really comes in. At balance of the product. It's the
bringing [menswear designer] the end of the day, we strive to balance of the storytelling, and at the
Brendon [Babenzien] on shortly create product that really is ageless end of the day, you have to keep that
thereafter, that was really critical. and timeless. core customer in mind.

The State of Fashion 2025 58

Consumer Shifts 04. Silver Spenders

What goes into the design process How has J.Crew adapted its supply
in maintaining that balance? chain to meet the needs of its new
It’s a constant dialogue we have here. design strategy?
‘Should we keep this item in? Should As you know, we are not fast fashion.
we move forward? How much should We do believe [in] allowing time for
we tweak this bestselling style? How the creative process and the design
much should we let it go?’ Luckily, process. We have a lot of Italian
we’re sitting on a lot of great fabrics that we use that require quite
customer data and product-selling a bit of lead time. We haven’t tried to
information. We talk a lot to our trim our calendar to adapt to a
customers. We have a lot of access [faster] fashion cycle. That said, we
now to our customers, and through do believe that there’s opportunities
all of that, we really have found, that come up all the time.
I think, a really nice sweet spot
of maintaining that balance. What we have done over the past
four years is really establish a faster
If we’re delivering on a trend, for cycle, a cycle that allows us to react
example, the barn jacket is trending to what’s happening in our own
today, and we had this incredible business and react to what's
vintage version, which we did a happening out there in the world to
release of and it sells out in minutes become more dynamic. I think you
— incredible. But we also have in our have to be dynamic, even if you want
offering a [new version] of the to really protect the longer-term
original barn jacket on our men’s creative storytelling. I think it’s very
side and a waxed and cropped easy for a brand to swing the
version on our women's side, too. pendulum one way or the other.
So, having those iterations of I think you just have to be nimble
what’s heritage to us but delivering but, at the same time, you have to
iterations in a way that feels really really be careful about maintaining
modern and relevant has really been the integrity of the product that
the crux of our product formula. you’re delivering.

J.Crew catalogue image. Theo Wenner/J.Crew.

The State of Fashion 2025 59

Consumer Shifts 04. Silver Spenders

What is the role of distribution in

reaching all your different segments
of customers?
It’s important to recognise where the
different audiences are and meet
them where they are. This means
delivering on the store experience is
going to feel different than something
you're going to see on the website,
which has become a channel of
convenience. The store has really
been about a celebration of the
best of brand.

I think when you think about those

two channels, they’re actually
switched in a way compared to 10 Demi Moore in J.Crew advert. Max Farago/J.Crew. J.Crew catalogue image. Theo Wenner/J.Crew.
years ago, when people really did
stop by the store to pick things up. to feel more authentic and more catalogue, that this story is for a of the physical connection and the
Stores were the channel organic, and then using other younger customer, or this story is excitement that people have for
of convenience. platforms for really being as for an older customer. It really does shopping in general, connecting with
inspirational and aspirational as feel pretty ageless when you open brands they love, and the importance
Today, with the ease and the we need to be. that book. of, not just great marketing, but
convenience of the online shop, it just actually delivering great product and
made a lot more sense for us to Why bring back the catalogue now? Engagement around the brand that great experience behind that
demonstrate the best of the brand in The loudest and the clearest feedback brings the catalogue and the store marketing.
the stores, which is one of the most that we got from customers was, together has been, I would say, an
important platforms for us. ‘Please bring back the catalogue.’ I unanticipated wonderful moment for
knew when I started that we weren’t us. It really connects all the parts of
There are many different ways we can ready, because I knew that the magic why people love this brand. The
show up in the world and there’s a of the catalogue was really about the customer component obviously is
moment to celebrate things storytelling and really being able to really critical, and having the stores be
differently on TikTok versus stand behind the product, so I allowed so meaningful again, it’s just so
Instagram, for instance. Letting go us to really take our time. refreshing for those of us who’ve been
a little bit more on certain platforms, We really don’t think about it in this business for a long time. I think
where it just makes sense for people creatively when we’re developing the it just really reiterates the importance This interview has been edited and condensed.

The State of Fashion 2025 60

05. Value Shift

Secondhand clothes rail. ArtMarie/Getty Images.

Consumer Shifts 05. Value Shift

05. Value Shift Macroeconomic pressures and rising prices have driven fashion
shoppers to adopt cost-conscious behaviours. This is expected to persist, even as
some economies begin showing signs of recovery. This dynamic is fuelling growth
in segments with strong value-for-money perception, such as resale, off-price and
dupes, among others. To capture customers’ share of wallet, brands will need to
prove their value.

KEY INSIGHTS EXECUTIVE PRIORITIES

• Fashion customers consistently adopt cost-conscious • Identify a brand value proposition that resonates with
shopping behaviours, with 64 percent of US shoppers customers based on their trade-down behaviour and
trading down in the third quarter of 2024. definition of "value," by focusing on price or quality, for
example.
• Over 70 percent of customers plan to purchase from
outlets or off-price retailers in the next 12 months, • Emphasise value in brand communications to earn
even if their discretionary budget increased. customers’ trust and convince them a product is worth
purchasing.
• Nearly one in three US adults say they intentionally
bought a dupe of a premium or luxury product. Half • Consider embedding value into the product proposition
say they bought it for cost savings, while 17 percent and channel strategy. Determine whether launching
would continue to purchase dupes even if they could new value-orientated products, price points or
afford the original item. channels, such as resale or outlets, would appeal to
shoppers, while protecting core brand equity.

The State of Fashion 2025 62

Consumer Shifts 05. Value Shift

Fashion customers are looking to spend less

and spend smarter

#1 >60% @Fred, this image came from

the McKinsey team, we might
risk cited by fashion executives in of customers say they often try to
not have the rights to use it
2025 is consumer confidence and save money on clothing, footwear
appetite to spend1 and accessories3

In 2022, consumer confidence indexes in the US, Consumers are not only looking to spend less, but
Eurozone and China hit their lowest levels since they are also trying to stretch their money further.
2005, and confidence in China once again neared Over 60 percent of consumers in the US and UK
record lows in August 2024. Across markets, say they are attempting to save money on fashion
shopper uncertainty about macroeconomic “often” or “as much as possible.” In the US, this
conditions remains. In the first half of 2024, figure is as high as 75 percent.3
consumer confidence was about 10 to 30 points
Shoppers across income levels are trading down,
below 2019 averages across the Eurozone, US and
changing the type of product or quantity purchased
China, though confidence levels in the Eurozone
in pursuit of better value, but their behaviour varies
and US are ticking up slightly from 2023.2
by segment. While value and mid-market shoppers
Intent to spend on discretionary categories such as tend to buy from outlets or off-price retailers (>33
fashion remains low. Over 40 percent of shoppers percent) or search for the best price for an item
in the US, UK and Germany are spending less on (>31 percent), premium shoppers are more likely to
clothing, footwear and accessories than they did a leverage “buy now, pay later” services (16 percent)
year ago.3 or use resale platforms to save (23 percent). Premium
customers embrace certain trade-down behaviours
even more than customers from other segments; a
greater share say they have purchased a cheaper
replica, or “dupe,” of the product they wanted
compared to value and mid-market shoppers.3 Clothing sale. Mike Kemp/Getty Images.

The State of Fashion 2025 63

Consumer Shifts 05. Value Shift

Even as economies improve, value-orientated

behaviours are likely to persist
Shoppers are not eager to increase their fashion Behaviours that customers would continue even if they had more money to spend,
budgets, even as economic prospects and consumer %
sentiment improve in some regions. Over 80 Deep dive to follow
percent of shoppers plan to spend the same or less
on clothing, footwear and accessories in 2025.3
Purchase from an outlet or off-price retailer 75

An “inflation overhang,” the idea that customers

take time to adjust to higher prices, is not the only Hunt down the best price for the product 72
dynamic at play. Even customers with growing
discretionary spend are prioritising experiences
Wait until the product goes on discount 62
and travel over fashion. In the third quarter of
2024, the top category that US and European
customers splurged on was eating out, followed by Buy or sell products on resale websites 61
travel and buying groceries.4

The survey also revealed the stickiness of value- Purchase from a discounter or a private label 58
seeking shopper behaviour. When asked which
categories they would spend on (e.g. groceries, Buy a cheaper version (i.e. "dupe") of the product 54
clothing, activities) given higher discretionary
spend, over 70 percent say they would continue
certain trade-down behaviours in their fashion Shop from a lower price retailer than normal 54
purchases.3
Use a "buy now, pay later" scheme 51
“Value” can take on different meanings. For some, it
might mean shopping pre-owned or buying on sale,
for others it might mean buying fewer, higher Shop from a cheaper brand than normal 46
quality items.

Delay a purchase of a product to save money 43

Source: BoF-McKinsey State of Fashion 2025 Consumer Survey

The State of Fashion 2025 64

Consumer Shifts 05. Value Shift

Affordability is propelling growth for off-price

retailers and outlets

1.8x
off-price retailer revenue
growth between 2023 and
2024 vs the broader market5

Off-price retailers have continued to grow

revenues and improve profitability despite broader
market turbulence, this year’s McKinsey Global
Fashion Index (MGFI) analysis shows. Traditional
off-price retailers Burlington, Ross and TJX are
expected to grow revenues by a weighted average
of 4.6 percent in 2024, compared to a 2.6 percent A TJ Maxx store. Shutterstock.
average for publicly listed fashion companies. Ross
and TJX were also among the MGFI Super
Winners list, leading in industry economic profit in TJX
2023.5 “We're convinced that consumers will keep seeking value. We believe our strategy of trading across a broad
range of income and age demographics differentiates us from other retailers.”
Ernie Herrman, chief executive and president, August 21, 20248
Outlet channels are also benefitting from this
dynamic. In the first half of 2024, Zalando’s
business-to-consumer (B2C) channel profitability
rose 1.4 percentage points year on year and Ross
revenue grew by 0.6 percent.6 Meanwhile, e- “Second quarter sales and earnings were above our expectations as our stronger value offerings
commerce off-price brands are growing even resonated with our customers … now more than ever, we believe price value is critical for [customers]
faster, with players such as BestSecret growing 25 when determining where to shop.”
percent in the first quarter of 2024.7 Michael Hartshorn, group president and chief operating officer, August 22, 20249

The State of Fashion 2025 65

Consumer Shifts 05. Value Shift

Consumer search for value is driving wins

in the resale market

41%
of consumers look to
secondhand outlets when
seeking apparel deals10

The resale market in the US grew 15x faster than

the broader clothing retail sector in 2023. By
2025, secondhand sales will account for 10
percent of the global apparel market, and the
segment is expected to grow at a 12 percent
compound annual growth rate to reach $350
billion by 2028.10
Secondhand fashion customer. ThredUp.
The perception among consumers is that they get
more value from resale purchases. 60 percent say
shopping secondhand apparel gives them the Sandro
most value for money.10 In the non-luxury space, Sandro’s resale programme drives customer loyalty by giving sellers either 70 percent of the resale value
players such as ThredUp and Vinted broke even if they choose to be paid directly, or 100 percent of the resale value if they choose Sandro credit.14
for the first time in 2023.11 12 Vinted reports that
65 percent of its buyers prefer to buy fewer, more
expensive items that last, rather than more,
cheap fashion items.13 Shein
Shein launched its own online peer-to-peer resale platform, Shein Exchange, in Europe in summer 2024
Some brands have recognised this growth after seeing success in the US. In 2023, Shein Exchange gained over 4.2 million new users in the US.15
opportunity and are developing their own resale
capabilities.

The State of Fashion 2025 66

 Consumer Shifts 05. Value Shift

TheThe
pursuit
pursuit
of affordable
of affordable
alternatives
alternatives
hashas
given
given
riserise
to “dupe
to “dupe
mania”
mania”

1 in
1 in
33
US adults
US say
adults
theysay intentionally
they intentionally
Shein Shein
Shein uses Shein
promote
promote Shein
uses influencers
influencers
Sheinasproducts
products
who outwardly
who outwardly
dupes. as dupes.
boughtbought
a dupe aofdupe
a premium
of a premium
or luxury
or product
luxury product
16 16

Lululemon
Lululemon
In a rebrand
In aofrebrand
what used
of what
to beused
regarded
to be as
regarded
taboo as taboo
Lululemon Lululemon
hosted a pop-up
hostedwhere
a pop-up where
counterfeits,
counterfeits,
Gen-Z hasGen-Z
popularised
has popularised
“dupes,” “dupes,” shoppers couldshoppers
swapcould
out their
swap dupe
out their dupe
or duplicates
or duplicates
of more expensive
of more expensive
products. products.
The The leggings forleggings
real ones
for—real
freeones
of — free of
phenomenonphenomenon
has grownhasbeyond
grown Gen-Z,
beyond however.
Gen-Z, however.charge. Thecharge.
campaign
Thepaid
campaign
off, aspaid
50 off, as 50
Nearly oneNearly
third of
one
USthird
adults
of US
sayadults
they say they percent of those
percentwho
of visited
those whowerevisited were
new customers.
new customers.
16 16
intentionally
intentionally
bought a dupe
bought of a premium
dupe of a premium
or or
luxury product,
luxuryand
product,
the #dupe
and the hashtag
#dupeonhashtag
TikTokon TikTok
has nearlyhas
6 billion
nearlyviews.
6 billion views.
16 17 16 17

Shoppers Shoppers
don’t just don’t
turn to just
dupes
turnfor
to dupes
one-offfor one-off
trends. Among
trends.UKAmong
shoppers,
UK shoppers,
11 percent11say they say they Quince
percent Quince
buy a dupebuy
at least
a dupeonce
at least
everyonce
few every
months.
fewHalf
months. Half Brands like Brands
Quincelike
haveQuince
been built
have been built
say they do
say
sothey
for the
do so
savings,
for thebut
savings,
17 percent
but 17 percent on a “same,on
but
a “same,
cheaper” butprinciple,
cheaper” principle,
consider dupes
consider
as great
dupesalternatives
as great alternatives
even if they
even if they producing replicas
producingof luxury
replicas basics
of luxury
at basics at
could afford
could
theafford
original.
the16original.16 affordable prices
affordable
whilst
prices
maintaining
whilst maintaining
quality. In 2023,
quality.
Quince’s
In 2023,sales
Quince’s
tripled,
sales tripled,
and the brandandaims
the brand
to triple
aimssales
to triple sales
again in 2024again
to reach
in 2024 $1to
billion.
reach 18 $1 billion.18

Lululemon leggings
Lululemon
in store.
leggings
Shutterstock.
in store. Shutterstock.

The State of Fashion 2025 67

Consumer Shifts 05. Value Shift

Brands looking to differentiate will need to

convince shoppers that they are worth the price
EXECUTIVE PRIORITIES

Identify value drivers Communicate value Integrate value into the channel and
product strategy

Identify the “value proposition” that Convince consumers of the defined value Attract value-minded shoppers through
resonates with customers, whether rooted in proposition through effective brand alternative channels and differentiated
quality or affordable prices. communication. products, while protecting core brand equity.

As “value” can take on different meanings, Create campaigns that highlight the Leverage owned outlets and resale platforms to
brands will need to identify which value- craftsmanship and quality of products, the attract entry-level shoppers who may one day
seeking behaviours drive their customers innovation behind them or competitive prices to buy at full price. Additionally, resale can give
and tailor their strategies accordingly. justify a purchase to shoppers. brands more control over the quality of their
Shopper surveys, social listening and secondhand goods in circulation, with the
analysis of customer relationship Leverage non-traditional channels to meet bonus effect of increasing circularity.
management data can all be effective ways consumers where they are — and where they will
to identify what shoppers care about in be receptive. Organic influencer content, Consider “premiumisation” of select product
terms of value. shopper forums and social media platforms such lines to showcase value through quality of
as TikTok can all be powerful ways to influence materials and durability.
consumers’ brand perception.

The State of Fashion 2025 68

Consumer Shifts 05. Value Shift

Ralph Lauren: Selling

a Dream at Every Pricee
The 57-year-old brand devoted recent years to pitchingng
shoppers on the idea of “Ralph’s World,” a preppy
lo shirt
wonderland that anyone can visit for the price of a polo
ouvet
(or a linen suit, or a $100,000 watch). CEO Patrice Louvet
explains why that’s set up the brand for success even at a
ces.
time when consumers are rebelling against higher prices.
BY BRIAN BASKIN

Plenty of brands talk about world building, but few however customers come into Ralph’s world, they fatigue with spiralling prices and China’s sluggish
are as committed to the concept as Ralph Lauren, feel like they’re getting good value for their economy clouds the outlook for a once-promising
which recently recreated its Polo Bar restaurant at investment. market. As it navigates the turbulence, Ralph
a Hamptons estate to wine and dine guests Lauren is doubling down on its storytelling and
attending its latest fashion show. Consumers appear to be on board: Ralph Lauren’s leaning into the core products that have given the
stores are busy, even as the average price of the brand its longevity.
It was one of the showier bits of “Ralph’s world,” the goods sold in them has risen over 70 percent since
all-encompassing concept that has served as the 2018. So are investors — the company’s stock hit an
linchpin of a strategy to elevate the brand’s image, all-time high in October 2024.
allowing it to expand into high-margin categories
such as outerwear and handbags while still selling But the elevation project now faces its greatest test
plenty of polo shirts. The goal is to make sure that, yet, as shoppers around the world demonstrate

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Consumer Shifts 05. Value Shift

So many brands have been raising

prices and elevating their image.
First, everyone is buying into a piece
of the Ralph Lauren world. Whether
our marketing investment. It’s now
about 7 percent of total company
“This range of
There’s a sense in the market that you want to be a banker on Wall revenue. It was 3.3 percent a few product enables
there’s perhaps a bit of fatigue with Street, whether you want to be a years back [in fiscal 2017]. We’re
that among consumers. I'm curious horseback rider in the Hamptons, using broad storytelling, like the us to connect
with all types of
if that's been your experience. whether you want to be a cowboy in timeless campaign we just did [titled
We’ve been on a multi-year journey Colorado, we create these movie sets. “Ralph’s New York”], and then we
regarding our brand elevation. Brand
elevation means elevate the
The products are the props. The
consumers [are] the actors. That’s
have more targeted marketing
activities that go after different consumers.
storytelling, elevate the product,
elevate the shopping experience. The
true whether you’re a VIC who
spends $1 million with us in one pop
consumer groups.
We'll appeal to
outcome is the ability to price. to refurnish your entire house or
whether you're going to one of our
The second is all the work that we do
on the product and celebrating the
the uber-rich
We often get compared to a lot of the outlets and you're looking for product and making sure it’s superior and we'll appeal
other companies in that we’re [raising a polo shirt. quality, making sure it’s got timeless
like-for-like prices]. I don’t view us as style, making sure it’s something that to people who
will buy a piece
taking pricing. I view us as driving Then we leverage the breadth of the you can wear in five years, or you can
elevation, making sure that the portfolio that we have. What’s pretty wear in 10 years.
consumer value is there. Because for
the pricing to stick, you need the
special is we sell $100,000 watches
and you can have a pack of T-shirts. Then the third area is the shopping of the dream.”
consumer to feel like this is a good This range of product enables us to experience. Often, people focus
investment. connect with all types of consumers. exclusively on stores. For us, the
We’ll appeal to the uber-rich and we’ll elevation applies to every single
I think every consumer cares about appeal to people who will buy a piece touchpoint the consumer has with
value. Whether you’re a billionaire or of the dream, but they may not buy our brand. So, whether that's our
whether you’re scraping by on $12 an the $100,000 watch. website, whether that’s our outlets,
hour, every consumer cares about whether that's the work we do with
value and making sure they're putting I think people intuitively understand our wholesale partners, to make sure
money into something that reflects how the $100,000 watch connects to that they’re getting this unique
what they care about. [Ralph’s] world. Tell me how that experience.
looks for the pack of T-shirts or the
When you talk about the value polo shirt. I think the combination of the three is
proposition, what does that look like As a consumer, I’m connecting with what enables us to appeal to someone
for your top customers and for the three things. I'm connecting with the who just wants a polo shirt or
customers who are more storytelling. That touches everybody someone who wants to refurnish their
aspirational? now. We have dramatically increased entire house.

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Consumer Shifts 05. Value Shift

Let’s talk about the last show, How have stores evolved over apartment. That’s where our VICs can
the one in the Hamptons. How were the course of this elevation project come. They can spend the day
you using that to reach your VICs, compared to say, five or six
and then, also, for that larger years ago?
world building? First, you will now have the ability to
We actually don't do fashion shows. walk into many more stores. That's
Yes, we have models on the runway been an important part of our
[but] we do brand-cultural moments, elevation as we put more emphasis on
and we invite you into a movie. The direct-to-consumer.
movie in [September] was set in the
Hamptons. There’s been a lot of innovation in
terms of the types of stores based on
The shows I like the most are the ones the city that we’re in. We focus on
that showcase the entire portfolio. [our] top-30 cities. Earlier this week,
So you have our luxury business we opened a new store in Shenzhen.
collection, Purple Label, Polo, men’s, It's a really modern take on the Ralph
women's and children's. Then, the Lauren experience, which fits nicely in
way we activate the show is again Shenzhen. I don't know that we could
through every single touchpoint. If do that on Madison Avenue.
you’re a VIC, we'll give you the option
to come and join us at the show. We We haven’t renovated our flagships
might have in our stores a viewing for many, many years. We believe in
of the show. We will leverage it on vintage, but there's a point where
our social media platforms pretty consumer experience shouldn't
Ralph’s New York campaign. Lachlan Bailey/Ralph Lauren.
actively. necessarily be vintage, so we just
renovated our Chicago store. We there with their families. We’re
The idea is to have a surround-sound added the coffee shop. Coffee has just weaving technology in. You will have
marketing programme and to appeal been an incredible success, well seen these endless-aisle screens
to a broad group of both our current beyond our wildest dreams. We’re where you can have access in our
consumers and future consumers. leveraging hospitality. store to now the entire range. We
What we're finding with these cultural want people to be able to tap into our
moments is they appeal very broadly We are putting more emphasis on full lifestyle. We don't just sell denim.
clienteling. In London, we just We don’t just sell handbags. You
and they’re an incredible way to renovated an entire floor in our new want to buy a sofa? We have a sofa.
recruit new consumers, which is the Bond Street store, which now looks You want to buy a polo shirt? We
lifeblood of this company. and feels like a Ralph Lauren have that too.

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Consumer Shifts 05. Value Shift

China’s been a bit of a troubled categories they're familiar with. So evaluating which categories to invest that come into this office in terms of,
market, especially for higher-end many of our items are classics and in next? ‘Could we do this? Could we do that?’
Western brands. Ralph Lauren has what we call ‘core.’ Like 70 percent of Because Ralph Lauren’s such a broad and the answer is, ‘Yes, later.’
been more optimistic. What are you our business is core, which you can lifestyle brand, it's actually
seeing there that others aren’t? get season on season, as opposed to challenging because there are so Any final thoughts you wanted to
China is a big opportunity for us short, fashion, where everything really many things we could actually do. The add here?
mid, and long term, and we’ve got very changes from season to season. We’re filter we look at is how does it fit with I think there’s a lot of negativity right
good momentum there. We have a known for these icons [like the] cable the overall brand equity, the now around the luxury space. Yes,
very focused strategy on the top-six knit sweater, polo shirt, Oxford shirt, categories, and then it’s size of prize, some big [brands] are struggling, but
cities, which I think is a differentiator tweed jacket, leather outerwear, and difficulty of the dive. We're close to a there are companies winning, and if
versus some of the other players. that's really resonating nicely with the $7 billion company, on our way to 10, you look at what’s driving that, it's the
Arguably, we are underdeveloped consumer right now. so we’re looking for big building strength of the brand and the
relative to other luxury brands, blocks. relevancy of the brand. It's the focus
because China is about 8 percent of Is that [70 percent core, 30 percent on core, recognisable, authentic,
our [sales]. It used to be about 3 fashion] a stable ratio? Then, what are the capabilities or timeless products, and then it's a real
percent before Covid, so we're We’ve actually made a significant expertise required to be able to be attention to the shopping experience
growing nicely, but others are 20 change to lean much more into core. credible because our mindset is if and really walking in the consumer’s
percent, 30 percent, 40 percent of Some of our businesses used to be 20 we're going to play in an area, it's not shoes in terms of what they’re looking
their business, which also indicates percent core, 80 percent fashion. to participate; it's to win. We're not for. I'm optimistic about where this
the size of the opportunity for us. We’ve concluded that that's not our interested in being number 55 in a business is and where it can go. It's
game. Our game is iconic products category. We want to be in a going to have ebbs and flows, but I
On the product side, our most that consumers recognise, love [and] leadership position. That's been think the negativism is probably
elevated products are what we’re trust, year on year, generation on Ralph’s philosophy from the get-go. overblown.
selling actually in China. We were generation. We’ve leaned much more
talking value earlier. The consumer's into that, including in the women's If you double-click on that, where you
clearly seeing the value in those more business, which is historically known land is what we’re driving now, which
elevated products, so think beautiful to be much more fashion-driven. is women’s apparel, outerwear,
linen suits, think wonderful cashmere handbags. I think those are pretty
turtlenecks. We're going to continue Rather than look to change everything evergreen given the size of the
to lean into that. every season, there’s so much to build businesses. Right? If you ask me, ‘‘
on. There’s so much of our core that
This is a time where consumers, given consumers trust, that a number of ‘When do you think you’ve fully
the uncertainty and the anxiety — and consumers actually don’t know yet. tapped into the potential of these
there’s a lot of that in China — are three categories? Two years? Three
leaning into brands they know, Category expansion is a big tentpole years?’ I'd tell you it's probably 10
products they trust, product of this strategy. How are you plus. There are so many other things This interview has been edited and condensed.

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06. The Human
Side of Sales

Sales assistant and customer in a clothing store. Pixdeluxe/Getty Images.

Fashion System 06. The Human Side of Sales

06. The Human Side of Sales Differentiating the in-store experience is key
to reigniting demand for in-person shopping. Brands can achieve that by
empowering their store associates to reach their full potential, as sales staff have
a central and valuable role to play in connecting with customers. The benefits
will be sizeable, since customer and employee experience are inextricably linked.

KEY INSIGHTS EXECUTIVE PRIORITIES

• Store associates can be a key differentiator in customer • Enable store personnel with training and tools to
satisfaction across regions, according to the BoF- change the way they interact with customers,
McKinsey State of Fashion 2025 Consumer Survey. reorientating focus towards product expertise and
relationship-building, using new technologies to arm
• 75 percent of shoppers are likely to spend more after staff with analytical insights.
receiving high-quality service from store personnel,
indicating upsell and cross-sell opportunities. • Motivate in-store staff by broadening incentive
structures beyond immediate, in-person sales goals to
• A 2024 study found that more than 20 percent of longer-term omnichannel customer development.
missed sales at a prominent US retailer were related to
issues with store associates, such as suboptimal • Optimise processes via automation or digitisation in
engagement or unavailability of staff. customer interactions where human touch is less
valued, thereby freeing up store associates' time to
focus on key conversion drivers.

• Evolve the store associate role to focus on career

progression and the interpersonal aspects of the job,
such as connecting with customers, which will help
retain employees in today’s competitive hiring
environment.

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Fashion System 06. The Human Side of Sales

It will be imperative to maximise customer

engagement amid slowing in-store sales in 2025

75% >20%
Now that the post-pandemic flurry of customers
returning to stores has begun to cool, in-store sales
growth is forecast to be around 1 to 2 percent on
average across key markets in 2025, compared to
the last few years of high single-digit to double-digit
of shoppers in 2022 were likely of missed in-store sales were related
growth.1
to spend more after receiving to issues with store staff, such as
high-quality service4 poor engagement or unavailability5
This normalisation comes as store foot traffic is
approaching pre-pandemic levels across regions.2
Some markets like continental Europe anticipate
surpassing their pre-pandemic offline market size in
2024.1

However, the role of the store has evolved globally.

It is estimated that almost 70 percent of retail sales
today are digitally influenced, making stores more
of a destination for conversion and building brand
loyalty than initial discovery.2 54 percent of apparel
shoppers say they prefer to buy clothing in brick-
and-mortar locations versus online.3

As store growth decelerates, retailers will need to

further differentiate their store experience from the
competition to convert customers in stores. While
retailers have been focused on delivering digital
innovations in store, in doing so they have
deprioritised some of the basics that shoppers
returned to stores for in the first place, such as the Women trying on clothes in a store. Tdub303/Getty Images.
human side of sales.

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Fashion System 06. The Human Side of Sales

Store associates are crucial in differentiating

the store experience
Drivers of satisfaction and dissatisfaction in shopper store experience, Must-have hygienic factors: Non-human
Ranked by relative importance elements of the shopping journey and store
characteristics tend to be must-haves or hygienic
Sales assistant interactions, St o r e c h ar ac t e r i s t i c s , Non-human elements, such
such as providing advice such as easy navigation as checkout and fitting factors.
and help with items and fewer crowds room experience
These elements drive both high satisfaction when
present and dissatisfaction when not present, but
Differentiator Must-have
Elements that,
Drivers of satisfaction Drivers of satisfaction and dissatisfaction do not tend to differentiate the experience or
when present,
drive shopper increase sales.6
Store has pleasant
delight Sales assistants shopping atmosphere Quick and
provide styling advice
efficient checkout
Differentiating factors: Human interactions such
as interactions with store associates tend to be key
Sales assistants help Stores in a differentiators of the in-store experience.
find items and sizes convenient location
These boost shopper delight and are key drivers of
conversion and loyalty, since these exchanges are
Stores aren’t too crowded
only possible in stores.6

Baseline Hygienic
Human interactions are particularly important to
Low-significance factors Drivers of dissatisfaction aspirational and younger consumers. The former
are up to 2x as likely to seek styling advice from
Items are easy to find
staff compared to value and mid-market shoppers,
and the latter are 1.5x as likely compared to
Fitting rooms and shoppers over the age of 50.6
try-on experience

Elements that,
when present, Well-organised shelves
do not drive Tools that make
shopper shopping easier Note: Satisfaction indicates a high level of satisfaction (9-10 on a 10-
delight point scale). Drivers of satisfaction and dissatisfaction are
determined based on a correlation analysis of shopper net
Elements that, when missing, Elements that, when missing, sentiment towards elements of in-store experience vs level of
do not drive dissatisfaction drive high dissatisfaction satisfaction
Source: BoF-McKinsey State of Fashion 2025 Consumer Survey

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Fashion System 06. The Human Side of Sales

Solving human capital challenges is essential to

retaining associates in today’s labour market

>60% 1.2x $10k

of shoppers cite poorly trained or retail workers are 1.2x more likely to up to $10k average estimated cost of
prepared staff as a cause of leave their jobs than the average US losing a single retail frontline
discontent with store experiences7 employee8 employee8

Shoppers are the least satisfied with human In 2023, 75 percent of global companies across In the past few years, US retail wage growth has
interactions in their store experiences, scoring as industries reported operating without enough outpaced other sectors. Since the pandemic, retail
much as 25 percentage points (%points) below frontline employees.9 hourly wages have increased by over 20 percent vs
other aspects on average, including fitting rooms 11 percent in the private sector.11
and checkout transactions and store atmosphere.6 The labour shortage is particularly pronounced in
retail. As of May 2024, there were 2.5 million more Retail pay growth in the UK continues to outpace
Satisfaction with store staff is lower in the US, UK retail job vacancies than job seekers in the US. other sectors. In August, pay was up 9 percent year
and Germany compared to China, where shoppers More than 44 percent of US retail workers are
on year.12 This was partially driven by the near 10
are around half as satisfied.6 planning to leave their jobs within three to six percent increase in the national living wage in April
months.8
While satisfaction is low across age groups, 2024, which impacted a significant portion of the
shoppers under the age of 30 show higher net This is also evident in the luxury sector, where frontline retail population.13 14
satisfaction of 43 percent compared to 32 percent some flagships in Paris reported operating with staff
Rising workforce costs are making the industry’s
for those aged 50 and above. In contrast, older shortages of 20 percent in 2024. Industry leader
high turnover more costly. Losing a single frontline
shoppers tend to be more delighted by the store LVMH forecasts it will need to recruit 22,000 new
retail employee can cost a retailer $2,000 to
atmosphere.6 workers by the end of 2025, nearly two thirds being
$10,000 on average. Costs tend to be higher for
sales associates.10
managerial positions and more experienced
employees. Multiplied by thousands of employees
across multiple years, those costs can weigh on a
retailer’s bottom line.

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Fashion System 06. The Human Side of Sales

Upskilling staff and investing in tech support tools

will enable better customer interactions
UPSKILLING STORE STAFF OPTIMISING CUSTOMER INTERACTIONS WITH TECH

Upskilling and training store associates is the top priority for executives aiming More than half of fashion executives agree that the use of digital tools to
to improve sales and customer engagement in stores in 2025.15 facilitate omnichannel sales will be a key priority in the year ahead.15

Professional development of store associates has long been a priority for As store associates shift to focus more on customer interactions, it will be
retailers, given the young and inexperienced workforce (more than 30 percent important to arm them with the tools and knowledge to meaningfully engage
of all first jobs in the US are in retail).16 However, the focus on training is with customers. New customer relationship management (CRM) enabled
expected to increase in the year ahead. technologies can help store associates get real-time information about the
customer they are interacting with to make for a better store experience.
As staff turnover continues to rise, retailers will need to increase the speed and
cost-efficiency of training. Formats like AI-powered training and micro- Luxury and non-luxury brands alike have begun using technology to track
learning, where content is broken into small chunks, will play an increasingly engagement and connect with customers after they leave the store, while
important role. others are providing staff with data-backed, personalised customer
recommendations for cross-sell and upsell opportunities in store.
Training has a positive impact on employee satisfaction and retention. One
large retailer that implemented college-level courses and skills certification
found its employees were four times more likely to stay in their jobs.8

Reiss Kering
In 2024, Reiss partnered with AI-powered learning platform Thrive to boost Kering’s clienteling app, Luce, provides store associates with tailored product
employee development by enhancing the onboarding process, celebrating internal recommendations and personalised promotions for customers. The app has
achievements and creating a collaborative learning environment.17 boosted the average order value by between 15 and 20 percent.19

Aritzia Target
Aritzia has a “University” programme that includes onboarding for new hires and In August 2024, Target rolled out a generative AI-enabled tool called Store
ongoing training for existing employees. This year, it reported providing >80,000 Companion at its >2,000 stores. The tool improves store associates' efficiency by
hours of formal training.18 providing live coaching and on-the-job answers to questions about processes.20

The State of Fashion 2025 78

Fashion System 06. The Human Side of Sales

Employee incentives should reward customer

lifetime value and reflect modern shopping habits
Creating staff incentives that prioritise customer
interactions and relationship-building can increase Frasers Group
both sales and employee satisfaction. When Frasers Group hosts a festival for its employees every
year and holds monthly peer-nominated awards for
incentives align with the parts of work employees
“champions” across divisions, where winners receive
deem meaningful, they can feel more fulfilled and public recognition plus double pay for that month.23
appreciated.

For any sort of incentive, the key performance

h"ps://www.ge"yimages.co.uk/detail/ne
indicators of staff success need to reflect new ways Dior ws-photo/employees-assist-a-customer-
of working. Changes might include rewarding staff Dior saw a 10 percent improvement in employee at-a-nordstrom-inc-local-news-
based on onboarding new loyalty members or retention after launching a platform where staff photo/1166075086?adppopup=true
driving omnichannel sales, such as digital sales could earn performance-based points redeemable
ordered in store. for tailored experiences, such as luxury spa days
and wine tastings.25
Revised incentives are required to reward customer
lifetime value over individual transactions and
better reflect modern shopping journeys. Browsing Nordstrom
in store remains an influential channel for learning Nordstrom associates can invite customers to
about products, yet as of 2021 only 31 percent of receive “Style Board” emails where they can curate
businesses measured the contribution of stores to collections of products and still receive
commission on those digital purchases. Even
digital sales, and vice versa.21 22
though it is not mandatory, the majority of
employees use the feature.24

Nordstrom store assistant and customer. David Becker/Getty Images.

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Fashion System 06. The Human Side of Sales

Store staff should be freed up to focus on

customer-satisfaction drivers
DEPLOYING STORE STAFF INTELLIGENTLY STREAMLINING MANUAL TASKS

Retailers are increasingly adopting data-driven approaches to staff Retailers can leverage technology to automate and streamline activities such
deployment, improving both how and where staff allocate their time. as digital task management, ordering and production planning, which can free
up employee time for more customer-centric activities.
Leading retailers are capturing data on transactions and footfall, including
movements within store, to make better scheduling decisions. Although the technology is not new, unlocking the full value of radio-frequency
identifiers (RFID) in store operations should continue to be a priority for
Additionally, they are testing different approaches to understand where human
retailers in the year ahead. Correct implementation of RFID across inventory-
capital is best deployed to drive incremental sales. For example, a US-based
related store processes can lead to a 10 to 15 percent reduction in associated
sportswear brand reworked its staff deployment model after learning that staff
labour hours.29
coverage of the fitting rooms was key to driving both sales and basket size
through cross-selling and upselling.26 Additionally, brands are increasingly testing customer-facing RFID use cases
that make the customer experience more seamless while freeing up store
associate time. Though nascent, RFID self-checkout is set to expand in the
coming year; Radar, a technology company that works with major apparel
retailers such as American Eagle, plans to launch its RFID-powered checkout
function in 2024.30

Aritzia BJ’s Wholesale

Store scheduling decisions are informed on a daily and weekly basis BJ’s Wholesale automates inventory tasks by using Simbe Robotics’ robot, Tally,
by traffic data, shopper-to-associate ratios and sales productivity expectations.27 which Simbe reports can reduce e-commerce fulfilment time and improve worker
safety by automating tasks like manoeuvring large pallets.31

Faherty Uniqlo
Faherty uses gig-style staffing during holidays and high-traffic times to support Uniqlo’s self-checkout, where shoppers drop items into an RFID-enabled basket,
backend activities like steaming and stacking. Using the specialised gig platform is used in 70 to 90 percent of transactions across markets and is credited with
Reflex, the company employs gig staffing for around 10 percent of hours per week.28 cutting transaction times in half.30 32

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Fashion System 06. The Human Side of Sales

To improve employee experience, retailers should

prioritise development and human interactions
In retail, there are six main factors that impact employee retention. US Top reasons why retail employees plan to leave their jobs, 2023
employees plan to leave their jobs primarily due to concerns about career
development, citing limited growth opportunities. Compensation issues rank Change in rank
Reason Likelihood of leaving, %
second, influenced by macroeconomic pressures. Employees passionate about year on year
the industry, however, tend to cite these factors as reasons to stay, hence
investments in career development and compensation can be a “win-win” for Career development 41
retailers looking to reduce the high costs of staff turnover.8
This underscores the importance of defining a company-specific target
employee profile, whether that be career brand enthusiasts, retirees looking for Compensation 38
a store discount or part-timers seeking flexibility.

Improved employee experience can make for more satisfied, tenured

workforces and more satisfied customers, too. Companies with top-quartile Inspiring leaders 35
employee experience are twice as likely to have top-quartile customer
experience.8
Health and wellbeing 34
Employees with high satisfaction tend to have a higher calibre of output as they
typically are more tenured and make fewer errors on the job. Retail workers
also value customer interactions, citing “relational” elements of the job as a key
Meaningful work 29
part of why they deem the work meaningful.8

Workplace flexibility 28

Note: Survey question asked respondents who indicated they are at least “somewhat likely” to leave their current jobs in the next three to six months to choose the top three aspects of employee experience from
a list of 12 that affect their plans to leave their current job
Source: US Great Attraction Survey April 2022 and May 2023

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Fashion System 06. The Human Side of Sales

It will be crucial for retailers to develop an end-to-

end employee value proposition
EXECUTIVE PRIORITIES

Enable staff with training and tools Motivate store associates with Optimise processes to refocus store
to improve customer interactions broader incentive structures personnel on high-value activities

Upskill store personnel by arming them with Extend both hard and soft incentives to drive Automate and digitise select manual
the knowledge and tools needed to improve conversion and longer-term customer value, processes, such as merchandising and returns,
customer satisfaction and engagement. This rewarding associates who drive future digital to rework the role of store personnel in a way
can include training them on relationship purchases in addition to immediate, in-person that drives customer conversion. Identify
management and product expertise, as well ones. Have corporate and in-store management where to deploy sales associates versus
as providing them with tools and real-time champion the goals to illustrate how they are automated or self-service options by analysing
customer analytics to improve product valued by the entire organisation. the key turning points in conversion that will
recommendations. maximise return on investment.

Retain employees with coaching

and one-to-one interactions

Make changes to employee benefits to attract

and retain high-quality store personnel,
tailoring changes to the target employee and
their motivations. In doing so, career
development pathways will be essential in
driving retention and brand buy-in. Leading
retailers can achieve this by offering academy-
style courses that fully immerse their
associates.

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Fashion System 06. The Human Side of Sales

Aritzia: Redefining Shopping

hopping
One Store at a Time
Not so long ago, Aritzia was a little-known
womenswear brand serving elevated workwear
staples from a modest footprint of stores. CEO
Jennifer Wong talks about how the retailer found
itself in hypergrowth — and why excellence starts
from within the company.
BY CATHALEEN CHEN

Well before the explosion of quiet luxury and retail strategy and career development programmes
#Corpcore on TikTok, Aritzia was an obscure for employees that propelled the retailer to be on
Canadian retailer specialising in easy-to-style track to triple sales from fiscal 2021, becoming a
trousers and blazers for those in the know. bona fide powerhouse in the North American retail
landscape.
The company has consistently expanded since
launching in Vancouver 40 years ago, but it wasn’t Walk into any of Aritzia’s 124 locations and fans
until after the pandemic that its growth shifted into will say there’s just something about shopping at
hyperdrive. Of course, a fashion cycle favouring Aritzia that makes it irresistible. Wong is tight-
minimalist wardrobe staples — Ariztia’s bread-and- lipped on the exact formula, but alludes to the
butter — helped fuel that acceleration. But it was importance of customer service, premium real
chief executive Jennifer Wong’s comprehensive estate and managing a tight product strategy.

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Fashion System 06. The Human Side of Sales

What’s the role of retail at Aritzia? shopping for, whatever their style mannequins in a way to show “That's probably
This is our 40th year in business, and preferences are. different ways of wearing a single
we started out as a traditional retailer. item. We can visually display on a one of the
If it could be in our blood, I feel like The first thing to do is to connect and mannequin many different ways to biggest
it’s in our blood. get a read. Once we're able to style a blazer, so it's dressed up a little
determine what the client is looking bit or literally with a baseball cap. differentiators,
Retailing today is a lot different than for, it starts off a relationship where but once you're
it was in 1984 when we opened our the client then sees how beneficial it is What are other colourful
first store, but many things have to work with a style advisor. At the components that go into crafting an in the store, it's
stayed the same. Clients still want same time, if you get the ‘I'm just in-store experience that people the people. We
exceptional experiences. They want browsing’ response, I think that's wouldn’t necessarily think of?
interesting and beautiful products obviously the cue, and thankfully, our The biggest differentiator for us is our have amazing
that they can wear, that they can trust. style advisors are ‘people’ people. locations. We position our stores in people that love
We really believe in a personalised the best locations that we can possibly
The biggest change has been the store relationship and so when you walk secure, whether it’s SoHo, whether what they do.”
format. It went from roughly 1,500 into our stores, it is highly it's Fifth Avenue, whether it's the
square feet to around 10,000 square personalised in that we are inspired triple-A shopping centres we're in,
feet on average today, and we're by the luxury brands. Many of our and it’s not just the shopping centres
looking forward to opening stores in style advisors have literal themselves. It’s the actual location in
the New York area that are even relationships with the client where the those shopping centres.
bigger than that. This creates a whole client comes back time and time
different dynamic, including being again, seeking out the style advisor Our stores are our number one
able to have cafes, and food and because they've established a marketing vehicle, making sure we are
beverage. relationship. where the foot traffic is, and where
the eyeballs are. That's probably one
How is Aritzia able to ensure How does Aritzia approach visual of the biggest differentiators, but once
a high level of customer service merchandising and the power of you’re in the store, it’s the people. We
in its stores? in-store display? have amazing people that love what
We have a world-class training It’s about presenting our product in they do.
programme. We believe in servicing any given season in a way that we
so it's not just about selling. It's about think is appealing to the customer At the end of the day, there's an
making sure that we make a walking in. We have client favourites energy when you walk in, and that
connection with the customer, and interspersed among new items that energy is created by the humans in the
understand what it is they're looking we're introducing for the season, and store. We have a tremendous team.
for, and being able to showcase and I think the combination of the two Fifteen percent of our people have
offer whatever occasion they're inspires the client. We style the been with us for 10 years or longer.

The State of Fashion 2025 84

Fashion System 06. The Human Side of Sales

Aritzia store interior. Aritzia.

Can you talk a little bit about When I’m asked, why have you bar high. Then the third piece is it is also really believe in promoting from
the sales associate recruitment stayed at Aritzia for so long, there are very rewarding to be associated with a within. You can have a career track
and retention process? You three things. The first is, I've never successful brand. It's rewarding to here in many different ways. Creative
famously began your career as had to go anywhere else for a career have a clear perspective personally, product track, operations track, sales
a style advisor, and you ended up opportunity. Being at Aritzia where and when you're performing well, it's track, management track. There's a
where you are today. we're growing and we’re doing new rewarding financially, too. clear track that you can embark on,
Yes, I'm the perfect example of things, there are tonnes of and once you’re in, we like to think
someone who started as a part-time opportunities. The second piece is I One of the things that we do is we that that is the beginning of the
style advisor, thought I'd go into really do truly love the people I work attract amazing talent, people who are pipeline for our talent and our
banking and finance when I graduated with. They are exceptionally smart passionate about fashion, love leadership.
from university, and here I am 37 people that are intellectually working with our clients, strive for
years later as the CEO and very proud stimulating when I come to work. excellence, and share the same values
of my career here. They make me better. They keep the for creativity. At the same time, we

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Fashion System 06. The Human Side of Sales

Would you say that that’s the biggest What do you think has been at the
benefit of cultivating retention and heart of Aritzia’s meteoric growth
employee loyalty? over the past couple of years?
During Covid, we did not lay off or Our product, our product innovation
furlough a single employee due to and our ability to get it right. Then
Covid-19. At times, it was very there’s the store experience: the
stressful [around] how we were going beautiful store design, the music we
to take care of our people and take play, the cafes we have, the customer
care of our business, but we were able service we offer. It’s the premier real
to do both. We continued to pay our estate locations that we have our
people, every single one of them, stores in, and then it is the people we
during the pandemic while our stores have in every single area of the
were closed. What that allowed us to business.
do was, when stores reopened, we had
people already trained, ready to go It’s technology, it’s operations
and hitting the ground running. acumen, it’s our people practices in
Coming out of Covid, retail got busy. terms of recruitment and retention.
There was a pent-up demand. So we It’s all of the support infrastructure,
weren't scrabbling, trying to hire people, process and technology that
people during a tight labour market. we've been able to evolve as we've
grown, but also made sure that we
What are Aritzia’s retail invested in the infrastructure.
expansion ambitions?
Right now, we’re focused on the US. All those things are what
That’s where growth is coming from. differentiates Aritzia, and it’s not any
We open 10 to 12 stores a year, and one of those things, but it's all of these
then I would say four to five things that come together and how
repositions a year. That means we we’ve been able to execute well over
might have an existing store that we the years on all of it. When I say we
can possibly reposition in that same want to be excellent at everything,
location or expand in terms of square that's really what’s in our minds. It’s
footage. We’re opening in new our mindset.
markets. We’re opening more stores
in existing markets. We have 57
stores in the US now and we think
that we can have close to 150 stores. This interview has been edited and condensed. Aritzia campaign. Aritzia.

The State of Fashion 2025 86

07. Marketplaces Disrupted

Woman purchasing clothes on a mobile app. Alistair Berg/Getty Images.

Fashion System 07. Marketplaces Disrupted

07. Marketplaces Disrupted Following a tumultuous period for luxury

e-commerce platforms, online non-luxury marketplaces are facing
challenges of their own. Share prices have dropped as much as 98 percent
since Covid-19 peaks due to existential business model challenges and
disruptions. Non-luxury marketplaces globally must carve out a clear role
in the fashion ecosystem to survive.

KEY INSIGHTS EXECUTIVE PRIORITIES

• Europe’s online fashion marketplaces in the value and • Make assortment a competitive advantage. Curate
mid-market segments destroyed $700 million in offerings to establish the platform as the destination of
economic profit (EP) in 2023. While losses may narrow to choice for customers, while also minimising assortment
$400 million in 2024, most of these players remain value complexity.
destroyers, generating negative EP — a sharp reversal
• Maximise customer lifetime value by delivering a best-
from just four years ago.
in-class user experience, from acquisition to purchase
• Though challenged by Shein and Temu, Amazon is and retention.
defending its lead in the value segment in the US. In the • Improve profitability beyond the core business through
mid-market and premium segments, department stores business-to-business offerings and additional consumer
are maximising their omnichannel advantage and revenue streams such as subscription models.
fashion pure-players are strengthening their value
propositions. • Modernise the tech stack, designing a roadmap for the
optimal customer experience, while facilitating systems
• In China, social commerce and low-cost players have integration with third parties such as new brands.
taken the market by storm: Monthly active app users of
• Drive cost efficiency by using AI for core processes,
Douyin and Pinduoduo increased by 52 and 45 percent
both in the backend and frontend.
between June 2020 and June 2024, respectively.

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Fashion System 07. Marketplaces Disrupted

Online fashion marketplaces are facing existential

business model challenges and disruptions
The economic model of marketplaces is in distress … … while other disruptions add pressure

Customers are more costly Return rates continue to Production complexity is Customers want flexible, Necessary tech upgrades
to acquire and less loyal drag on profitability slowing speed-to-market omnichannel experiences require investment

60% 20-30% 2-10k -8 points 63%

increase in e-commerce of online fashion purchases new products added to drop in percentage points of fashion executives plan
customer acquisition costs are returned, according to Shein’s platform daily7 in online fashion sales to increase digital and
from 2017 to 20221 logistics experts4 growth expected 2024 to technology investments in
2026 vs pre-pandemic10 202514

From July 2023 to June Practices like “bracketing,” The on-demand After the Covid-19 Customer expectations
2024, the cost of reaching where customers buy manufacturing model, used pandemic, consumers demand players to invest
1,000 users on Meta rose by multiple sizes or styles and by Shein, has challenged wanted to touch items and beyond core functions and
24 percent while return on return most, are driving high marketplaces that have less- receive in-person service.10 logistics. In 2023, 81
ad spend dropped 44 return rates and increasing responsive product engines. percent of consumers
percent.2 costs for retailers.5 As a result, retail foot traffic preferred personalised
Shein introduces 2,000 to has increased globally, experiences.15
The number of US apparel Some retailers have 10,000 new items daily, nearly reaching pre-
shoppers that are uncertain introduced return fees, using real-time customer pandemic levels. While Many players still rely on
about which brands to choose which customers may not be demand data to produce online fashion will continue outdated tech stacks. To
when they start shopping willing to pay. In the first 3 batches of 100 to 200 units. to grow faster than offline, tackle high costs and slow
increased by 30 percentage months of 2024, 48 percent This cuts turnaround times its growth is expected to speed-to-market they will
points from 2020 to 2022.3 of US shoppers abandoned to around 10 days compared slow significantly.11 12 13 need comprehensive data
carts due to unexpected to the 21-day norm.7 8 9 and analytics roadmaps.16
fees.6

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Fashion System 07. Marketplaces Disrupted

The “first wave” of online marketplace players

have struggled to sustain share price growth
The “first wave” of pure online marketplaces, or Monthly average share price development, 2018 – Sep. 2024,a Growth of monthly averages,
players that entered the market and captured indexed to Jan. 2018 = 100 %
significant share before 2015, saw stock prices Non-exhaustive Jan. 2018 – Jan. 2021 –
surge due to inflated valuations during the Covid- Sep. 2024a b Sep. 2024a
320
19 pandemic when physical stores were closed.
However, renewed interest in physical stores and
shifts in the competitive landscape have led to 280 +29 -40 Boozt Sweden

sharp declines since 2021, with many trading

below their 2018 levels.17
240
Specialised fashion players have been the most -47 -75 Zalando Germany

exposed to the turmoil in the sector. Others

operating across categories, such as Zalando 200
(which expanded into lifestyle), have been able to
manage the fluctuations of fashion demand better. -55 -65 Alibaba China
160
A few years ago, investors prioritised sales growth
in e-commerce, but with rising capital costs, they United
are now focusing on profitability. Unprofitable
120
-85 -92 Boohoo Kingdom
businesses are no longer viable. The impact on
struggling specialised fashion marketplaces is 80
especially pronounced. Asos and Boohoo are -94 -91 Asos United
Kingdom
among the UK’s most shorted stocks; Boohoo is
facing shareholder pressure to break up the 40 Global
Emerging
business and sell its top brands.18 19 20 -95 -98 Fashion
Group
markets
0
Jan. 2018 Covid-19 Sep. 2024
store
a. Monthly average starting January 2, 2018 and ending September 25, 2024 closures
b. Global Fashion Group indexed to 2 July 2019 when listed
Source: McKinsey Value Intelligence

The State of Fashion 2025 90

 Fashion System 07. Marketplaces Disrupted

In Europe, online fashion marketplaces will need to

evolve their business models
In Europe, “first wave” online fashion marketplaces are losing share to low-cost, Economic profit of European online fashion marketplaces,
high-growth players like Shein and Temu, as well as traditional retailers.9 USD (millions)
Number of players Value creators Value destroyers
According to the McKinsey Global Fashion Index, in 2023 online fashion
marketplaces saw the largest value destruction since 2010, at $700 million.
4 2 5 4 0 1 2
While this loss is expected to narrow, these companies are still struggling to
evolve their business models. Four dynamics are expected to intensify in 2025:
1 5 2 3 7 6 5
• Prioritising profitable orders: Zalando raised its average order value to
€60.40 ($65.60) in the first quarter of 2024, from €57.30 ($62.23) in
2023, through premiumisation and expansion into sportswear. Asos
introduced a refund deduction for customers with a higher return frequency
375
and returns below a certain basket size threshold.22 23 276
143 116 154
• Exploring new value pools: About You and Zalando have expanded their
-1 0 2
business-to-business operations in search of higher margins, creating -90
-154 -187
distinct identities from their business-to-customer propositions to offer
technology, marketing and logistics services to fashion brands.24 25
-422
• Building scale and potentially impacting the marketplace-brand power
balance: In luxury, Mytheresa acquired Yoox-Net-a-Porter in October -717 -691
2024. This trend is likely to accelerate in non-luxury segments. For
instance, Frasers Group has grown its stakes in Asos, Boohoo and N
Brown.26 27 28

• Leveraging generative AI: 45 percent of fashion executives say marketing

use cases for generative AI offer huge potential to drive value in 2025.29
2018 2019 2020 2021 2022 2023 2024E

a. Based on H1 actuals and H2 analyst consensus

Note: Companies include: Asos, About You, Boohoo, N Brown Group, Spartoo, Zalando, Boozt
Source: McKinsey Global Fashion Index

The State of Fashion 2025 91

Fashion System 07. Marketplaces Disrupted

Amazon Fashion leads the US value segment; the

mid and premium segments remain fragmented
The primary online fashion marketplaces in the US include Amazon Fashion, Selected marketplaces’ share of US total online fashion revenue 2023,
Shein, Temu and large multi-brand retailers. Other fashion pure-players are %
smaller in scale and regionally concentrated.
Online pure-play Omnichannel Non-exhaustive
Amazon Fashion leads the online fashion market in the US, driving more than
40 percent of total online fashion revenue in 2023.30 While Shein and Temu
pose a challenge (their monthly active users increased by 21 percent and 297
percent in 2023, respectively), Amazon is defending its lead by launching a low-
cost marketplace for items under $20, offering delivery times of nine to 11
days.31 32 33 Further potential developments could reinforce this value play:

• Lawmakers in the US are reviewing the de minimis threshold, which allows

imports under $800 to be duty free. If removed, prices for around one third >40%
of Shein and Temu products could rise by up to 20 percent.34 Amazon Fashion accounted for
more than 40 percent of online
• Potential limitations with TikTok's reach in the US could impact Shein and fashion retail sales in 2023
Temu. The Temu hashtag had 11 billion views in early 2023 and Shein is the
top fashion brand on TikTok Shop as of mid-2024.35 36 37

In the mid-market and premium segments, department stores are seizing their
omnichannel advantage and launching online third-party marketplaces.38
Fashion pure-players are strengthening their high-end portfolios: Revolve has
acquired luxury label Alexandre Vauthier, for example.39 Amazon has also been
solidifying its position in these segments with initiatives like the launch of
Luxury Stores in 2020 and its investment in Saks Global in 2024.40

Amazon Shein Macy’s Walmart Nord- Target Kohl’s Temu Fashion Revolve
Fashion strom Nova
Source: McKinsey analysis

The State of Fashion 2025 92

Fashion System 07. Marketplaces Disrupted

In China, managing social commerce profitability

and the blend of branded vs value products is key
Social and live commerce are crucial for engagement and conversion in online Growth of monthly active users for major online platforms in fashion in China,
June 2020 – June 2024,a
fashion shopping in China. Traditional shelf-based platforms such as Alibaba's
%
Tmall and Taobao face stiff competition from social platforms.41 42

In the last 12 months, 44 percent of Chinese consumers shopped for fashion on 52

social platforms. More than half say they shop on Douyin for apparel.43 Other
rising platforms include value-focused Pinduoduo and the messaging platform 45
WeChat, on which brands use mini-programmes and DTC brand accounts.44 45
Given the proliferation of players, brands will need to balance distribution by:

• Managing the profitability of social commerce with livestreamers: 81

31
percent of consumers engaged in live commerce in 2023, and the market is
projected to grow from 3 to 8 trillion RMB by 2026, with more traditional
shelf-based players entering the space.46 47 However, as economic growth
slows, promotional activities become more costly. Livestreamers charge
high fees and earn based on gross merchandise value, forcing merchants to
compete on price and absorb discounts. Impulsive buying from livestreams
also leads to high return rates.48

• Balancing allocation of branded and value items: Alibaba, once focused

on branded quality products, is adopting a low-price strategy, but it must
balance Tmall’s branded offerings with Taobao’s value products accessed
via the same website, as branded sellers may be hesitant to list next to Douyin Pinduoduo Taobao
cheaper “dupes.” Meanwhile, Pinduoduo is looking to attract brands, which
Number of
may be wary of the platform’s prior focus on unbranded and “outlet” items, monthly active
780 695 934
as well as its cost-focused audience.49 users, millions,
June 2024

a. Total e-commerce users, not fashion-specific

Source: QuestMobile

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Fashion System 07. Marketplaces Disrupted

Five actions will support the longevity

of first-wave marketplaces
EXECUTIVE PRIORITIES

Make assortment a competitive Maximise customer lifetime value Create new avenues for profitability
advantage

Prioritise customer insights to curate an Leverage owned marketing channels to drive Expand business-to-business services, such as
assortment that is differentiated from traffic, invest in paid advertising to retarget offering consumer data analytics based on
competitors, thereby becoming the existing customers, and personalise product website traffic, marketing placement services
destination of choice. Work together with recommendations and offers to boost average and fulfilment solutions.
brands on exclusive capsule collections, order value and frequency.
colourways or collaborations. Explore additional consumer revenue streams
Increase customer retention by clearly such as subscription models for delivery and
Minimise complexity and unproductive SKUs communicating loyalty benefits, such as early financing offerings.
to drive efficiency in the assortment. Balance access to limited collections. Underpin this with
the rationalisation effort with maintaining top-tier customer service and customer
sufficient breadth for scale. relationship management technology.

Modernise the tech Leverage AI to reduce

stack and talent operating costs

Create a clear data analytics plan that Drive cost efficiencies by deploying AI across
maximises the benefits of new technology, use cases. For example, use AI to create product
turning tech into a business enabler rather descriptions, sizing charts and fit guidance to
than just a cost centre. reduce return rates; optimise the logistics
network; and automate demand planning and
Build integration-ready, flexible IT inventory management.
infrastructure that can support new offerings
beyond the core business. Invest in top tech
talent to deliver the implementation.

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Fashion System 07. Marketplaces Disrupted

Mytheresa: Staying Ahead

ead
in Luxury E-Commercee
CEO Michael Kliger has turned the German e-tailer intonto a
leader in online luxury — and one of the few to remain
eal to
profitable amid a sector-wide slowdown. Ahead of a deal
rter,
acquire one of its biggest competitors, Yoox-Net-a-Porter,
Kliger anticipates a more stable luxury e-commerce market
in 2025.
BY MALIQUE MORRIS

Being a multi-brand luxury retailer online has never e-tailer has generated profitable growth by focusing Net-a-Porter, which carries more brands and has a
been harder. There are the high costs to acquire on driving sales from its top-spending customers. larger customer base. (The deal is slated to close in
new customers, the ever-present problem of excess Having hit on a winning formula, Mytheresa isn’t 2025 pending regulatory approval.)
inventory and brands that prefer to sell on their own done innovating. Even as its old rivals are
sites. A broader luxury slowdown has triggered a diminished, there’s always new e-commerce start- But for the company’s chief executive, Michael
shakeout in the category, with Matches entering ups jockeying to establish themselves. To remain Kliger, remaining resilient in luxury e-commerce
administration and Farfetch being acquired by competitive in the long term, online retailers have goes beyond a play for consolidation. Kliger
Korean e-commerce giant Coupang in a fire sale. to go beyond serving a niche, even an especially anticipates a slow but steady recovery in 2025 and
lucrative one like the top one percent. They also identifies ways to retain a strong position in tough
Rather than attempting to compete on price or have to balance increasing customer loyalty — times, including tapping new markets, selling more
endless selection, survivors must prove they can which helps grow profits — with a customer full-priced products and proving to consumers and
offer shoppers an experience they can’t get acquisition strategy that lets them widen their reach brand partners why multi-brand retail is still
elsewhere. Mytheresa has emerged as a leading without losing money. That’s why Mytheresa is valuable.
example of how to do this successfully. The German acquiring one of its primary competitors, Yoox-

The State of Fashion 2025 95

 Fashion System 07. Marketplaces Disrupted

The luxury slowdown came

swiftly this year and hit luxury
that’s the time when you show that
you’re committed to the market.
E-commerce is often thought of as
a channel for consumers to research
“It is possible to
e-commerce particularly hard, That's the time we do events, that's products and shop for convenience, create a luxurious
contributing to the situations at the time when we introduce a Chinese while stores are where they go to
Matches and Farfetch. When you version of our name [Mei Lin Shi], enjoy a truly complete luxury experience
online, but it’s not
look ahead to the next several when we hire the new local experience. Is it possible to provide
months, what do you expect for the president of [greater China, Dede a true luxurious shopping
luxury e-commerce sector?
Looking forward, I expect continued
Chan Brignoli]. experience being online only, and
how do you go about doing that? a copycat of what
stabilisation for the sector overall. Are there any markets where you see
emerging growth opportunities in
It is possible to create a luxurious
experience online, but it’s not
the store can do.
We had a very tough time, but also
that produced some healthy reactions
luxury e-commerce?
If you want to look for opportunities,
a copycat of what the store can do. What we can do is
in terms of reduction. [The industry] there’s always three elements. One is What we can do is understand what understand what
reduced the amount of stock in you need economic growth. Second, the customer wants from us, and the
the market. a significant part of our business is customer wants inspiration. the customer
wants from us.”
womenswear. You need a country,
I don’t expect a V-shaped recovery, a culture, where women are I have a great quote from a customer.
but I think stabilisation and continued participating in the workforce. She said, ‘I don’t have the luxury to
progress. Nothing has changed for the Any society where people travel more, waste time.’ Once the purchase has
rightful expectation that the share of where more people join the been decided, once the inspiration
digital luxury will continue to workforce, in any of those countries has succeeded, our luxury is it’s
increase, and will definitely pass the we see the uptick of e-commerce, efficient, it’s fast. Our luxury is you
30 percent threshold in the next because then shopping is not so much don’t have to worry, you don’t have
couple of years. an attractive pastime anymore. to drive to town.
Then, the last factor is, of course,
The downturn in China — an regulatory permits. You have to define luxury in the way
important market for luxury — has the customer wants it.
been tough for a number of players. India ticks the box: middle class,
How is Mytheresa navigating the affluence, huge success story … more
situation there? women joining the workforce. Some
My expectation for continued African markets already tick all those
stabilisation is really driven by three boxes. In some African markets
Europe and the US. China will, in my you have excellent technological
expectation, not get worse; it will infrastructure, which sometimes
stabilise, but not improve much. But people overlook.

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Fashion System 07. Marketplaces Disrupted

In-person events for top customers

are one of Mytheresa’s primary
sales drivers. But customer
acquisition is still critical for online
retailers to grow their businesses in
the long term. How should luxury
retailers balance catering to top
clients with enticing new customers
across income brackets?
We have a very clearly defined target
of a wardrobe builder that spends a
lot. To acquire more of those types of
customers, we have really fine-tuned
our digital marketing. The trick here
is really to have powerful algorithms
that give you predicted customer
lifetime [value].

When we do our bigger events, we

always give our clients a chance to
bring a friend.
Mytheresa webpage. Mytheresa.
We are also hosting events with
ambassadors … in their houses, we retailer’s website but rather through different traffic than if you advertise for Then as we enter the relationship, as
partner with them, which often social media and Google searches. an $800 sneaker. These are all the we understand not only what they
involves donation to their charity of When you do get a new customer choices you have to make to bought, but also what they looked at,
choice. Then they invite 50, 60 of who comes to the site through one [determine] what type and quality of then we can get better in providing
their friends, and the social sphere of of those side doors, how do you traffic you drive to your website. relevant content in terms of product
a very good customer is potential for keep them coming back to your recommendations.
new good customers. The crucial site and build their loyalty and Then it all depends how the first
point here is we try to find lifetime value? purchase goes. We know that the Clients which we acquired in 2015,
the customers again and again that fit satisfaction score on the first purchase that cohort, in terms of money, are
our model. We try to generate good, high-quality still growing.
traffic by where we advertise [and] with was a big driver for loyalty, because if
Many online shoppers find products what we advertise. If you advertise for you don’t have a good satisfaction, you
today not by going directly to a a $150 sneaker, and get clicks, you get don’t get a chance for the second time.

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Fashion System 07. Marketplaces Disrupted

You’ve openly said that Mytheresa the task, but also high confidence that luxury retailer, customers expect a The question we, as a retailer, have to
benefits from its competitors’ we can do that. high level of service, from customer answer [for brands] is: why should I
struggles. But there are also smaller interactions to shipping, which share my margins?
luxury e-tailers that are doing well The economy has forced retailers to comes with costs. How do you
and aiming to reach Mytheresa’s ramp up discounting. Even if some manage costs in a way that allows Our hard push is we need to bring
level. How do you plan to stay ahead companies are doing fewer luxury e-commerce to be profitable? additional visibility; we need to bring
of the competition and maintain markdowns, it’s still more frequent If you want to serve that [luxury] additional customers; [and] we need
your dominant position in 2025? than before. How can luxury customer, that's not cheap. They to provide relevance.
I can imagine Yoox-Net-a-Porter e-tailers convince aspirational expect a lot, and you have to give it.
will help with this. shoppers to buy more full-priced If your only answer is, ‘Well, I bring
There are many good e-tailers, merchandise even in a time of Focus on full-price selling. A high you traffic,’ then your value-add is
smaller ones, who do a fantastic job economic uncertainty? share of full-price selling allows you to very thin.
in curation and positioning. We have We need to ensure that there's more spend more. Focus on more valuable
big respect for those, and that also than just price. We cannot take the pieces. A beautifully packaged Brands are more picky nowadays,
keeps us awake. We should be on price away. We cannot say, ‘No, you product costs you the same amount because they have increased their
our toes. have to ignore price;’ it's impossible. whether there's a $50 product in retail effort, they have improved their
there or a $1,000 product in there. DTC. In many aspects, they are
With the Net-a-Porter [and] Mr You need to overcome this by reaching more people than they were
Porter brand, we can stay highly providing excellent service. Yes, you The third most-important item to able to reach 10 years ago.
relevant without diluting profiles. I can get it there at 10 percent, but we make a profit is marketing cost. Make Wholesalers, retailers have to work
don't need to dilute Mytheresa or have the full trust. If something sure, to the best of your tools and harder.
dilute Net-a-Porter. I make them happens, we are [here] for you. Are algorithms, that you spend your
both as strong as possible. you sure the other shop will do that marketing on valuable customers.
for you? Are you sure it’s the right If you spend a big amount of money
This is a very big exercise to integrate product? You need to compensate for but that customer is with you for the
Net-a-Porter, Mr Porter, to have it. next five, six, 10 years, it was such a
Yoox, again, on a dedicated platform good deal.
that really serves their needs. That’s a Our strategy is not: they have minus-
big project. Mytheresa has proven 10, then we have also minus-10. That For years now brands have been
that we are very good at big projects. just doesn’t make sense economically. pulling back on their wholesale
We implemented our own technology. So what additional emotional accounts to boost their direct-to-
This was not done by outside components can we do? consumer channels. What value can
consultants. online multi-brand retailers offer to
Mytheresa is known for being shoppers and brands, and how can
Operational excellence makes a profitable in an industry where it can retailers retain brand partners in the
difference, and I have big respect for be difficult to turn a profit. Also, as a long term? This interview has been edited and condensed.

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08. Sportswear Showdown

Tennis player Ben Shelton wearing On. Shi Tang/Getty Images.

Fashion System 08. Sportswear Showdown

08. Sportswear Showdown Challenger brands are forecast to generate over

half of the sportswear segment’s economic profit in 2024, up from 20 percent
in 2020. This means the battle between challengers and incumbents in the
growing sportswear market will likely intensify. To gain market share, brands
will need to develop innovative products and use the right ambassadors and
channels to activate unique brand stories.

KEY INSIGHTS EXECUTIVE PRIORITIES

• In 2023, sportswear grew faster than the broader • Invest in product innovations, both in core franchises
fashion market in key regions, by 2 to 3 percentage and when expanding into new categories. Product
points (%points) in China, 5 to 6%points in the US and remains king.
2 to 3%points in Europe.
• Double down on product marketing to convey the
• Fast-growing challenger brands are now expected to benefits of the innovations. It has become even more
make up 57 percent of the sportswear segment’s important to deliver sharp messages on specific
economic profit, nearly tripling since 2020. product novelties to customers.
• Build partnerships with ambassadors at both macro and
• Investors continue to be bullish on challenger
micro levels. Secure emerging athletes early, leverage
sportswear brands, expecting their growth trajectory
celebrities for brand storytelling and tap into local
to be steeper than incumbents. Publicly traded
communities for authenticity.
challengers have seen significant share price gains
from January through September 2024. • Develop a clear distribution strategy with direct-to-
consumer channels to drive engagement and
storytelling, while strategically using retail channels to
maximise reach and profitability.

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Fashion System 08. Sportswear Showdown

Challenger brands will generate the majority of

economic profit in sportswear in 2024
In 2024, challenger sportswear players — such as Economic profit (EP) of publicly listed incumbent vs publicly listed challenger
Deckers (owner of Hoka) and Asics — are expected brands,a 2018-2024E, 2018-2024,
% %point change
to create over 50 percent of the segment’s value,
surpassing incumbent sportswear brands known as
the “Big Four” (Nike, Adidas, Puma and Under
Armour) in economic profit for the first time,
according to the McKinsey Global Fashion Index. 19
Challengersb 28
Challengers have succeeded by growing revenue 43
faster than incumbents while also expanding their 50
57 +29
profitability. Challengers are expected to have
grown revenues 18 percent per year between 2020
and 2024E — 14 percentage points (%points) above
incumbents — and improved profitability by
4%points over the period, while incumbents saw
81
profitability decline 2.4%points.1 Incumbentsc 72

Privately owned challengers are also seeing 57

50
exceptional growth globally, including New 43 -29
Balance, Vuori and Alo Yoga.2

2018 2020 2022 2023 2024E

a. Economic profit (EP) is a measure defined as currency-adjusted Net Operating Profit Less Adjusted Taxes (NOPLAT) minus capital charge (WACC, multiplied by invested capital), reflecting the economic value
created from operating activities and investments
b. Challengers, which include Deckers, Amer Sports, Wolverine, Fila, Lululemon, Skechers, Li Ning, On, Columbia Sportswear, Asics and Anta Sports, reached over 25 percent of market share in 2018. Amer Sports
and On included from 2020, based on data being publicly available, having listed in 2024 and 2021 respectively vs rest of data set
c. Incumbents are classified as brands that generated over $5 billion in revenue in 2018, including Nike, Adidas, Puma and Under Armour. These brands, known as the "Big Four,” had reached peak year-on-year
growth before 2018, maintaining a strong presence across multiple categories at the time
Source: McKinsey Global Fashion Index

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Fashion System 08. Sportswear Showdown

Challenger brands have aggressively taken market

share by targeting niches and expanding reach
CHALLENGER BRAND PLAYBOOK

DELIVERING VISIBLE TARGETING SPECIALISED TAPPING INTO CULTURAL FILLING WHOLESALE

INNOVATION CATEGORIES MARKETING WHITESPACE

In recent years, incumbents have While incumbents focused on a Challengers borrowed from In the late 2010s, incumbent
been excessively reliant on broader set of sports categories, incumbents’ marketing playbooks, brands such as Nike and Adidas
incremental improvements to their many challengers tailored offerings focusing on celebrities and culture. began to actively shift distribution
performance technologies. These around smaller ones, targeting new New Balance and Alo Yoga, for towards direct-to-consumer (DTC)
innovations are often less customers and more niche sports. example, tapped high-profile channels, de-emphasising
noticeable and garner less celebrities such as Jack Harlow wholesale.15 16
consumer attention.3 Lululemon built its business to $6 and Kendall Jenner.10 11 While
billion in 2021 by addressing the incumbents struggled with While incumbent brands moved
On the other hand, challenger athleticwear gap for women, which authenticity due to a wide fanbase, away from some wholesale
brands have reimagined running incumbents had failed to conquer.6 challengers conveyed greater partners, challenger brands moved
footwear with visible innovations Women’s sales represented less authenticity with communities. into highly visited retailers, like
that deliver both performance and than 25 percent of Nike’s wholesale Dick’s Sporting Goods and JD
recognisable differentiation. Hoka’s sales in fiscal 2023 and of Under Vuori and Gymshark focused on Sports. Many challengers
oversized midsoles offer unique Armour’s total sales in 2023.7 8 grassroots marketing, building ties capitalised on the shift by pursuing
cushioning and are easily Meanwhile, Arc’teryx and Salomon with Southern California yogis and wholesale-first strategies, driving
identifiable, while On’s CloudTec® have delivered on ambitious growth the English gym scene, respectively, 65 to 70 percent of sales.17 18 19
soles use a distinct, pod-like design plans by focusing on outdoor sport while Hoka engaged running clubs
to provide runners with support.3 4 5 communities with marketing that and partnered with cultural platforms
enticed casual sneaker customers.9 such as Hypebeast and End.12 13 14

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Fashion System 08. Sportswear Showdown

In 2025, sportswear is expected to continue

to grow faster than fashion overall
In 2025, sportswear’s growth is expected to Year-on-year growth of retail sales, by region and segment,
continue to outpace the broader fashion market in %
key regions, by 5 to 6 percentage points (%points)
Sportswear Non-luxury fashion
in China, 3%points in the US and 2 to 3%points in
Europe.20
As much as 90 percent of sportswear companies
are predicting either steady or increased sales in
the year ahead.21 Key growth drivers include the Europe 6-7 5-6
4 4-5 2-4
increasingly blurred boundary between fashion 1-3
and activewear, the prioritisation of health and
wellbeing across age groups, and growing access
to sports content and events:

• Two in three Millennial and Gen-Z customers

wear athleisure multiple times per week.22 5-6 6-7
US 4-5 3-4
2-3
• 56 percent of Gen-Z customers consider
fitness a very high priority, and older
-1
generations are becoming more active
globally.23 21
• The global sports tourism sector is expected 11-12
9 9-10 8-9
to grow by 18 percent by 2030.24 China
3-4 2-4

2023 2024E 2025E

Note: The sportswear market includes sporting goods, athleisure and outdoor
Source: McKinsey State of Fashion forecasts

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Fashion System 08. Sportswear Showdown

The battle to capture share of this market

growth will intensify in 2025
Challengers have continued to see gains in their Share price evolution of select sportswear players, Growth Jan. 4 - Sep. 25 ‘24,
stock performance. From January to the end of Jan. 4, 2024 – Sep. 25, 2024, indexed to Jan. 4, 2024 = 100 %
September 2024, Asics’ share price jumped 168
percent, On’s rose 91 percent and Hoka-parent
Deckers’ was up 38 percent.25 300
+168 Asics

Meanwhile, incumbents have seen a more negative

development — except for Adidas, which regained
momentum with the revival of its hit Samba +91 On
250
sneaker. This reinforces the need for incumbents to
refresh their strategies around product, marketing
and channel. +38 Deckers

200

+28 Adidas

Under
150
+3

Incumbents
Armour

-14 Nike
100

-21 Puma

50
Jan Feb Mar Apr May Jun Jul Aug Sep

Source: McKinsey Value Intelligence

The State of Fashion 2025 104

Fashion System 08. Sportswear Showdown

To win share, brands will diversify their offerings,

balancing reach and cultural credibility
Diversification is a common growth tactic and a core part of the Total US estimated participation vs fanbase of select sports, 2025
incumbent playbook
Number of people who participate in the sporta
However, challenger brands have also diversified in order to grow. In
choosing how to diversify, brands must balance catering to sports that give
The global fanbase for racket sports has
them access to the largest customer bases (high participation rate), with Gym
and
grown to reach one billion, while Google
searches for “tennis” have grown 75 to
those that drive the most cultural credibility (high number of fans following training
80 percent since early 2024.26 27 28
the sport).
Hiking
Performance and athleisure brands are going deeper into each Running
Tennis
and
other’s territories racket
sports
For example, Alo Yoga, known for athleisure, yoga and training gear,
Road
launched its first performance-focused running shoe in 2024, while On is Cycling
expanding into categories such as training and tennis, aiming to double its
share of apparel sales in three to five years.29 30 31 Lululemon plans to double Yoga Basketball
its men’s business by 2026 compared to 2021, focusing on performance Swimming

sports such as golf and tennis.32

Football
(Soccer)
Material and product innovations are crucial for brands to build
credibility in sports categories Golf

Fewer breakthrough innovations have emerged in recent years, with patent

grants dropping 55 percent between the fourth quarter of 2021 and 2023.33 American
Skiing Football
While Nike has faced scrutiny about its innovation stream from retailers, it
is the most active in terms of patents, filing the most patents (182) in the
Baseball
global sports industry in the fourth quarter of 2023.33 34

Size of followership
a. US population over the age of 6 (event attendance, TV viewers, number of fans)
Source: SFIA “Topline participation” report 2024, McKinsey analysis

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Fashion System 08. Sportswear Showdown

Players are expected to create authentic

messaging amplified by ambassadors
LONG-TERM POTENTIAL OF ATHLETE CELEBRITY ENDORSEMENT FOR BRAND CONVERGENCE OF SPORTS
SPONSORSHIP STORYTELLING AND LOCAL CULTURE

Tennis player Coco Gauff. Robert Prange/Getty Images. Zendaya x On. On. Adidas store in China. Pedro Pardo/AFP/Getty Images.

The sports sponsorship market is expected to grow Looking ahead, challengers and incumbents will As sports and culture continue to converge,
from $63 billion in 2021 to $109 billion by 2030.35 likely be more strategic about which celebrities they incumbents and challengers may focus more on
tap for partnerships, prioritising credible connecting with local audiences by incorporating
Some athletes, especially younger stars, are opting
spokespeople over the ones who just have the cultural elements into their marketing.
to partner with smaller brands, as these contracts
largest followings.
could offer more control over their image.36 Despite During the 2024 Paris Olympics, New Balance
lower rates, smaller brands have offered athletes In June 2024, Zendaya signed a multi-year collaborated with local artists such as Franck
creative control or equity stakes, as seen between collaboration with On, which the brand intended to Pellegrino in its Marais store. New Balance also
Holo Footwear and NBA player Isaac Okoro.37 This drive meaningful storytelling around movement brought Joe Freshgoods’ “From Prom to Paris”
shift could encourage brands to offer more flexible and wellbeing.42 project to life through personal art exhibitions.45
deals to retain and attract talent.
During the same month, Puma named K-pop star Adidas is reconnecting with Chinese youth through
Brands are recognising the long-term potential of Rosé, from the group Blackpink, as its long-term its “In China, for China” strategy. This includes
emerging talent, supported by initiatives allowing global ambassador. Rosé’s style aligns with Puma’s localisation through partnerships with the China
college athletes to sign deals.38 New Balance signed aesthetic, making her an ideal fit to redefine Puma’s Literature and Art Foundation to promote sports
Coco Gauff six years ago and now she is one of the classic products and head up the “Rewrite the culture through the “Century Masters” programme,
most marketable female athletes.39 In 2022, Nike Classics” programme.43 44 which aims to reach 10,000 schools annually.
signed WNBA player Caitlin Clark, the No.1 Adidas has also teamed up with Chinese actor Chen
WNBA draft in 2024.40 41 Xiao to promote its initiatives across China.46

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Fashion System 08. Sportswear Showdown

Sportswear brands must strike the right balance

between DTC and wholesale customer touchpoints
On and Hoka are planning to continue their expansion into direct-to-consumer Share of global DTC sales by brand, 2019-2023,
%
(DTC).47 48 Nike and Adidas, meanwhile, are renewing part of their focus on
wholesale after shifting heavily towards DTC and experiencing missed sales
targets and rising inventory levels.49 50 51 52 Nike Adidas On Hoka

50
DTC will be used for customer experience and community building:
Adidas is launching its new premium outlet format, “The Pulse,” in the UK,
designed for convenience and to easily adapt to high-demand products and new
collections.53 54 Hoka opened its first US flagship in New York in June 2024,
which will also serve as an events space.55
Wholesale will be used to increase reach and brand presence: Brands are
40
expected to prioritise high-traffic retailers or culturally relevant partners, such
as Dick’s Sporting Goods and End, and seek ways to integrate into their
ecosystems, for example through offering exclusive deals to loyalty members.56
57 Lululemon, which does 90 percent of sales through its own channels,

partnered with Zalando to expand its distribution in Europe.58

Competition for shelf space is growing: Sportswear retailers are elevating
stores and expanding to attract more traffic, while reducing their reliance on 30
single brands. Sports Direct is planning to open 10 new flagship stores, while
JD Sports acquired Finish Line and Hibbett in North America.59 60 61 Foot
Locker is expanding its product range in response to shifting consumer
preferences towards a broader selection of brands, in line with its 2023 “Lace
Up Plan,” which includes an aspiration to reduce Nike's share of sales from 70
percent in 2023 to around 55 to 60 percent by 2026.62
20
2019 2020 2021 2022 2023

Source: McKinsey analysis, annual reports and press releases

The State of Fashion 2025 107

Fashion System 08. Sportswear Showdown

Brands should prioritise product, marketing

and distribution to gain share
EXECUTIVE PRIORITIES

Invest in innovation in the core Double down on marketing that Build authentic partnerships
product and beyond conveys innovation benefits at all levels

Create breakthrough product innovations Create compelling product marketing content Secure emerging athlete collaborations early,
that are visible and marketable with rapid that clearly conveys the innovation's benefits with attractive and flexible contracts.
athlete-to-consumer pipelines. and newness, cutting through the noise with a
simple, impactful message. Refocus messaging on the brand’s roots with
Diversify into new categories by balancing clear, authentic storytelling by working with
reach and credibility, without losing sight of Execute targeted marketing strategies that make celebrities that align to the brand’s narrative.
core offerings. innovations visible through credible channels
such as run club communities. Tap into communities with local activations and
Reintroduce styles from core franchises by events in key markets to gain credibility and
innovating archival designs and tapping into generate excitement.
consumer trends.

Develop a distribution strategy

with distinct channel roles

Use direct-to-consumer channels to drive

customer engagement and brand storytelling.

Engage in strategic retail partnerships to

maximise reach and profitability. Ensure
consistency across customer touchpoints by
offering connected membership programmes
between the brand and retailer.

The State of Fashion 2025 108

Fashion System 08. Sportswear Showdown

New Balance: Disrupting

srupting
ustry
the Sneaker Industry
As the brand races to $10 billion in sales,s, president
and CEO Joe Preston opens up about what New
Balance is doing that its rivals aren’t, thee company’s
artnerships
unique approach to brand and athlete partnerships
novation battle.
and how it plans to stay ahead in the innovation

BY DANIEL-YAW MILLER

When thinking about challenger brands in the put it firmly in a cluster of fast-growing brands The brand’s aim in the year ahead is to stay on
sneaker market, New Balance might not be the first collectively taking market share from the industry’s course and focus on what’s been working. That
name that comes to mind. The 117-year-old incumbents. In 2023, sales grew 23 percent versus includes managing distribution to ensure it isn’t
company predates upstarts like Swiss running the prior year to reach $6.5 billion. New Balance’s oversaturating the marketplace with any one style,
brand On and Deckers-owned running label Hoka goal is to increase that figure to $10 billion in the maintaining close relationships with wholesale
by more than a century. next few years. partners and retaining the company’s laser-focused
approach to picking the right brand partners — not
But while the brand has historically kept relatively To reach that target, president and chief executive just the most famous ones — be they athletes like
quiet compared to bigger names such as Nike, officer Joe Preston, who joined the brand in 1995 Sydney McLaughlin-Levrone or designers like
Adidas and Puma, even remaining privately owned, and took over the top job in 2018, doesn’t plan to Teddy Santis.
a radical transformation over the past decade has change a thing.

The State of Fashion 2025 109

Fashion System 08. Sportswear Showdown

What has New Balance been US manufacturing. We’re the only centre; the second one is a product “Authenticity is
doing right that its competitors athletic brand that has factories here innovation centre that resides inside
are not doing? in the US: two in Massachusetts, and of our New Balance track, literally a really powerful
For us, it's all about controlling our up in Maine we have [three] factories across the street from our global element of
destiny. That's all grounded in trying up there. We’ve just added a new one headquarters. That is all about
to make sure that we are close to the in New Hampshire. All of our delivering the best product to the best a brand’s DNA …
consumer, understanding how they competitors — most of them are athletes in the world, who we’re That’s a real
want to shop, where they want to shop public — have tried to do this in the working individually with. [We’re]
and when they want to shop, then also past and have given up. We believe, also taking those insights and making differentiator
being finely attuned to the trends that for us, that it provides a great way to sure we’re driving innovation for the that we have
are taking place out there and making drive innovation. We’ve opened up a everyday athlete. Then we also want
sure that we are delivering products new manufacturing R&D centre here to make sure we are being innovative versus some of
and experiences that put us at the in Boston, about a mile from our all across our company. We’re trying the other brands
intersection between sport and headquarters. to make sure that we are staying up to
fashion, between sport and music. date, or ahead, in tech innovation that that are trying
That's where, we believe, is great Are there any other advantages allows us to get closer to that to challenge the
energy. to manufacturing some consumer, allows us to spot trends
products domestically? earlier, [and] most importantly, to two big brands.”
New Balance is far older than many I think it absolutely helps us from a respond to those trends earlier in time
of its competitors. Do you think of quality standpoint. We are making the to be meaningful.
yourselves as a challenger brand? shoes. [We’re] designing the
Yes, we absolutely try to operate with processes that go into making those How do you mine your archive
that mindset. We are not as big as the shoes and that in and of itself drives to bring forward untapped retro
two biggest players within the stronger quality with the product that products or innovative products
industry. [Therefore], we need to we’re making with the contract based on retro designs?
make sure we are operating in a way manufacturers. I fundamentally We feel really fortunate [for] just the
that’s true to who we are but also believe that it’s a real strength of our number of products that we have that
disruptive in a way that upstart company as a result. were so grounded in innovation and
brands, challenger brands, can be. performance at the time, so they’re
How much emphasis do you place really authentic. That allows us to
Do you feel that being a private on innovation? bring them back to life in a manner
company has been helpful in that? We’ve made two significant that remains interesting through
I definitely think in some areas it investments: one on the colour and material, but really trying
helps us. It allows us to take the manufacturing side, with the opening to stay true to what that product was.
longer view. A good example of that is of a new manufacturing innovation Our design teams are constantly

The State of Fashion 2025 110

Fashion System 08. Sportswear Showdown

looking back at our catalogue to see There’s an art and a science to it.
if there’s anything that would There’s a math equation you can
resonate with what’s happening in do, and you also have to have a feel
today’s environment. Some of those for the market. That is a combination
you see brought forward, and others of being able to have strong analytical
are still there because the teams are teams [and] have people on your
waiting for a moment that aligns with teams that understand the
some of the trends taking place marketplace. I think that experience
around the globe. that we have within our marketplace
management, whether it comes
Do you anticipate long-term from merchandising or within
interest in these retro styles? the field, is a really important
I think authenticity is a really element.
powerful element of a brand’s DNA.
As younger consumers come into The sneaker market is more
the category who are trying to competitive today than ever
understand a brand, where they before. How do you see this
came from, what made them be who dynamic playing out?
they are, I think that’s always going The marketplace has been disruptive
to be important. Now it can ebb and for the past 15 years. For the first 10 of
flow on what’s in style from a those, it was primarily around retail
silhouette standpoint, but I think and the shift from consumers
authenticity is a key. That’s a real shopping solely in stores to shopping
differentiator that we have versus more online. Within our sector,
some of the other brands that are because of the price points and
trying to challenge the two big because of the hands-on nature of the
brands. product, it allows for the opening of
stores by brands. I think that
How do you determine the right combination of us being a retailer
amount of product to put into the and a great partner to our wholesalers
market while also wanting to is helping to fuel our rise because
maximise sales and not leave money we’re able to present ourselves in
on the table? the best way.

British rapper and New Balance ambassador Dave. New Balance.

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Fashion System 08. Sportswear Showdown

“That combination
of us being
a retailer and a
great partner to
our wholesalers
is helping to fuel
our rise.”

American rapper and New Balance ambassador Jack Harlow. New Balance.

How do you strike the right balance This year has seen a big convergence approach that we take. Our goal is to
between direct sales and wholesale? between the sports and fashion be a premium sports brand, and we
We believe wholesale is a really industries. What’s New Balance’s want to make sure we align ourselves
important part of reaching the approach now when evaluating with partners that feel the same way.
consumer. We pride ourselves on who to partner with? Then we take an individualised
trying to be a good partner for our The same as we approach any approach to not just the product
wholesale partners. We believe it’s an business relationship that we have: development but the execution and
integral part of our growth and the we’re looking for individuals or how that comes to life. I think that
health of our brand and the health of companies that we believe share the combination has proven to be
the industry. At the same time, we same values as we do. I think the one successful for us.
also know that our focus on DTC thing that separates us from our
allows us to present the brand in the competitors with our relationship
best way, and we believe that with these athletes, or with someone
combination is very powerful. in the fashion world, is the bespoke This interview has been edited and condensed.

The State of Fashion 2025 112

09.Inventory Excellence

Woman working in a warehouse. Luis Alvarez/Getty Images.

Fashion System 09. Inventory Excellence

09. Inventory Excellence Inventory remains a challenge for the industry

with both excess stock and stocks-outs impacting brands. In 2025, margin
pressures and sustainability regulation will place greater emphasis on
end-to-end planning excellence, with brands increasingly adopting tech tools
and adjusting their operating model to support agile supply chains.

KEY INSIGHTS EXECUTIVE PRIORITIES

• The fashion industry produced between an estimated • Break down silos across the value chain, collaborating
2.5 billion and 5 billion items of excess stock in 2023, through fact-based root cause analysis and shifting
worth between $70 billion and $140 billion in sales. the cultural mindset to foster cross-functional
decision making.
• The average share of fashion brands’ assortments on
discount increased 5 percentage points in the first half • Incentivise inventory excellence across teams by
of 2024 compared to the year prior. aligning organisational KPIs and shifting to a dynamic
approach to inventory management.
• The Ecodesign for Sustainable Products Regulation will
require brands in the EU to report on the management • Leverage technology-enabled tools that marry data
of excess stock in 2025 and will make it illegal to between retail functions and are closer to the realities
destroy unsold products in 2026. of demand, involving suppliers where possible.

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Fashion System 09. Inventory Excellence

Getting the fashion “inventory equation” right

has become increasingly challenging
Mean temperature and seasonal demand, Jan. 2019 – Jan. 2024, While inventory challenges are complex for most retail industries, the fashion
%
industry faces distinct issues:

Above average temperatures drag down consumer demand for winterwear, • Rapid trend cycles: The number of micro-trends has boomed, and
making it increasingly difficult for brands to sell-through seasonal stock. trending styles fluctuate in search volume by up to 300 percent in just 12
months, making it hard for brands to predict demand.1 The number of
Mean temperature vs January average in New York videos tagged #fashion on TikTok has increased 2.5x in the past three
Seasonal demand for winter clothing years.2 Ultra-fast-fashion players such as Shein are also shortening speed-
to-market times to as little as 15 days.3
8
7 • Unpredictable seasonality: Climate change is making it harder to predict
weather conditions and correlating demand. Temperature fluctuations
from the average make it difficult for brands to sell through stock. While
global temperatures for 2024 are higher than any other on record, summer
2024 was the coldest in almost a decade in some European regions.4 5

• Lengthy supply chains: The complex routing of fashion goods across

retailers, brands and manufacturers results in long lead times with limited
flexibility. Similarly, the uptick in supply chain disruptions also poses a
challenge for brands. Delays at the Suez Canal, for example, can extend lead
-7 times by 30 percent.6
-8
-9
• Product and channel complexity: Consumers are increasingly
purchasing fashion items across a variety of channels, making it difficult for
brands to provide multiple options for size and colour across a growing
number of touchpoints, especially if not operating a single stock pool. One
-17 example is social commerce, through which a fifth of US customers have
Jan. 2019 Jan. 2020 Jan. 2021 Jan. 2022 Jan. 2023 Jan. 2024 purchased clothing in the last 12 months.7

Source: Planalytics

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Fashion System 09. Inventory Excellence

As a result, fashion brands continue to struggle

with both excess stock and stock-outs

2.5-5B
of excess of garments produced by
20%
average loss in brands’ monthly
fashion brands in 2023 profit due to inaccurate stock buying
across sizes12

Excess stock in the fashion industry was estimated Stock-outs that span beyond a small proportion for
to be worth between $70 billion and $140 billion in brand-building purposes undoubtedly create
sales value in 2023.8 missed revenue opportunities.

In 2024, despite overall industry inventory levels The root causes of stock-outs are more varied than
remaining broadly flat, about one third of brands ever and cut across functions, making them difficult
continued to struggle with inventory positions.8 to identify and address. These range from on-time-
in-full issues due to vendor problems to inaccurate
Luxury inventories rose 2 percentage points
inventory forecasting.
(%points) in the first half of 2024 compared to
2023.8 LVMH and Kering recorded excess Out-of-stock sizes ranks as the top complaint
inventory of almost €5 billion ($5.4 billion) among shoppers. Inaccurate stock purchasing
combined in 2023, with impaired inventory across sizes is estimated to result in profit loss of up
accounting for about 4 to 8 percent of total sales.9 to 20 percent on average.12 For example,
Lululemon attributed slower growth in the US in
Many brands resorted to profit-diluting tactics like
the first quarter of 2024 in part to insufficient
discounting. In the US, the average proportion of
inventory and stocks-outs in smaller women's
discounted fashion items in the first half of 2024
sizes.13
rose 5%points year on year.10 Nike said markdowns
affected around 44 percent of its assortment on
average in 2024, compared to just 19 percent in
2022.11 Shipping parcels. Alistair Berg/Getty Images.

The State of Fashion 2025 116

Fashion System 09. Inventory Excellence

Managing inventory is key for brands to achieve

profitability and address new regulation
A focus on profitability is pushing brands to optimise inventories Inventory turnover vs profit margin, select publicly traded fashion brands,
2011-2023
In 2025, brands will increasingly prioritise profitability amid flat sales volumes
and increased markdowns. Given the strong correlation between inventory EBIT margin, %
turnover and profitability, tightly managing inventory will be one lever they can
Brand 1 Brand 4 Brand 7
pull. Meanwhile, higher warehousing costs created by limited capacity and high 40
interest rates are also pushing brands to shift unsold inventory: warehousing Brand 2 Brand 5
costs increased 10 percent in 2023 compared to the year prior.14 36 Brand 3 Brand 6

Recent sustainability regulations are adding pressure 32

While over-stocking has been the preferred option to maximise sales, there are
further sustainability considerations that may impact this strategy in 2025, 28
including regulation and self-imposed emissions targets.
24
In July 2024, the EU approved the Ecodesign for Sustainable Products
Regulation, which will require fashion companies in the EU to report on unsold 20
textiles starting in 2025 and will make it illegal to destroy unsold products in
early 2026.15 16

Similarly, in August 2024, California became the first US state to approve the 12
Extended Producer Responsibility programme for textiles, requiring apparel
players to submit a plan for collection, repair and recycling of goods by July 8
2030.16
With 60 percent of brands behind on sustainability targets, reducing over- 4
production and cutting waste through cost-effective initiatives may place
0
brands in the best position to achieve targets and maintain the bottom line.7
-4

0 1 2 3 4 5 6 7 8
Inventory turnover
Note: Includes select value, mid-market and affordable luxury brands
Source: S&P CapIQ data, McKinsey analysis

The State of Fashion 2025 117

Fashion System 09. Inventory Excellence

Fashion brands need to adopt proactive tactics to

inventory management using tech-enabled tools
In search of a healthy bottom line and more sustainable business practices, Fashion executives' top strategies for inventory optimisation in 2025,
companies are recognising the importance of a proactive approach to inventory %
optimisation:
Proactive tactics Reactive tactics
• Data-driven planning and forecasting tools: 75 percent of fashion (i.e. data-backed tools, (i.e. activities taken in response
executives plan to prioritise data-driven tooling.18 Brands are turning to predictive analytics) to inventory misallocation)
advanced analytics platform providers such as o9, Nextail and Blue Yonder
to automate processes from demand forecasting to allocation of inventory. Use data-driven planning
75
These use cases have the potential to reduce inventory by 5 to 15 percent and forecasting
and to achieve a 15 to 25 percent improvement on stock-outs.19 Kering
reported a 20 percent improvement in the accuracy of its inventory Increase share of
open-to-buy 35
forecasting with AI demand planning.9

• Dynamic open-to-buy adjustments: Increasing the share of in-season

Increase private
purchases helps brands control inventory levels. Other mechanisms such as 35
sales
“test and react” and “on demand” are also increasingly used by brands,
enabling them to buy low quantities and test market reactions before
reordering to reduce stock risk. In 2023, Asos announced its objective to Increase volumes to
30
outlets
scale “test and react” to 10 percent of its own-brand products.20

• Network optimisation: As supply chains become more complex, brands Recycle excess
26
are looking to maximise efficiency in their network. Advanced analytics and inventory
digital twins can help model scenarios across channels. Hugo Boss plans to
invest more than €150 million ($163 million) in digital intelligence by 2025
Partner with
and reported inventory-to-sales ratios down 3.4 percentage points in the off-price players
21
second quarter of 2024 compared to the same period a year prior.21 22
Increase level of
promotions 21

Source: BoF-McKinsey State of Fashion 2025 Executive Survey, affordable luxury and luxury companies only

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Fashion System 09. Inventory Excellence

Achieving sustained impact will require

end-to-end collaboration across the value chain
Traditionally, merchandising, sourcing, logistics Five levers to enable end-to-end planning collaboration
and supply functions used isolated solutions to
address inventory challenges. This has led to lost
value due to inefficient handovers, opaque Revisit decision rights to empower buyers,
Align clear roles
processes and limited data sharing across teams planners and inventory managers to rationalise
and responsibilities
and channels. inventory

Brands can no longer expect supply or store teams

to resolve out-of-stock inventory. Instead, they
must break down silos, collaborating and
Set up cross- Set up an “inventory strike team” for faster, fact-
connecting decisions on assortment stock level functional based inventory interventions
across the value chain and through omnichannel teams Outline required preparation by function for cross-
optimisation. functional synchronisation of planning
An end-to-end transformation is estimated to yield
10 to 15 percent cost savings in retail, whilst
End-to-end
implementing individual solutions across functions Establish Ensure inventory performance is reviewed regularly
planning
typically yields only 5 to 10 percent.23 a clear in hindsight sessions
collaboration
review Institute a regular cadence of forecast accuracy and
cadence planning process improvement sessions

Align Revamp KPIs and incentive structures to account for

incentive inventory productivity and full price sell-through
structure Align planning targets across functions and channels

Establish a central control tower to act as the single

Connect
source of truth, with full transparency into inventory
systems position by SKU, location and channel

The State of Fashion 2025 119

Fashion System 09. Inventory Excellence

Brands must reflect this change through an

updated operating model and a mindset shift
EXECUTIVE PRIORITIES

Embed processes and a cultural Widen accountability for Leverage technology-enabled tools
mindset that breaks down silos inventory levels

Collaborate across the value chain, instilling Align on organisation-wide goals, establishing Take a customer-centric approach to the use of
a partnership mentality, working from a single inventory KPIs such as carrying cost, turnover, generative AI, machine learning and advanced
source of truth (known as a “platform tracking and sell-through with accountability analytics tools to stay closer to the realities of
approach”) and connecting decision making that is shared across the business and endorsed demand and increase the accuracy of advanced
across functions. This will enable fact-based by leadership. Focus on return on investment planning and scheduling systems.
inventory interventions supported by central rather than simply reducing costs.
leaders with weekly meetings. Prioritise data transparency and marry the data
Endorse a mindset shift from a static (i.e. six- to between retail functions, integrating multiple
Secure endorsement from senior leaders with nine-month lead) to dynamic buying approach systems. Understand and identify existing data
influence across the organisation who can that is always on and involves the whole handovers and potential translation issues
remove barriers to collaboration and set an business. Instil cultural confidence in data tools between systems or teams.
example for the wider business to follow. to inform decision making.
Involve suppliers and be open to sharing
Establish a cadence for fact-based problem insights and data with manufacturers to
solving to jointly resolve service and inventory improve end-to-end visibility on early indicators
issues, for example through nearshoring order of disruption.
allocation.

The State of Fashion 2025 120

10. The Sustainability
Collective

Wind turbines. Justin Paget/Getty Images.

Fashion System 10. The Sustainability Collective

10. The Sustainability Collective Fragmentation and complexity across the

fashion value chain, coupled with consumer reluctance to pay for sustainable
products, are inherent barriers to reaching sustainability goals. But with
decarbonisation efforts falling short of targets and the climate crisis accelerating,
inaction is not an option. The fashion sector must act collectively to drive impact.

KEY INSIGHTS EXECUTIVE PRIORITIES

• 63 percent of brands are behind on their 2030 • Set a “dual mission” to commit to sustainability
decarbonisation goals. initiatives while also addressing profitability through
collective industry action.
• Only 18 percent of fashion executives consider
sustainability a top-three risk for growth in 2025, • Consolidate and support suppliers by reaching “critical
compared to 29 percent for 2024, despite acceleration mass” volumes and strengthening strategic
of regulatory reform across the industry. relationships, aligning incentives to shared
decarbonisation roadmaps.
• Apparel consumption is projected to rise by 63 percent
to 102 million tonnes by 2030. If the industry continues • Partner with leading traceability and impact-
its current trajectory, by 2050 it would use more than measurement providers for granular data that creates
one quarter of the world’s carbon budget. visibility across the value chain and enables clear,
attainable targets to be established.

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Fashion System 10. The Sustainability Collective

Complexity, fragmentation and consumer

sentiment are barriers to sustainability targets
PERCEIVED ECONOMIC AND FRAGMENTATION OF SUPPLIERS DISCONNECT BETWEEN CONSUMER
OPERATIONAL COMPLEXITY AND BRANDS ACTIONS AND VALUES

>$1 trillion >60% >50%

required investment in the of global apparel production of UK consumers who state they
global fashion supply chain to is conducted by small- and avoid fast fashion have also
achieve decarbonisation medium-sized suppliers purchased from a fast-fashion
retailer in the last 12 months
Decarbonisation of fashion’s supply chain could cost The fashion value chain spans thousands of players There is an “action-intention” gap when it comes to
$1 trillion, but it is likely more economically viable with limited integration. This restricts the impact of consumers and sustainable fashion. While 46
than executives think.1 Yet factors mask this reality: investment and makes charting an optimal, cost- percent of UK shoppers say they avoid buying fast
effective path to decarbonisation inherently fashion, more than half made a purchase at a fast-
• 70 percent of fashion emissions occur upstream,
complex: fashion retailer in the past year.5
yet suppliers struggle with the upfront costs of
decarbonisation initiatives due to tight margins • There are over 300,000 fashion brands • Consumers’ willingness to pay a premium for
and high financing costs.2 worldwide, each representing no more than 3 sustainable goods remains unclear. In the US
• Cost-effective levers (e.g. energy efficiency) percent of total industry sales.4 and UK, for example, 61 percent of consumers
typically involve significant collaboration and rank price as a more important consideration
• Meanwhile, approximately 60 percent of global than sustainability in fashion purchases.6
shifts in business operations that can leave
apparel production is conducted by small- and
suppliers exposed to risks such as slower lead
medium-sized suppliers, who may struggle with This places the onus on brands to actively engage
times and adjustments to order volumes.
uncertain volume commitments, and competing and educate consumers to ignite demand for
• Competing business priorities are often sustainability initiative requests from brands. sustainable products. With the exception of a
prioritised over sustainability initiatives that are Similarly, they often lack the credit and handful of brands, the industry has yet to unlock a
comparatively difficult to measure in terms of guarantors to secure funding.3 marketable, at-scale value proposition for
impact and return on investment. sustainable fashion.

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Fashion System 10. The Sustainability Collective

As a result, brands, suppliers and innovators

are struggling to make progress
Brands are deprioritising sustainability and Yearly reduction in scope-three emission intensity across the fashion industry by brand,
scaling back their commitments %
63 percent remain behind on their sustainability
commitments.2 Yet only 18 percent of fashion Required reduction in emission intensity to reach 2030 targeta Fashion brand
executives rank sustainability as a top three risk to
-20
growth in 2025, compared to 29 percent for 2024.7
40% of brands
Many fashion brands are scaling back their -18
commitments, for example by pushing back or High acceleration needed
>10%point difference
dropping their net zero targets.8 -16 between historical and
future required reductions 23% of brands
Suppliers are also deprioritising sustainability
-14 Acceleration needed
Over 40 suppliers have failed to meet commitments 0-10%point difference
to set science-based sustainability targets, largely between historical
-12 and future required
due to feasibility and high costs.9 reductions

Sustainable innovations are struggling to scale -10

Swedish textile recycler Renewcell filed for
bankruptcy in February 2024. It has since been -8
37% of brands
refinanced and renamed Circulose by Altor Equity On track
-4
Partners with a focus on scaling the compelling <0%point difference
between historical
technology with new financing and support.10 11
-2 and future required
Similarly, Bolt Threads paused operations of its reductions
leather-alternative Mylo, backed by Stella
0
McCartney and Adidas in June 2023.12 Both 10 8 6 4 2 0 -2 -4 -6 -8 -10 -12 -20
reported difficulties securing sufficient financing Achieved reduction in emission intensitya
and volumes required for scale. a. Measured in emissions per unit of activity by using revenue data. Future revenues are forecasted based on historic growth rate from 2017-
2022. Companies with historically low growth rates (<3%) are assumed a growth rate of 3%, medium growth firms (<7%) are assumed a
Other sustainable material players, such as growth rate of 5% and companies with historically high growth rates (>7%) are assumed a growth rate of 7%
Note: Sample includes fashion brands and retailers in the CDP database with revenue >$1 billion. 25 companies have 2030 as the target year
TomTex, are now seeking partnerships outside of and the remaining five companies have the target year between 2028 and 2032
fashion to secure larger order volumes.13 Source: Annual reports; sustainability reports; CDP reports; McKinsey Corporate Performance Analytics

The State of Fashion 2025 124

Fashion System 10. The Sustainability Collective

Inaction is not an option. The fashion industry

can focus on cost-effective decarbonisation
Brands must consider swift action Brands can explore cost-effective decarbonisation
By 2030, global apparel consumption is projected to rise by 63 percent to 102 Contrary to common perception, implementing sustainability levers can drive
million tonnes. On this trajectory, by 2050 the apparel industry would cost-efficiencies and up to 50 percent of tier-two emission abatement can be
represent more than one quarter of the world’s carbon budget.14 Similarly, cost neutral.15
regulation such as the EU Strategy for Sustainable and Circular Textiles Brands can achieve dual savings across emissions and costs. For example,
signals a shift away from voluntary action, with potential financial penalties for collaborating with suppliers on low-cost energy efficiency levers can offset
non-compliance. more expensive initiatives such as sustainable material innovation.
Brands must consider their role as value chain orchestrators, acting collectively Additionally, reducing waste and overproduction can be achieved through
to fast-track critical mass and scale while sharing costs and risks among effective inventory management. For more detail, see theme 09 Inventory
players. Excellence.

Marginal abatement cost curve (MACC) for large fashion players

Abatement Sustainability Height

cost, lever: shows the
USD / tCO2 abatement
cost

Width shows
abatement
potential

Supplier collaboration: Material innovation: Supplier collaboration: Material innovation:

energy-efficiency levers textile-to-textile renewable electricity (purchase organic and recycled
Reduce overproduction recycled polyester agreements, energy contracts) cotton
and wastea
Abatement potential,
a. For more detail on reducing overproduction and waste, see Theme 09 Inventory Excellence kt CO2e abated / year
Source: McKinsey analysis, expert interviews, research papers

The State of Fashion 2025 125

Fashion System 10. The Sustainability Collective

Long-term brand-supplier collaboration is an

integral part of reducing industry emissions
Tier-two production, the stage in which fabrics are produced and treated,
accounts for between 45 and 65 percent of fashion’s scope-three emissions.16 H&M Group, Bestseller and CIP
Yet 75 percent of fashion brands fail to involve suppliers in their sustainability H&M Group, Bestseller and Copenhagen Infrastructure Partners (CIP)
initiatives.17 Driving decarbonisation is a long-term, complex process where the announced plans to develop the first offshore wind project in Bangladesh to
power manufacturers in the region with renewable energy. The project is
onus often falls on suppliers to fund and execute initiatives. While examples of
forecast to cut emissions by around 725,000 tonnes annually and support the
collective action are emerging, more brands will need to participate to drive country in its goal of supplying 40 percent of the nation’s power through
meaningful scale: renewable sources by 2041.18

• Consolidate and partner on strategic commitments: Fashion brands

can focus on fewer supplier relationships, consolidating sourcing to reach
critical mass. Doing so helps brands influence and support their suppliers’
Future Supplier Initiative
The Future Supplier Initiative, announced in June 2024, aims to bring down the
sustainability and operational improvements. Brands should focus on their
cost of financing for decarbonisation projects by having brands help
top 60 to 80 percent of supplier volumes, either in core or high-volume
underwrite the debt their suppliers take on. This is facilitated by the Fashion
categories. Pact, in partnership with Apparel Impact Institute, Guidehouse and DBS Bank.
The initiative aims to match projects with the highest potential for impact,
• Embrace long-term commitments to suppliers: To justify the upfront identifying common factory units, interventions and costs, to enable a global
implementation cost and complexity of sustainable practices, brands should and regional joint effort between fashion brands.19
enter long-term strategic commitments with suppliers through volume
offtakes, lead-time extensions and short-term price premiums.
PVH Corp.
• Collectively address industry bottlenecks: Brands can play an active
PVH Corp. teamed up with Standard Chartered Bank and HSBC Bank USA to
role in reducing implementation barriers, such as engaging financial create a new financing programme for suppliers that exceed PVH’s Human
institutions to provide suppliers with interest-free loans or discounting Rights and Environmental Supply Chain standards, offering favourable trade
future orders. Similarly, brands can collaborate with suppliers and policy finance options and discounted financing to incentivise sustainability
makers to identify high-priority levers and educate suppliers on best projects.20 21

practices related to energy efficiency, effective planning and partner

collaboration.

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Fashion System 10. The Sustainability Collective

Brands can create favourable conditions for

sustainable-material innovators to scale
In recent years, several sustainable-material start-ups have emerged,
demonstrating transformative technologies and clear value propositions. But H&M Group and Syre
few have succeeded in reaching scale and significantly reducing fashion’s use of H&M Group and Vargas Holding launched Syre, a new venture to scale textile-
emissions-intensive materials. to-textile polyester recycling in March 2024.22 Syre is backed by private equity
and venture capital firms TPG Rise Climate, Giant Ventures and Norrsken, and
closed a $100 million Series A funding round in May 2024.23
Brands must de-risk the commercial prospects for new business building.
H&M secured an off-take agreement with Syre worth $600 million over a seven-
Those that do so will not only accelerate emission abatement but also secure year period, covering a significant share of H&M’s long-term need for recycled
early-mover advantage through access to sustainable materials at lower prices polyester. The objective of this agreement is to rapidly scale the technology.
than peers: Meanwhile, Syre announced plans to open two large recycling plants in Iberia
and Vietnam as part of a broader plan to have 12 production plants at full speed
• Place fewer, bolder investments: Brands should take a more focused worldwide by 2032.23
approach to backing material innovation, making larger investments that
provide start-ups with the capital to scale operations and meet the
capacities required for an industry transition. Inditex and Ambercycle
As part of its effort to reach 25 percent next-gen materials by 2030, Inditex
• De-risk the commercials: To provide start-ups with the runway needed to
announced a three-year partnership with Ambercycle to help scale its textile-
scale and become cost-competitive, brands can offer funding options to-textile recycled polyester. The partnership, announced in 2023, includes a
directly, through debt financing for example, or indirectly, signalling clear purchase commitment whereby Inditex will purchase 70 percent of
demand through off-take agreements and multi-year arrangements. Ambercycle’s production, supporting the company to scale and construct its
first commercial factory, which is expected to start production in 2025.24 25 26
• Build material-innovation muscle: Brands must develop an in-house
understanding of the technicalities and economics of adopting new
materials. To do so, they must adjust business processes such as absorbing
short-term increases in material costs and managing volumes through
phased introduction.

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Fashion System 10. The Sustainability Collective

Brands can reignite progress if they focus on

working with the broader fashion ecosystem
EXECUTIVE PRIORITIES

Commit to sustainability initiatives Rethink long-term supplier contracts Get granular on data

Adopt a “dual mission” addressing Embed new processes for supplier sourcing, Partner with leading traceability and impact
profitability and sustainability together while creating a collaborative model for working with measurement providers and collaborate more
collaborating with stakeholders to commit to tier-two suppliers. closely with suppliers on data transparency. To
emission abatement initiatives. Brands and set targets, suppliers need detailed data on their
manufacturers can cost-effectively reduce Ensure adherence to decarbonisation plans carbon emissions. Securing this data requires
their emissions through joint investments. through aligned incentives and commercial time, technology and know-how.
contracts. Use marginal abatement cost curves
Shift towards an action-oriented, collective (see page 125) to identify and prioritise Map the entire value chain — including tier-three
model, sharing best practices on supplier sustainable initiatives in conjunction with suppliers, the first stage in the value chain that
decarbonisation and financing solutions that suppliers. deals with raw material processing — to improve
can meaningfully scale initiatives and reduce data visibility and quality. This work is critical for
financial risk. Consolidate suppliers to achieve critical mass setting more attainable sustainability targets,
without becoming overly reliant on any single prioritising and sequencing decarbonisation
Commit to commercialisation — the stage supplier. Brands should independently select initiatives and measuring their impact.
between development and widespread tier-one suppliers and work with suppliers to set
availability. This helps solutions avoid getting stricter sustainability criteria for tier-two
stuck sub-scale, while also capturing first- contracting with tier-one suppliers.
mover advantage and maximising potential.

The State of Fashion 2025 128

McKinsey Global
Fashion Index

High-street shoppers. Getty Images.

 McKinsey Global Fashion Index

McKinsey Global Fashion Index The industry’s economic profit continues to

achieve record heights. However, market dynamics are changing. Whereas luxury
players once led in value creation, non-luxury players are catching up. These
shifts have made the gap between top- and bottom-performers the smallest it has
been since 2011.

KEY INSIGHTS

• Economic profit (EP) grew 16 percent from 2022 to 2023 • Luxury margins are expected to drop 2 percentage points
and is expected to reach record-high levels in 2024. That (%points) in 2024, while premium/bridge and mid-market
said, the 5 percent growth expected in 2024 is lower segments are forecast to generate record-high margins.
than the growth seen in 2023.
• In the non-luxury segment, sportswear and mall brands
• While the luxury segment drove value creation in recent show exceptional profitability and revenue growth, while
years, in 2024 EP for the segment is expected to fall for pure online marketplaces are narrowing their EP losses.
the first time since 2016 (excluding Covid-19) due to • Between 2022 and 2024, the top 20 percent of players are
lower demand creating margin pressure. expected to lose 13%points in value, while the bottom 20
percent gain 13%points, closing the gap between players.
• Following the shift in segment dynamics in 2023, in 2024
non-luxury is expected to generate more EP than any • Luxury leads the Super Winners list, based on
other segment since 2010 (excluding Covid-19) driven by performance in the last full year. New entrants include
efficient operations and customers trading down, with a Deckers, Mexican department store operator El Puerto de
30-index point increase from 2023. Liverpool and Moncler. Further reshuffling is expected by
the end of 2024.

The State of Fashion 2025 130

 McKinsey Global Fashion Index

The industry is expected to post record economic

profit in 2024
The McKinsey Global Fashion Index (MGFI) uses Total economic profit (EP) development,
data from 400 public companies to track the fashion Index (2010=100)
industry’s most important segments, product
Year-on-year economic profit change,
categories and markets. It measures financial
%
growth and value creation through economic profit
(EP), calculated as the difference between a 2 7 -5 -12 -14 -21 36 23 -13 -186 387 -6 16 5
company's adjusted operating profit (minus taxes)
and its cost of capital. EP also reflects value created
over time, allowing the index to gauge how much a 2 .8x
company invests to generate its results. 249
238
219
In recent years, companies have shifted their focus 205
from topline growth to profitability, leading to
significant margin improvements. As EP is highly
sensitive to margin gains, which are twice as
important as capital turns in shaping the EP 102 110 104

E sti m ate
100 102
91 83 89
trajectory, these margin improvements have 78
61
resulted in disproportionate value creation.

In 2023, a 0.5 percentage point (%point) margin

improvement and 4 percent revenue growth led to a
16 percent EP increase for the industry. The trend is
expected to continue in 2024, with EP estimated to
grow 5 percent, driven by a 0.2%point margin boost -76
and 3 percent revenue growth. Additionally, given 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E
the improved capital intensity compared to 2019, EP
is expected to stabilise at 2.8x pre-Covid levels.

a. Based on H1 actuals (for 65 percent of companies) and H2 analyst consensus

Source: McKinsey Global Fashion Index

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 McKinsey Global Fashion Index

However, record-high EP is not enough to allay

investor uncertainty which drives lower valuations
Profitability improvements that have driven record- Total economic profit (EP) development,
high EP in the fashion industry have met investor Index (2010=100)
expectations. However, the share of the valuation
driven by future profit expectations has fallen, 100 108 116 122 126 128 128 134 145 143 72 177 186 203 212
shedding light on investor uncertainty about the
industry’s future value creation opportunities. 46 EVa/EBITAb EBITAc index (2010=100)

To regain investor confidence, companies will need

to create compelling strategies and brand narratives
aligned with achieving sustainable growth. 249
238
19 219
205
Luxury has already started to show signs of this.
After peaking in 2020, luxury enterprise value is 18
trading slightly higher in 2024 than 2022 (with an
enterprise value to EBITA ratio of 19.2 vs 18.0 in 17
102 110 104

E sti m ate
100 102
2022),d due to current slower growth and 91 83 89
16 78
anticipated future value. Non-luxury valuations 61
continue to decline, reaching the lowest multiples 15
since 2012 (15.9 in 2024 vs 16.8 in 2022).
14

-76
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E
a. Enterprise value (EV). 2024 value is for calendar year, the rest fiscal years of companies
b. EV/EBITA is a financial ratio that compares a company's enterprise value (EV) to its earnings before interest, taxes and amortisation (EBITA), used to evaluate a company's valuation and profitability
c. Earnings before interest, taxes and amortisation
d. Based on H1 actuals (for 65 percent of companies) and H2 analyst consensus
Note: Luxury includes luxury and affordable luxury, non-luxury includes premium/bridge, mid-market and value/discount segment
Source: McKinsey Global Fashion Index

The State of Fashion 2025 132

 McKinsey Global Fashion Index

The non-luxury segment is expected to buoy EP,

marking a shift in industry dynamics
Between 2021 and 2022, luxury alone contributed Change in industry EP by value segment contribution, 2021-2024E,
to the fashion industry’s growth in economic profit. Index (2010 industry EP=100)
The segment achieved this growth in part due to
price increases. Other segments dragged industry
EP down. 11

In 2023, this dynamic began to change. Non-luxury Luxury/ 30

drove the lion’s share of value creation, while luxury affordable luxury 24 21
only accounted for 11 points out of the total 33-
point increase in the industry’s EP index.

This shift is expected to continue in 2024. Luxury is -19

expected to create less value than the previous year Non-luxury
-38
for the first time since 2016 (excluding Covid-19).
Meanwhile, non-luxury is expected to contribute
more value — an expected 30-index point increase
in economic profit — than any segment since 2010
(excluding Covid-19). Change in total
-14 +33 +11
industry EP

2021-2022 2022-2023 2023-2024Ea

a. Based on H1 actuals (for 65 percent of companies) and H2 analyst consensus

Note: Luxury includes luxury and affordable luxury, non-luxury includes premium/bridge, mid-market and value/discount segments
Source: McKinsey Global Fashion Index

The State of Fashion 2025 133

 McKinsey Global Fashion Index

Consumer downtrading is driving non-luxury,

while pricing and demand is challenging luxury
After years of raising prices, luxury players can no Total economic profit (EP) by value segment,
Index (2010 industry EP=100)
longer pull this lever without negatively impacting
demand. Some players have opted for more
Luxury Affordable luxury (excluded from the charts) Premium/bridge
promotions, which has compressed their margins. remained relatively stable from 2022 to 2024
Overall, the segment also saw one of its key growth with growth of 2 EP index points

engines, mainland China, sputter, as consumer +3 5 % -19%

confidence in the region has dropped.
103 +9 %
93 84 -24%
Fashion customers consistently adopt cost- 69
54 48
conscious shopping behaviours, with 64 percent of 41 44
US shoppers trading down in the third quarter of
2024. Over 70 percent of customers plan to
purchase from outlets or off-price retailers in the 2021 2022 2023 2024Ea 2021 2022 2023 2024Ea
next 12 months, even if their discretionary budget
increased, according to the BoF-McKinsey State of Mid-market Excluding Inditex, the mid-market Value/discount
Fashion 2025 Consumer Survey. declined by 56% from 2021 to 2022
but is expected to increase by 127%
from 2022 to 2024
As non-luxury companies continue to focus on cost
cutting and operational gains, profitability is +3 8 %
expected to improve, particularly in the mid-market. -31%
77 +1 4 %
61 - 18%
56
42
30 29 33
24

2021 2022 2023 2024Ea 2021 2022 2023 2024Ea

a. Based on H1 actuals (for 65 percent of companies) and H2 analyst consensus

Note: Examples of companies in each segment: luxury: LVMH, Hermès, Richemont; affordable luxury: Tapestry, Ralph Lauren, Hugo Boss; premium/bridge: Nike, Abercrombie & Fitch, Lululemon; mid-market:
Inditex, Fast Retailing, Dick’s Sporting Goods; value/discount: TJX and Ross Stores
Chart totals do not add up to total industry EP as the affordable luxury segment is excluded from the charts but included in the total industry EP
Source: McKinsey Global Fashion Index

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 McKinsey Global Fashion Index

Cost cuts and operational gains have raised non-

luxury margins, while luxury margins declined
Luxury segment EBITA margins are expected to EBITA margin by value segment,
fall by 2 percentage points between 2023 and 2024. %
However, margins are expected to remain higher than
2024Ea 2019-2022 average 2010-2018 average
other segments. Margin
2023 2010-2024 margin range
evolution
A focus on profitability has led non-luxury players
to reduce costs and streamline inventories. This has Luxury
allowed the premium/bridge and mid-market 23.3%
segments to reach record-high margins in 2023,
with more growth expected in 2024.
Affordable luxury
11.5%
• Inditex reduced its inventory by 7 percent in
January 2024 compared to 2023, driven by
robust operating performance and Premium/bridge
normalisation of supply chain conditions.1 11.0%

• Levi Strauss & Co. identified $100 million in Excluding Inditex, the mid-market’s EBITA
margin was 7.8% in 2023 and is expected to
cost savings for 2024 from its productivity Mid-market
reach a record high of 9.0% in 2024 vs the
10.4% long-term average
initiative “Project Fuel,” focused on optimising
the operating model and business processes.2
Value/discount
• Zalando grew its margins to 6.5 percent in the 11.3%
second quarter of 2024, in line with its adjusted
EBIT margin goal of 6 to 8 percent by 2028, up 0 2 4 6 8 10 12 14 16 18 20 22 24 26
from 3.5 percent in 2023.3 4

The affordable luxury and value/discount segments

are expected to see margin growth, but margins will
a. Based on H1 actuals (for 65 percent of companies) and H2 analyst consensus
remain below their historical peaks. Source: McKinsey Global Fashion Index

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 McKinsey Global Fashion Index

23 percent of luxury players expect to generate

more EP in 2024, driven by revenue gains
In 2024, the luxury segment started to navigate Luxury companies split by estimated EP development,
challenges and uncertainties as the post-pandemic 2023 vs 2024Ea b
spending surge slowed.
Companies’ total share
Companies responsible for 77 percent of the of luxury economic
profit, 2023
segment’s economic profit are projected to
experience negative EP growth from 2023 to 2024,
due to plateauing revenues and reduced EBITA
margins for some of the groups’ brands.

The companies responsible for the other 23 percent

of segment profit will see positive EP growth,
77% 23%
Companies with Companies with
though this growth is only 7 percent year on year, negative EP development positive EP development
not nearly enough to offset the segment’s EP losses. from 2023 to 2024E from 2023 to 2024E
This smaller group is growing EP by increasing
revenues, but margins remain flat. Because EP is
more sensitive to margin improvements than
revenue growth, this means overall EP growth will
be modest.
EP development -26% 7%
Percentage point
change in EBITA margin
-2 0

Revenue growth
1% 8%
a. Based on H1 actuals (for 65 percent of companies) and H2 analyst consensus
b. McKinsey Global Fashion Index analyses group performance, not brand performance
Source: McKinsey Global Fashion Index

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 McKinsey Global Fashion Index

In non-luxury, value creation will be more evenly

distributed across the segment
In 2024, the premium/bridge, mid-market and value/discount segments are EP change, 2023 vs 2024E,b top 20 premium/bridge,
expected to dial up value creation by focusing on profitability. As consumers mid-market and value/discount companies,
USD (millions)
continue to trade down, these players’ revenues are expected to increase as
well.
Mall brands Sportswear Pure online marketplaces
Segment “Super Winners” such as Inditex, Fast Retailing and TJX have seen
continuous EP growth for the last five years and are expected to continue 900 The top five companies
driving a large share of EP. However, other players in the segment are also in these segments are expected to
account for 56% of the segment's
expected to improve their performance, contributing to more evenly value, down from 68% in 2023,
800
distributed value creation across the segment: indicating a more even distribution of
value creation among players
• Mall Brands such as Abercrombie & Fitch, American Eagle and Gap are 700
starting to see the outcome of their transformation efforts, which are
expected to positively impact their EP trajectory in 2024.
600

• Sportswear challengers such as Hoka (owned by Deckers) and Salomon

(owned by Amer Sports) are outperforming incumbents such as Nike and 500
Adidas in EP and are expected to account for more than half of the
sportswear segment’s EP for the first time in 2024. 400

• Pure online marketplaces have faced market disruptions and experienced

their largest value loss since 2010, with $700 million destroyed in 2023. 300
However, a focus on profitability has started to show early improvements in
EP growth, with the destroyed value expected to decrease to $400 million 200
in 2024.a
100

a. Includes European players only

b. Based on H1 actuals (for 65 percent of companies) and H2 analyst consensus 0
Source: McKinsey Global Fashion Index Brand

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 McKinsey Global Fashion Index

Mall brand turnarounds are expected to be one of

the EP growth drivers in the non-luxury segment
After facing Covid-19 store closures and Economic profit development and trajectory for select brands, 2012-2023,
competition, surviving mall brands have undergone USD (millions)
brand transformations in a bid to generate robust
profitability. Their performance in the last year has 800
sparked investor confidence. From January 2023 to Gap
September 2024, these brands ranked among the
top 50 brands by average total shareholder return
out of approximately 400 publicly listed companies 400
in the fashion value segment.
American
• Gap is revamping its image under new Eagle
Outfitters
leadership by offering trendier, higher-quality
and better-fitting products. Old Navy’s success Abercrombie
& Fitch
is also contributing to the company’s positive
trajectory.5

• American Eagle Outfitters is regaining -400

momentum with streamlined operations, a
focus on Millennial customers and vertical
integration of the supply chain. Three-year
targets are $5.7-6 billion in revenue (up from -800
$5.3 billion in fiscal 2023), at a 10 percent
Intensified
margin (up from 7 percent).6 7 8 competition Brand
Covid-19
from first fast- store transformation
• Abercrombie & Fitch is targeting a broader fashion players closures period
-1,200
audience from Gen-Z to Millennials with 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Trajectory
improved quality and inclusive marketing. The
company achieved annual net sales growth of 21
percent in the second quarter of 2024 and met
Note: Trajectory based on company statements and Q1/Q2 2024 results
its operating profit goal of 15.5 percent.9 10 Source: McKinsey Global Fashion Index, company statements and Q1/Q2 2024 results

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 McKinsey Global Fashion Index

The gap between top- and bottom-performing

brands is the smallest it has been since 2011
Bottom performers are destroying less value than Fashion companies’ contribution to industry economic profit by ranked quintile,
previous years — in some cases, they are even %
becoming value creators. At the same time, top
Top 20% 21-80% Bottom 20% 2022-2024E,a
performers, especially in luxury, are experiencing
%point
EP declines. change

• The contribution to EP by the top 20 percent of

companies is expected to decrease by 13
percentage points(%points) from 2022 to 145
2024. Luxury accounts for most of this drop. 119
118 126 119 113 -13
• The contribution to EP by the bottom 20
percent of companies is expected to increase by 6 7 5 4 5
13%points, largely driven by the success of the
-39
-25 -31 -23 -17 +13
premium/bridge and mid-market segments. -51

-181

2010-2019 2020 2021 2022 2023 2024Ea

average

a. Based on H1 actuals (for 65 percent of companies) and H2 analyst consensus

Source: McKinsey Global Fashion Index

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 McKinsey Global Fashion Index

However, top-performing companies are still

expected to create most of the industry’s value
Economic profit (EP) power curve, 2024E,a EP contribution,
USD (millions) %

Value destroyers Value creators Top

17 Top 1 company

(N=167) excluding top 20 20

(N=162)

75 Top 10 companies

Top 20 companies
89 (Super Winners)

108 Top 50 companies

Average EP -51 84 1,944

a. Based on H1 actuals (for 65 percent of companies) and H2 analyst consensus

Source: McKinsey Global Fashion Index

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 McKinsey Global Fashion Index

Luxury tops the Super Winners list, while

sportswear and department stores shift places
The latest full-year 2023 list of Super Winners Top 20 players by economic profit, 2023,
shows that luxury players drove most of the USD (millions)
economic profit (EP) in 2023. LVMH drove just as
much EP as the next two players combined. A New entrants Luxury and affordable luxury players Change in rank
reshuffling among sportswear brands and vs 2022

department stores brought new entrants to the list LVMH 9,182 Unchanged
while ousting others. +1
Inditex 4,932
Nike 4,253 -1
• In the luxury segment, Moncler entered the list
for the first time. LVMH hit record EP levels in Hermès 4,017 Unchanged

2023 and represented 22 percent of the TJX 3,334 +1

industry’s total value. Richemont 2,695 -1

Fast Retailing 1,493 +1

• In sportswear, Deckers, parent of challenger
Kering 1,463 -1
brand Hoka, made its debut, while Nike and
Ross 1,401 Unchanged
Lululemon dropped by one place each. JD Sports
fell out of the top 20 for the first time since 2019. Anta Sports 1,345 +1
Lululemon 1,343 -1
• US department store Dillard’s dropped four Dick’s Sporting Goods 738 Unchanged
spots and Macy’s fell off the list. Meanwhile, Deckers 651 +9
Mexican department store El Puerto de Pandora 621 +1
Liverpool entered the list, becoming the first- Tapestry 578 +1
ever Latin American company to be featured.
Next 578 -2

In 2024, further reshuffling is expected as premium Dillard’s 573 -4

and mid-market brands gain traction, sportswear Crocs 567 -1

challengers keep growing and dominant luxury El Puerto de Liverpool 518 +10
players continue to struggle. Moncler 447 +7

Source: McKinsey Global Fashion Index

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 McKinsey Global Fashion Index

L Catterton: Finding Value

in a Tough Market
Nikhil Thukral, managing partner at the
LVMH-affiliated private equity fund, talks
about the ingredients of winning companies,
the dynamics challenging fashion’s
incumbents and how economic shifts
are shaping investor strategies.
BY MARC BAIN

How consumers spend their money is a topic Nikhil any economic ups and downs and swings in the These qualities are set to play a major role in
Thukral and L Catterton watch closely. market. separating leading companies from laggards in
2025, perhaps especially in luxury, where a
The large, consumer-focused private equity fund, What the firm is looking for is long-term value. slowdown is weighing on the sector. At the same
which has close ties to LVMH and where Thukral Among the fashion names in L Catterton’s time, competition outside of luxury is only growing
serves as managing partner, regularly tracks nearly expansive stable, which ranges from hospitality to fiercer as categories such as sportswear see a rise in
100,000 shoppers online as well as data such as consumer-packaged goods, are Birkenstock, which challenger brands putting pressure on incumbents.
brand awareness and loyalty metrics to determine went public in 2023, and fast-growing labels such With central banks once again cutting interest
how well its portfolio companies and their as Ganni. To Thukral, value doesn’t just mean rates, investors will have opportunities — if they
competitors are resonating with shoppers. The brands with top-line growth but also a clear know where to look.
information helps L Catterton understand whether identity and pricing power that can drive
customers will keep returning to a brand, despite margins and profitability.

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 McKinsey Global Fashion Index

Over the past few years, we’ve seen you fit into their world and what [you don’t think goes away. “For millennia,
changes in what investors prioritise
in companies. Profitability has
are] offering them.
In sportswear we’ve seen the rise of people have
become more important, for Second, the ability to be able to define challenger brands successfully thought about
example. What will brands need to and be true to your DNA. There are chipping away at the dominance of
prove to investors in 2025 to win great brands in fashion who are incumbents. Is that unique to their place in
their backing? building a beautiful product, but that sportswear, or is that something you society based on
I will tell you our perspective: First product isn’t necessarily tied into the see happening in other categories?
and foremost, it’s not that you need to DNA of the brand, so consumers have You see it happening in other what high-badge
be profitable, it's that you need to a difficult time identifying how this fits categories as well. In my opinion, it’s products do in
have a very strong profit formula in in with what you are about. lent itself well to sportswear because
the business. We look at that in terms there’s so much usage and the terms of
of gross margin. You need to be able Luxury had been fashion’s big value category was rising, so it's not atypical conferring that.
creator, but it slipped this year. Do
to understand ‘why does the business
command that gross margin and can it you believe that’s purely due to
that, when you have that happen and
you’ve got a few concentrated players, The basic need
continue to do that?’ In other words, macroeconomic factors, or is the you’ll have new propositions arise, we don’t think
does the brand have pricing power, consumer’s view of luxury changing? because the juice is worth the
and if so, why and how. Depending on which cohort, there squeeze. There’s a market goes away.”
may be an indexing of spend that goes opportunity. In other categories
The opposite is the watchout. How more towards experiences rather than where you haven't seen that happen,
much of the brand proposition is sold product. In other it’s more because, rightly, people are
on discount? Through what outlets cases, the dynamic is different. asking, ‘Is the effort worth it? Is there
are you selling it? As an investor, it's China is going through its first enough tailwind in those
not just looking at profitability and period of [its growth rate] and subcategories?’ If we were to look
EBITDA. It’s looking at the demand decreasing. As that’s across other spaces, luxury and
resonance of this brand. happening, the Chinese consumer is non-luxury, certainly at beauty
doing exactly what every other and personal care, you’ll see
What characterises winning fashion consumer does — they think about similar trends.
companies? their balance sheet, and they are
‘Fashion’ is a loaded term, because it deferring whatever they can. Do you have a sense of what’s
can imply a degree of following At the end of the day, luxury has a allowing challenger brands to
trends, and trends can be very difficult fundamental place in existence. For compete against the incumbents?
to call. What wins in fashion in millennia, people have thought about Today, cohorts of consumers are
particular is a clear understanding of their place in society based on what consuming media from such
your consumer, who you’re targeting high-badge products do in terms of fractionalised sources that you’ve got
and why you’re targeting them, where conferring that. The basic need we these tribes that emerge, and we live

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 McKinsey Global Fashion Index

in a world where technology has everything with the same brush.

enabled brands to find and activate Separating what's truly unique and
these tribes in a cost-efficient fashion, differentiated from what is otherwise
in digital in particular. So you can a rising tide and category, that's
build a brand cost-effectively, there’s where the science comes in. We
a virality to the brand because you’ve would look at this rate environment
got endorsements from existing and say, generally, that's going to be
customers and you can expand the good for investment. The watchout is
brand to a level amongst these tribes you've got to be able to separate the
in ways you couldn’t before. What On wheat from the chaff.
has done against Nike in that space is
a good example. It still has relatively Do you think we’ll ever go back to
low awareness but very strong the days of valuations like we saw
traction amongst a particular with, say, Allbirds again, or are
consumer [demographic]. those days over?
I think the nature of what drove
With banks now cutting interest valuations is different. You were
rates, how do you expect that will talking about a cohort, many of
change investor strategies? them going public with growth but
Any time there are rate movements, not a business model or inherent
it has the propensity to create profit formula that was enduring.
a mispricing of risk. Sometimes a rise Those days are gone. I think what
in rates can create opportunity, it’s going to turn to is, ‘Okay, what’s
because businesses that otherwise are the nature of the business? What
sound businesses end up becoming kind of profitability do you have?
under-priced relative to their long- And can we believe that profitability
term potential. The converse is also is going to be sustainable?’ That’s,
true. As rates come down, the biggest I think, where we see value
risk we see is a tendency to paint move towards.

On advert. On.

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 McKinsey Global Fashion Index

Given the current market which price band, are you talking that were monolithic around trying to “All cohorts of
environment and the backlog of
overdue exits, how do you see exit
about, because they behave quite
differently. We tend to focus on the
scale in digital and single-channel,
increasingly we're seeing the need for
consumers, both
strategies playing out in the year top 30 to 40 percent of US distribution, omnichannel growth and older and
ahead? households. That’s where the development. Wholesalers are great
It’s dynamic. On the positive side, disposable income is created. You partners and distributors. They help
younger, are
there is a much more rational set of contrast that with Asia, where you've build awareness. They valorise your increasingly
expectations between buyers and
sellers now than three, four years ago.
got a rising middle class powering the
consumer economy.
brand for you. We’re coming back
again to that world. There are parts of valuing
If you're a seller, you've been through luxury that haven't needed to do that, experiences over
some existential risk, including the We will also continue to think very because they already control the
pandemic, and maybe the world that carefully around ‘who is the distribution. But we think for younger traditional asset
you had and the valuations you had consumer, where does this brand fit brands, as they grow and scale, accumulation.”
will never come back. You’re more in, what's the emotional connection particularly in luxury, you're going to
inclined to say, ‘We should de-risk, the brand has?’ We're looking for need to get comfortable having a
when we can, at something things that are more than just broader channel strategy.
reasonable.’ That allows you to be functional in terms of why consumers
able to transact between buyer and buy. Everything has got to be
seller. supported by some sort of secular
growth driver. We're not trying to
We also see more strategic activity. time the economic cycle.
For the right brands, there will always
be interest. In time, you will see Are there any trends or shifts you
financial sponsors come back into this think are under-appreciated by
category as well. There needs to be the market?
more category health, more All cohorts of consumers, both older
predictable demand and you need to and younger, are increasingly valuing
have more market participants here. experiences over traditional asset
But it will come back. accumulation. This is particularly true
for the luxury consumer. We think
When you look to 2025, what are about luxury travel, we've seen a lot of
the big themes in consumer secular growth in those categories.
behaviour shaping the firm's
investment strategy? Two, I think as you're building brands
You have to know which segment, today, the days of business models This interview has been edited and condensed.

The State of Fashion 2025 145

GLOSSARY
Action-intention gap Brand marketing Customer acquisition cost (CAC) EBITA Extended Producer Gross domestic profit (GDP)
Disparity between an individual’s Marketing focused on top-of-funnel A measure of how much an An income statement item that is Responsibility (EPR) As a measure of economic health,
expressed intentions and their conversion, based on long-term organisation spends to acquire new arrived at by deducting amortisation An environmental policy approach it is the total monetary or market
actual behaviour or actions. strategies that involve continuously customers. from earnings before interest that holds producers responsible for value of all the finished goods and
promoting a brand’s story, identity and taxes, which is an alternative end-of-life consequences of their services produced within a country’s
Analytics roadmap and reputation through, for example, Decarbonisation measure of income a company goods. borders in a specific time period.
A plan that outlines the in-person events or ad campaigns. The reduction or elimination makes from its core operations.
implementation process for how an of carbon dioxide emissions Foreign direct investment (FDI) Gross merchandise value (GMV)
organisation will effectively manage, Carbon budget from a process, such as textile EBITA margin When a company from one Also known as gross merchandise
analyse, and use data to achieve its The total allowable amount of manufacturing, through low-carbon A measurement of a company’s country invests directly in business volume, this metric is the total value
business goals. carbon dioxide emissions that can be power sources. EBITA as a percentage of its total operations or assets in another of sales generated or facilitated
released into the atmosphere over a revenue. country, typically by establishing by a company, including through
APAC specific period while ensuring that De minimis tax ownership of foreign companies, customer-to-customer or peer-to-
Asia-Pacific, a geographical region global temperature rise stays within A law set by national tax officials that EBIT margin factories or properties. peer platforms. GMV is calculated
that includes countries in East Asia, a designated limit. sets a minimum value of imported A measurement of a company’s before accrued expenses (such as
Southeast Asia and Oceania. goods before certain custom duties EBIT as a percentage of its total Gaisho costs associated with advertising
Capability building and tax rates are applied. revenue. Hyper-personalised luxury shopping and marketing, delivery costs,
Artificial intelligence (AI) (manufacturing) services in Japan. discounts and returns) are deducted.
Computer systems performing tasks The process of enhancing Direct-to-consumer (DTC) Ecodesign for Sustainable
by mimicking the problem-solving manufacturing techniques, Selling products directly to the Products Regulation Generation-Z (Gen-Z) Hallucinations (AI)
and decision-making capabilities automation, production methods end consumer instead of through A legislative framework introduced The demographic cohort born Instances where an AI model
of humans, often used to process and quality control. It involves third-party retailers, wholesalers by the European Union aimed circa 1996–2012, following the generates responses that are
large amounts of data for predictive developing the capacity to meet and so on. at promoting the design and Millennial generation. incorrect or not based on real data.
purposes. production demands, enhance production of sustainable products
product quality and reduce costs. Discretionary goods by setting minimum environmental Generative AI Import concentration
Average order value (AOV) Goods that consumers deem are not performance standards throughout A type of artificial intelligence Measurement of the breadth of
The average amount spent each Consumer sentiment essential, such as travel, dining out the product lifecycle. that describes machine learning import supplier relationships based
time a customer places an order on a A measurement of how optimistic or entertainment, as well as fashion algorithms capable of generating on the average import Herfindahl-
website or mobile app. consumers feel about their finances, and beauty items, including apparel, Economic profit (EP) text, images or other forms of media. Hirschman Index across ~15 sectors.
the economy and purchasing. footwear and accessories. A measure defined as currency- Generative AI can be viewed as a sub- A decrease indicates diversification
BoF-McKinsey State of Fashion adjusted Net Operating Profit Less branch within deep learning, which is of sourcing.
2025 Consumer Survey Cost-competitiveness Diversification of sourcing Adjusted Taxes (NOPLAT) minus a sub-field in artificial intelligence.
A proprietary annual joint survey The ability to produce goods at a The practice of procuring goods, capital charge (Weighted Average Inventory turnover
from The Business of Fashion and lower cost than competitors while services, materials, or components Cost of Capital, or WACC, multiplied Geopolitical distance Financial metric calculated by
McKinsey polling consumers from maintaining acceptable quality and from a wide range of suppliers by invested capital). Economic Measurement of geopolitical dividing COGS by the average
the US, UK, France and China to profitability. rather than relying on a single or Profit reflects the economic value alignment between two trading inventory during that period,
understand consumer sentiment, limited group of sources. created by a company’s operating economies, based on UN General indicating the efficiency of
purchase behaviour and brand Cost of goods sold (COGS) activities and investments. Assembly voting records as a proxy inventory management and sales
attitudes. For the 2025 survey, 1,959 An income statement item reporting Dual mission for their position on global issues. performance.
respondents took part between the total costs of creating a product The ambition of both reducing total EV/EBITA A decrease indicates reduced trade
August and October 2024. or service that has been sold. product emissions and improving A financial ratio that compares a flows between economies that are Key opinion leader (KOL)
business profitability. company’s enterprise value (EV) to less politically aligned. Influential professionals in their
BoF-McKinsey State of Fashion Covid-19 its earnings before interest, taxes respective fields who have the
2025 Executive Survey Coronavirus disease 2019 is an Dupe and amortisation (EBITA), used to Gig-style staffing ability to sway public opinion about
A proprietary annual joint survey infectious disease caused by A product that closely resembles evaluate a company’s valuation and A flexible work arrangement where matters, products or services.
from The Business of Fashion and severe acute respiratory syndrome or imitates another, usually more profitability. businesses hire workers for short-
McKinsey polling international coronavirus 2 and was classified as expensive or well-known item. term, project-based tasks instead of K-pop
fashion executives and experts a pandemic by the World Health EU Strategy for Sustainable employing them full time. Short for popular music in South
about their business sentiment, Organisation on March 11, 2020. EBIT and Circular Textiles Korea.
investment plans and industry An income statement item that The overarching textiles vision of Greenhouse gas emissions
trends. For the 2025 survey, 345 Critical mass (manufacturing) stands for earnings before interest the European Union to achieve Greenhouse gases vented to the Last-mile delivery
respondents took part between The minimum level of production and tax expenses. full product circularity by 2030, earth’s atmosphere as a result of The final step in the e-commerce
August and October 2024. volume or capability necessary for a which includes over several specific human activity; includes carbon logistics process, where goods are
manufacturing operation to become directives targeting different points dioxide and equivalents that can transported from a distribution
economically viable and efficient. of the value chain. cause climate change. centre to the end-consumer.

The State of Fashion 2025 146

Large language model (LLM) Multi-modal capabilities (AI) Open-source AI Quality Control Orders Super Winners Traceability
Machine learning models that can The ability of AI systems to process Artificial intelligence systems Government-mandated regulations The top 20 fashion players by The ability to identify and monitor
comprehend and generate human and integrate information from whose source code is made publicly that establish standards and economic profit (based on economic the history, distribution, location
language text. LLMs are trained different types of data, such as text, available, allowing anyone to requirements for the production, profit for 2023) according to The and application of materials, parts
on large amounts of data and learn images, audio and video, enabling inspect, modify and distribute the import and sale of a specific goods to State of Fashion. and finished goods to understand
from pattern recognition across a responses to inputs from various software. ensure they meet quality and safety the sustainability practices relating
variety of tasks. formats and enhancing overall standards. Sustainability to a product.
understanding and interaction with Open-to-buy Within a business context,
Luxury shame users or tasks. An inventory planning strategy that Radio-frequency identification sustainability refers to businesses Trade-down behaviours
Cultural phenomenon wherein brands and retailers use to calculate (RFID) making decisions in terms of Changing shopping patterns, such as
individuals are wary of flaunting Multi-polar structure the budget available for purchasing A wireless system of tags that uses environmental, social, human the type or quantity of purchases, in
their luxury purchases for fear of Refers to a global system where new inventory. radio waves to identify and track and corporate governance impact pursuit of better value and prices.
social backlash. multiple economies participate in an object, e.g. when tracking items for the long term and relates to
global trade flows. Personal savings rate along a supply chain. how a company’s products and Ultra-high-net-worth individual
Marginal abatement cost curve The percentage of someone’s services contribute to sustainable (UHNWI)
(MACC) Natural language processing income that is saved. Reshoring development. An individual with investable assets
A tool to help compare the cost and (NLP) The practice of returning the in excess of $30 million.
environmental impact of various A sub-field of artificial intelligence Price segment (company) production and manufacturing of Tech stack
sustainability initiatives. The height used to analyse and understand The company segmentation based goods to the company’s original Collection of technologies and Use case
of each initiative indicates the human language, and perform tasks on a Sales Price Index, which country. tools used to develop and deploy a A targeted application to a specific
abatement cost (e.g. USD / tCO2). such as sentiment analysis, entity provides a range of prices for a software application or system (a business challenge that produces
recognition and language translation. standard basket of products within Scope-three emissions website, for example). one or more measurable outcomes.
McKinsey Global Fashion Index Large language models support NLP each segment and company’s home Indirect emissions that occur in For example, in marketing,
(MGFI) capabilities, powering use cases like market. The companies in the the value chain, both upstream and The Americas Act generative AI could be used to
A proprietary and copyrighted document management, chatbots and McKinsey Global Fashion Index and downstream, that are not produced Bipartisan bill in the United States generate creative content such as
McKinsey tool that provides a virtual assistants. the BoF-McKinsey State of Fashion by the company or brand itself. Congress aimed at enhancing co- personalised emails.
global and holistic benchmark for Survey are categorised in six operation and development across
the entire fashion industry. The Nearshoring segments, which are based on a price Shelf-based e-commerce the Americas by promoting trade, UK national living wage
MGFI was first created for The State The practice of a business moving index across a wide basket of goods E-commerce where products are investment and sustainable growth The minimum hourly pay that
of Fashion 2017 to track industry its activities or manufacturing to a and geographies. The segments presented on “digital shelves” in the region. workers 21 years of age and above
performance through three key geographic location that is closer to comprise (from lowest to highest on a website or app with detailed are entitled to.
variables: sales, operating profit the end consumer market. price segment): value/discount, information, high-resolution images Tier-one, -two and -three cities
and economic profit. The MGFI mid-market, premium/bridge, and customer reviews. Customers in India United States-Mexico-Canada
comprises an extensive list of Net sentiment affordable luxury and luxury. browse products, add them to their As defined by the Reserve Bank of Agreement (USMCA)
public companies spanning market Survey metric calculated as the cart and check out. Compare social India (RBI), tier-one cities have Trade agreement between the
segments, product categories and percent of respondents with positive Price segment (consumers) commerce where customers buy a population of 100,000 or more, United States, Mexico and Canada
geographies. The analysis of public sentiment minus the percent Consumer segmentation as per the based on social interactions and tier-two cities from 50,000 to 99,999 aimed at enhancing trade and
companies is built with data from of respondents with negative BoF-McKinsey State of Fashion influencers. and tier-three cities from 20,000 economic co-operation.
McKinsey Corporate Performance sentiment. 2025 Consumer Survey, based on to 49,999.
Analytics Tool (McKinsey CPAT). spend on clothing in the last 12 Silver generation Value creator
Off-price channel months defining four segments: The demographic cohort aged 50 Tier-two suppliers A company that creates value
Millennials A trading format based on discount value (<$500), Moderate ($500- years and over, which includes Baby The stage in which fabrics are generates positive economic profit
The demographic cohort born pricing. Off-price retailers or 999), Premium ($1,000 - $2,449) and Boomers and Generation X. produced and the source of — that is, its operating profit exceeds
circa 1982 to 1995, also referred retailers operating off-price Aspirational (>$2,500). resources and materials for tier-one its dollar cost of capital (profit
to as Generation-Y (based on channels are typically independent Social commerce suppliers. For example, a fabric mill above 0).
Generation-X, the preceding of manufacturers and buy large Premiumisation When customers purchase goods or that produces cotton fabric for a
generation). volumes of branded goods directly The strategy of enhancing a services within a social media app. It factory that assembles T-shirts for Value destroyer
from them. The model relies on the product’s quality, features or leverages social interactions, user- a brand. A company that destroys value
Mini programme purchase of overproduced, or excess, branding to position it as a higher- generated content and influencers generates negative economic profit
Small apps that run within the branded goods at a lower price. end or luxury offering. to drive sales, making the shopping Total landed cost — that is, its dollar cost of capital
WeChat app, allowing users to experience more engaging and The complete cost of a product exceeds its operating profit (profit
access a variety of functions without On-demand manufacturing Production-Linked-Incentives personalised. including the purchase price, below 0).
installing or downloading anything. A production system where products Government programmes designed shipping fees, custom duties,
are made to order, in the quantities to boost domestic manufacturing Speed-to-market taxes, insurance and any other
required, and when they are needed. by offering financial incentives The ability of a brand or retailer to associated costs incurred during the
This is in contrast to traditional to companies based on their quickly design, produce and deliver transportation and delivery process.
manufacturing, where large production output. new clothing collections or trends
quantities of products are produced to consumers, minimising the time
in advance and stored in warehouses. from concept to product availability.

The State of Fashion 2025 147

END NOTES
INDUSTRY OUTLOOK Global Blue, June 7, 2024 9. M.Ayhan Kose, Alen Mulabdic, 15, 2024 China, July 2024 analysis, September 2024
1. BoF-McKinsey State of Fashion “Global trade has nearly flatlined.
2025 Executive Survey 15. “Quarterly Report – Q1/2024”, Populism is taking a toll on growth”, 22. Sarah Kent, “A New US Trade 5. Xia Yining, Han Wei, “China’s 18. “Chinese Shoppers Flock to
European Travel Commission, World Bank Blog, February 22, 2024 Bill Aims to Incentivise Fashion debt-to-GDP ratio climbs to record APAC, Driven by Tax Free Spending
2. BoF-McKinsey State of Fashion April 2024 Nearshoring”, The Business of 287.8% in 2023”, Nikkei Asia, and Favorable Conditions”, Global
2024 Executive Survey 10. Sampled mentions of “tariffs” Fashion, March 06, 2024 January 30, 2024 Blue, May 2024
16. “The Wealth Report 2024”, and “trade policies” across Top 10
3. BoF-McKinsey State of Fashion Knight Frank, March 2024 Global Apparel Companies from 23. Brooke Roberts-Islam, 6. McKinsey analysis, September 19. BoF-McKinsey State of Fashion
2023 Executive Survey 2020-2024, McKinsey Analysis “Inside Turkey’s Powerful fashion 2024 2025 Executive Survey
17. “The Wealth Report 2021”, Factories”, The Business of Fashion,
4. Eshe Nelson, “Central Banks Knight Frank, March 2021 11. “EU Customs Reform: A July 23, 2024 7. McKinsey 2022 China Consumer 20. Tiffany Ap, “Why Thai
Around the World Are Easing Their data-driven vision for a simpler, Research survey, 2011 China Celebrities Are Fashion’s New
Aggressive Stance“, The New York 18. Daniel Zipser, “China Brief: smarter and safer Customs Union”, 24. Danny Parisi, “Mexico gains Consumer Research Survey Power Players”, The Business of
Times, September 18, 2024 Consumers Are Spending Again European commission, May 17, 2023 traction as manufacturing Fashion, November 14, 2023
(Outside of China)”, McKinsey & alternative for US brands producing 8. Pan Ning, “Uniqlo Greater China:
5. McKinsey Fashion Growth Company, April 8, 2024 12. “Southeast Asia pushes back on oversees”, Glossy, March 01, 2022 Promote Transformation to Local 21. “India to become USD 4 trillion
Forecasts 2025 cheap Chinese imports”, Nikkei Store Management, and Move Into a economy in FY25: Sanjeev Sanyal”,
19. Cathaleen Chen, “When Will Asia, July 31, 2024 25. USFIA Fashion Industry New Growth Phase”, Fast Retailing, The Economic Times, May 16, 2024
6. “World Economic Outlook Shoppers Push Back on High Benchmarking Study 2024, United July 11, 2024
Update: Policy Pivot, Rising Prices?”, The Business of Fashion, 13. Erica York, “Tariff Tracker: Staes Fashion Industry Association, 22. “Global growth broadly
Threats,” International Monetary July 12, 2024 Tracking the Economic Impact July, 2024 9. Crystal Tai, “Canadian craze: The unchanged amid persistent services
Fund, October 2024 of the Trump-Biden Tariffs”, Tax surging popularity of Arc’teryx, inflation”, International Monetary
Foundation , June 26, 2024 26. “How Columbia Sportswear is Lululemon in China”, Jing Daily, Fund, July 2024
7. Valentina Romei, Sam Fleming, Loosening its Ties to Asia”, The New January 22, 2024
“Anxious Europeans hoard savings TRADE RECONFIGURED 14. Jonatan Janmark, Karl-Hendrik York Times, October 25, 2023 23. Charmaine Jacob, “India’s
as US consumers boost global 1. Josh Wingrove, Jennifer Dlouhy, Magnus, Ignacio Marcos, Evan 10. “Amer Sports Reports First consumer market set to become
economy”, Financial Times, October Eric Martin, “Biden to Hike Tariffs Wiener, “Sustainable Style: How 27. “Sae-A Trading Announces Quarter 2024 Financial Results, the world’s third largest by 2027,
7, 2024 on China”, Bloomberg, May 12, 2024 fashion can afford and accelerate Definitive Agreement to Acquire Company Updates Full Year behind the U.S. and China”, CNBC,
decarbonisation”, McKinsey, March Tegra”, PR Newswire, April 08, 2024 Guidance”, Amer Sports, May 21, September 6, 2023
8. McKinsey Consumer Sentiment 2. “EU trade in goods with China: 28, 2024 2024
Q3 2023 Less deficit in 2023”, Eurostat, 28. Laura Husband, “Apparel 24. McKinsey Fashion Market and
March 04, 2024 15. McKinsey Analysis, Mckinsey manufacturer Sae-A Group expands 11. Casey Hall, “In China, a search Growth Forecasts 2025
9. National Statistics Agencies; Global Institute Cost Rica presence”, Just Style, for identity boosts Lululemon,
Eurostat; University of Michigan; 3. Jeongmin Seong, Olivia White, August 22, 2024 premium sportswear brands”, 25. “How the middle class will play
McKinsey analysis, September 2024 Michael Birshan, Lola Woetzel, 16. Sarah Kent, “Fashion’s Reuters, June 11, 2024 the hero in India’s rise as world
Camillo Lamanna, Jeffrey Condon, Renewable Power Play ”, The 29. “Shein Pushes into Europe to power”, The Economic Times, July
10. Isabel Schnabel, “The euro and Tiago Devesa, “Geopolitics and Business of Fashion, December Boost Supply Chain Beyond China”, 12. “Hermès Half-Year Financial 9, 2023
area inflation outlook: a scenario the Geometry of Global Trade”, 05, 2023 Bloomberg, June 22, 2023 Report”, Hermès, June 2024
analysis”, European Central Bank, McKinsey Global Institute, January 26. Praachi Raniwala, “What
August 30, 2024 17, 2024 17. “Product Quality is a Key 30. Chloe Mills, “Asos and Boohoo 13. “Prada Group Reports Solid High-Street Brands Get Wrong —
Challenge for Diversifying Supply turn to nearshoring as Red Sea H1-24 with Retail Sales Up 18% YoY and Right— in India”, The Business
11. Jeanna Smialek, “The Fed Makes 4. McKinsey Global Institute, World Chains”, Qima, Mar 5, 2024 Crisis Intensifies”, Retail Week, and EBIT Margin of 22.6%”, Prada of Fashion, June 11, 2024
a Large Rate Cut and Forecasts Trade Service - IHS Markit February 05, 2024 Group, July 30, 2024
More to Come”, The New York 18. “Indian industry opinions 27. “The Wealth Report”, Knight
Times, September 18, 2024 5. “Labour Cost Index (LCI) of divided over quality control order 14. Jing Zhang, “Will ‘luxury Frank, March 2024
China, 2010-2021”, Global Data on cotton”, Fibre2Fashion, Aug shaming’ in China threaten industry
12. National Statistical Agencies, 23, 2023 ASIA’S NEW GROWTH ENGINES bounceback? ”, Jing Daily, June 28. Gemma D’Auria, Chiara
McKinsey analysis, in partnership 6. Chris Rogers, “Logistics 1. International Monetary Fund, 24, 2024 Laudanna, Arianna Pileri, and
with Oxford Economics, September disruptions’ impact on apparel 19. Manoj Kumar, “India plans April 2024 Elena Pizzocaro, “Why courting
2024 supply chains”, S&P Global Market to expand production-linked 15. “China’s luxury spend is down aspirational luxury consumers still
Intelligence, February 28, 2024 incentives for small textile firms”, 2. “Revenue of the apparel market but confidence is up”, Vogue matters”, McKinsey & Company,
13. Xia Yining, Han Wei, “China’s Reuters, June 25, 2024 worldwide by country in 2023”, Business, May 2, 2024 April 12, 2024
debt-to-GDP ratio climbs to record 7. Global Labor Rate Comparisons, Statista, September 25, 2024
287.8% in 2023”, Nikkei Asia, Reshoring Institute, September 20. McKinsey Global Institute, 16. “‘Very Bullish’ on China 29. “India’s affluent population is
January 30, 2024 2022 Foreign Direct Investment 3. Spencer Feingold, “Where is Opportunities, Ralph Lauren CEO likely to hit 100 million by 2027”,
China’s economy headed? ”, World Says”, Bloomberg, July 11, 2024 Goldman Sachs, February 16. 2024
14. “Global Blue Releases the 8. “What are the impacts of the Red 21. Benjamin Parkin, “Global fashion Economic Forum, June 27, 2024
Monthly Tax Free Shopping Sea shipping crisis”, JP Morgan, brands cut Bangladesh orders after 17. McKinsey Global Institute, 30. Preeti Motiani, “Luxury goods
Business Update for May 2024”, February 08, 2024 turmoil”, Financial Times, August 4. National Bureau of Statistics of expert interviews, McKinsey above Rs 10 lakh like Louis Vuitton

The State of Fashion 2025 148

handbag, Bulgari jewellery etc. to July 19, 2024 15, 2024 World, May 24, 2024 Funnel”, Archival x Vogue Business, fascinatingly intentional approach
attract TCS from January 1, 2025”, April 18, 2024 to US Success”, Fashionista, August
The Economic Times, July 23, 2024 43. Japan National Tourism 8. “With 10x growth since 2023, 21. CIW Team, “Douyin’s Live 26, 2024
Organization, January-June 2024 Llama is the leading engine of AI Commerce Platform Continues 7. State of Fashion 2025 Executive
31. “Luxury market in India to grow innovation”; AI Meta Blog, August to Soar”, China Internet Watch, Survey 23. Ann Binlot, “Uniqlo dismissed
by 15%-25% in the next seven years: 44. Khanh Linh, “What’s Behind 29, 2024 January 22, 2024 the idea that it’s fast fashion through
Barclays”, DFU Publications, May Japan’s Luxury Boom? ”, The 8. Christina Adams, Kari Alldredge, the concept of lifewear”, Forbes,
11, 2024 Business of Fashion, July 8, 2024 9. Based on LM Sys Leaderboard 22. Man-Chung Cheung, “China Sajal Kohli, “State of the Consumer September 24, 2024
analysis across various accuracy Douyin Social Commerce Forecast 2024: What’s now and what’s next”,
32. Sagar Malviya, “India plays key 45. Satsuki Kaneko, “Japan foreign testing over time 2023”, E-Marketer, September McKinsey, June, 2024
role in growing Mango‘s global tourists top 3m in March, fueling 14, 2023
business: Exec”, The Economic record spending boom”, Nikkei Asia, 10. Lindsey Wilkinson, “Anthropic 9. “ McKinsey Global Institute VALUE SHIFT
Times, January 30, 2024 April 18, 2024 outperforms competitors in model 23. Stephanie Chevalier, “ Social Population estimates and 1. BoF-McKinsey State of Fashion
accuracy, performance test”, CIO commerce revenue in the US projections”, World Bank, January 2025 Executive Survey
33. Shemona Safaya, “Decathlon 46. Mia Glass, Yoshiaki Nohara, Dive, July 29, 2024 2018-2028”, May 30, 2024 7, 2024
to tap India’s ‘burgeoning’ sports “Japan’s economy gets boost from 25 2. National Statistics Agencies;
market with €100m investment”, million visitors in 2023”, The Japan 11. “Zalando Sees Strong Growth, 24. Aisha Malik, “TikTok turns 10. “ Distribution of Household Eurostat; University of Michigan;
Yahoo Finance, August 27, 2024 Times, January 17, 2024 invests in AI-powered inspiration”, to generative AI to boost its ads Wealth in the US”, Federal Reserve, McKinsey analysis, September 2024
Zalando Press Release, August 6, business”, TechCrunch, May 22, June 14, 2024
34. Vinod Mahanta, Anumeha 47. Adrienne Klasa, Davia Keohane, 2024 2024 3. BoF-McKinsey State of Fashion
Chaturvedi, “2023 was best ever “Return of rich tourists and weak 11. “Distribution of individual total 2025 Consumer Survey
year for Bulgari in India, and 2024 yen helps Japan escape luxury 12. Ivan Mehta, “Daydream rakes 25. Sara Lebow, “5 Charts wealth by characteristic”, Office for
looks even better: CEO Jean- downturn”, Financial Times, in $50m seed funding to build an Showing TikTok Shop’s Potential”, National Statistics, January 7, 2022 4. McKinsey Consumer Sentiment
Christophe Babin”, The Economic December 6, 2023 AI-powered search engine suited for E-marketer, September 15, 2023 Q3 2023
Times, March 15, 2024 e-commerce”, TechCrunch, June 12. McKinsey ConsumerWise Global
48. McKinsey Future of Wellness 20, 2024 26. Capital One Research, “TikTok Sentiment Data, August, 2024 5. MGFI Analysis 2024
35. Praachi Raniwala, “How Global Survey, August 2020, n=1,500+ per Shop Statistics”, Capital One
market 13. Lakshmi Aranasi, “The new Shopping, February 25, 2024 13. “The World Consumer Outlook 6. “Zalando Half-Year Report”,
Brands Tap India’s $130 Billion
Shazam for Fashion app”, Business 2025”, World Data Lab, May, 2024 Zalando, 2024
Wedding Market” The Business of
Fashion, September 17, 2024 49. Ashley Ogawa Clarke, “Inside Insider, Aug 11, 2024 27. TikTok for Business, “Success
the world of Japan’s elite personal Stories: Princess Polly”, TikTok 14. McKinsey ConsumerWise US 7. “BestSecret Group thrives in
shoppers”, Vogue Business, April 14. “Constructor Raises $25m Shop Blog Credit Card Spend Analysis, Fashion Q1 2024 with strong double-digit
36. “Indian Retail Industry
15, 2024 for AI-powered product search Retail revenue growth and double-digit
Analysis”, India Brand Equity
engines”, Pymnts, June 17, 2024 28. Jessica Deyo, “Pinterest credits profitability”, Best Secret, 2024
Foundation, July 2024
shoppability, AI investments for 15. Rafa Rodriguez, “The problem of
15. “Constructor Raises $25M Series ‘milestones’ Q1”, Marketing Dive, fashion for women over 50”, El Pais, 8. The TJX Companies, Inc., Q2
37. “Good results for LVMH in the
DISCOVERY REINVENTED B led by Sapphire Ventures, Tripling May 2, 2024 December 10, 2023 2025 Earnings Call, Aug 21, 2024
first half of the year despite the
prevailing environment”, LVMH, 1. “The empowered consumer”, Valuation to $550M”, PR Newswire,
Accenture Consumer Pulse June 17, 2024 16. Joshua Hunt, “The inside track 9. Ross Stores, Inc., Q2 2025
July 23, 2024
Research 2024, April 29, 2024 on New Balance’s sensible sneaker Earnings Call, Aug 22, 2024
38. “Richemont announces strong 16. Ann Cao, “Alibaba sets up new SILVER SPENDERS revolution”, GQ, February 27, 2023
2. Isabella Fish, “ASOS clears old ‘digital technology’ firm under 1. Susan Atran, “Gen-Z is tightening 10. “2024 Resale Report”, ThredUP
underlying performance for the year
fashions on path to profitability”, e-commerce unit Taobao and Tmall it’s belt”, Bank of America, October 17. Mike DeStefano, “How new
end 31 March 2024”, Richemont, 11. Sarah Kent, “Profitability
The Times, March 26, 2024 Group”, South China Morning Post, 13, 2023 balance reinvented itself”, Complex
May 17, 2024 Hurdles Haven’t Slowed the Growth
September 4, 2024
3. Eve Rouse, “The Future of 2. “Cash-strapped Gen-Z expect 18. Sara Shriber, “Brand to Watch: of Resale”, The Business of Fashion,
39. Avery Booker, “Luxury brands’
Ecommerce Search”, Nosto and 17. Elizabeth Utley, “Taobao brands to demonstrate purpose new balance”, Civic Science, March 27, 2024
Japan dilemma: Boom or bust? ”,
CensusWide, February 15, 2023 and Tmall Upgrades Consumer beyond profit”, Dentsu, May 22, September 19, 2023
Jing Daily, August 17, 2024 12. Lucy Hooker, “Vinted makes first
Shopping Experience and Merchant 2024
4. Marc Bain, “Is Generative AI the 19. Danny Parisi, “In it’s 40th year, profit on used fashion”, BBC News,
40. Gertrude Chavez-Dreyfuss, Support Through AI”, Alizila, June
New Fashion-Tech Bubble?”, The 3. Tamara Sender, “Youth Fashion; J.Crew looks to heritage to win new April 29, 2024
“Yen drops to 38-year low, US dollar 13, 2024
Business of Fashion, May 6, 2024 Young Brits Cut Back on Fashion customers”, Glossy, March 21, 2023
slumps after weak data”, Reuters, 13. “Second-hand is Replacing
July 3, 2024 18. “Inspiring and empowering Spend”, Mintel, March 14, 2024
5. McKinsey State of Fashion 2025, 20. Megan Cerullo, “J.Crew revives New in Wardrobes Across Europe,
customers with AI-powered
Executive Survey it’s iconic catalog 7 years after According to Vinted’s Latest Impact
41. “Duty-free sales at Japan experiences”, Zalando, June 6, 2024
4. Kayla Zhu, “Charted: Maxed-Out turning the page”, CBS News, Report”, Vinted, June 18, 2024
department stores hit record high
6. “Upgrading How we Buy”, Google 19. “Customers don’t just want more Credit Cards by Generation”, Visual September 9, 2024
in 2023”, The Japan Times, January 14. Sandro Secondhand
26, 2024 and Wired Consulting, August 6, they want better”, Zalando, April Capitalist, September 16, 2024
2024 03, 2023 21. “ Fast Retailing Financial Results
5. State of Fashion 2025 Consumer Summary”, Fast Retailing, July 15. “SHEIN Launches SHEIN
42. Nancy Zheng, “Japan’s tourist Exchange Resale Platform in Europe
7. Marc Bain, “How Google Aims 20. Reem Makari, “Social Media ads Survey 11, 2024
arrivals at record high, recovering and the United Kingdom”, Shein,
from pandemic drop”, Nikkei Asia, to Transform Shopping with AI”, overtake TV and search engines for
The Business of Fashion, October 6. “GenZ Broke the Marketing 22. Dhani Mau, “Inside Uniqlo’s June 3, 2024
discover”, Performance Marketing

The State of Fashion 2025 149

16. Amelia Hill, “Counterfeit Goes 13. “National Minimum Wage 30. Cathaleen Chen, “Fashion’s shoppers fell back in love with “Luxury E-Commerce: Who’s Your China E-Commerce Strategy”,
Cool: Brands Urged to Embrace and National Living Wage”, UK Stalled Self-Checkout Revolution”, the high street”, Financial times, Surviving and Why”, Business of The Business of Fashion, April 11,
#Dupe”, The Business of Fashion, Department for Business & Trade, The Business of Fashion, May 3, January 10, 2024 Fashion, June 3, 2024 2023
The Guardian, May 20, 2024 March 2024 2024
12. “Reports of Street Retails Demise 27. Nigel Taylor, “Frasers Group 42. McKinsey State of Fashion
17. Ellyn Briggs, “Why Brands Can 14. “3.7M jobs paid below the real 31. “Simbe’s Club Solution Helps Are Greatly Exaggerated”, CBRE, increases N Brown stake again, is Forecasts; McKinsey Global Fashion
Benefit From ‘Dupe’ Culture”, The living wage in first rise since 2020”, Technology-Forward BJs’ Wholesale May 13, 2024 now biggest Boohoo shareholder”, Index
Morning Consult, October 18, 2023 Living Wage Foundation, February Club Deliver Stellar Member & February 12, 2024
20, 2024 Team Experiences”, Simbe, 2024 13. Huina Technology, “Year-on- 43. The State of Fashion 2025
18. Malique Morris, “What Luxury year increase of 4% in the first half 28. Samantha Conti, “Mytheresa Consumer Survey
‘Dupe’ Brands Get Right About 15. “Retail Jobs”, The National Retail 32. Ben Cohen, “The Self-Checkout of 2023 | National shopping mall Acquires Yoox Net-a-porter From
Shoppers”, The Business of Fashion, Federation, 2024 Even the Haters Will Love”, The passenger flow data report in the Richemont”, Women’s Wear Daily, 44. “The Chinese Site That Rewired
August 26, 2024 Wall Street Journal, December first half of 2024”, EastMoney, June October 7, 2024, Online Shopping”, The New York
16. BoF-McKinsey State of Fashion 16, 2023 15, 2024 Times, April 22, 2024
2025 Executive Survey 29. BoF-McKinsey State of Fashion
14. BoF-McKinsey State of Fashion 2025 Executive Survey 45. Zoe Suen, “Luxury’s New
THE HUMAN SIDE OF SALES 17. “Reiss”, Thrive, July 25, 2024 2025 Executive Survey WeChat Playbook”, The Business of
1. McKinsey Fashion Growth MARKETPLACES DISRUPTED 30. McKinsey analysis Fashion, May 10, 2022
Forecasts 2025 18. “People Highlights”, Aritzia, 1. “Brands Losing a Record $29 for 15. Shep Hyken, “The personalized
2024 Each New Customer Acquired”, customer experience: Customers 31. Sensor Tower 46. Lucia Laurer, “Live Commerce:
2. “Reports of Street Retail’s Demise Businesswire a Berkshire Hathaway want you to know them”, 14 March, Top Chinese Platforms, Revenue &
Are Greatly Exaggerated”, CBRE, 19. Maghan McDowell, “There are company, July 19, 2022 2024 32. Loiuse Matsakis, “How Shein Market Analysis”, ECDB, September
May 13, 2024 no digitally native luxury brands. and Temu Snuck Up on Amazon”, 26, 2024
Kering wants to retrofit one”, Vogue 2. Malique Morris, “How Brands 16. Brian Baskin, “Case Study | How Yahoo finance, May 24, 2024
3. “2024 E-commerce Consumer Business, June 10, 2019 Can Balance DTC and Wholesale”, to Create the Perfect E-Commerce 47. “Market size of live streaming
Survey”, Ryder, September 24, 2024 The Business of Fashion, July 8, Site”, State of Fashion, September 33. David Mayer, “Amazon is about e-commerce in China from 2019 to
20. “Target to Roll Out 2024 16, 2024 to take on Temu and Shein by 2023 with estimates until 2026”,
4. “8 Reasons Why Brick and Mortar Transformative GenAI Technology copying them”, June 27, 2024 iResearch; Website (27sem.com),
Stores are Important for Retail”, to its Store Team Members 3. Amazon Ads, “How fashion 17. McKinsey Value Intelligence March 2024
ArcherPoint, January 24, 2022 Chainwide”, Target, June 20, 2024 brands are dmystifying consumer 34. Gabrielle Fonrouge, “Shein
loyalty and engaging shoppers”, 18. Aoife Morgan, “What’s next for and Temu prices are set to get a lot 48. Fang Ming, “The dilemmas of
5. McKinsey analysis, July 2024 21. Sky Canaves, “Physical stores Glossy, November 17, 2022 online retailers as investors lose higher as Biden takes aim at retailers livestreaming in China”, WARC,
have more influence than any single faith?”, Retail Gazette, May 28, 2024 linked to China”, September 13, November 15, 2023
6. BoF-McKinsey State of Fashion digital channel in driving fashion 4. Cathaleen Chen, “H&M Has 2024, CNBC
2025 Consumer Survey discovery”, eMarketer, March 18, Begun Charging for returns”, 19. Sunniva Kolostyak, “The UK’s 49. Cathy Lai, Clifford Waits Kurz,
2024 September, 2023 Most Shorted Stocks”, Morningstar, 35. Emarketer “China E-Commerce Giants Face
7. Kimberley Drobny, “2023 Retail October 1, 2024 Their Biggest Test”, S&P Global,
Customer Experience Survey”, 22. Arthur Zaczkiewicz, “Why 5. Malique Morris, “Fashion’s New 36. Julia Waldow, “I’ve never seen April 9, 2024
Theatro, January 25, 2023 Store-level Incentives Can Be Key Playbook for Online Returns”, 20. Eloise Hill, “Boohoo bosses anything like this’: Temu’s ad spend
to Omnichannel Success”, Women’s The Business of Fashion, October consider break-up of retailer”, Retail soars as it embarks on a marketing
8. David Fuller, Bryan Logan, Wear Daily, April 26, 2021 23, 2023 Gazette, September 29, 2024 blitz”, Modern Retail, January 22,
Nikola Jakic, and Jessica Wu, “How 2024 SPORTSWEAR SHOWDOWN
retailers can build and retain a 23. Frasers Group 6. Baymard Institute, “Cart 21. McKinsey Global Fashion Index 1. McKinsey Global Fashion Index
strong frontline workforce in 2024”, Abandonment Stats” (MGFI) 37. “Top 10 Apparel Brands on (MGFI)
McKinsey & Company, July 17, 2024 24. Expert interviews TikTok Shop in 2024”, Facteus, June
7. John Deighton, “How Shein and 22. Reuters, “Zalando Returns 26, 2024 2. Daniel-Yaw Miller, “The Rise of
9. “Elevate The Frontline To Elevate 25. “How we helped Dior keep their Temu Conquered Fast Fashion – and to Growth Thanks to Premium Sportswear’s Challenger Brands,
The Business”, Forrester, March, staff happy”, The NDL Group Forged a New Business Model”, Brands”, THE Business of Fashion, 38. Cathaleen Chen, “Innovation in Four Charts”, The Business of
2023 Harvard Business School, April May 7, 2024 Won’t Save Department Stores. The Fashion, June 4, 2024
26. Expert interviews 25, 2023 Right Products Will.”, The Business
10. Miles Socha, “What to Watch: 23. Emer Moreau, “Asos shoppers of Fashion, April 1, 2024 3. Inti Pacheco, “How Nike Fell
Luxury Brands Tackle Shortage of 27. Expert interviews 8. Kenneth Pucker, “Beware the hit out at new £3.95 returns charge”, Behind in the Innovation Race”,
Sales Associates” Women’s Wear ‘Sheinification’ of Fashion”, The BBC, September 9, 2024 39. Don-Alvin Adegeest, “Revolve The Wall Street Journal, October
Daily, January 2, 2024 28. Leticia Miranda, “No more to acquire couture house Alexandre 21, 2023
Business of Fashion, March 5, 2024
familiar faces at the checkout? Why 24. B2B Solutions, About You Vauthier”, Fashion United, June
11. U.S. Bureau of Labor Statistics, stores are hiring gig workers”, NBC 9. BoF Team, McKinsey & Company, 25, 2024 4. Daniel-Yaw Miller, “Case
2024 News, February 7, 2022 “The Year Ahead: Deconstructing 25. Sandra Halliday, “New Zalando Study | Can On Set a New Pace
Fast Fashion’s Future”, The Business strategy targets B2C and B2B 40. Richard Kestenbaum, “ Saks to for Sportswear”, The Business of
12. “Earnings and employment 29. Praveen Adhi, Tyler Harris, transformation, includes more buy Neiman Marcus and Amazon Fashion, September 21, 2022
of Fashion, December 18, 2023
from Pay As You Earn Real Time Gerry Hough, “RFID’s renaissance lifestyle categories”, Fashion will Invest. Here’s why this is
Information, UK: September in retail”, McKinsey & Company, 10. McKinsey analysis Network, March 13, 2024 happening”, Forbes, July 10, 2024 5. Daniel-Yaw Miller, “How Hoka
2024”, Office for National Statistics, May 7, 2021 Fends Off the Imitators”, The
September, 2024 11. Laura Onita, “How online 26. Marc Bain, Joan Kennedy, 41. Tiffany Ap, “It’s Time to Rethink Business of Fashion, June 7, 2023

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6. Cara Salpini, “lululemon didn’t 21. Sabine Bcker, Alexander Thiel, in the sports industry”, Sportcal, Retail Dive, March 13, 2024 61. “German Shoe Giant Snipes cuts annual forecasts on tepid US
change activewear, it changed Gemma D’Auria, Sajal Kohli, “Time January 30, 2024 Growing US Footprint”, March demand, slower product refresh”,
apparel”, Retail Dive, November to move: Sporting goods 2024”, 48. Tom Ryan, “Hoka’s Growth 4, 2022 August 29, 2024, Reuters
9, 2022 McKinsey, January 30, 2024 34. Georgia Wright, “From swoosh Accelerates On Robust Full-Price
to stumble, can Nike regain its Selling”, The Daily Outdoor Retailer, 62. Foot Locker Investor Day 2023 14. Savills News, “Total Warehouse
7. “NIKE, Inc. Reports Fiscal 2024 22. Ben Butling, “Luxury meets stride?”, Retail Gazette, July 4, 2024 May 24, 2024 presentation, March 20, 2023 Costs increase on average 10.1%
Fourth Quarter and Full Year athleisure: Emerging trends in globally”, Savills,August 21, 2023
Results”, Nike, June 29, 2024 designer activewear”, November 35. Daniel-Yaw Miller, “Case Study 49. Daniel-Yaw Miller, Marc Bain,
22, 2023 | Fashion’s New Rules For Sports “Nike’s Complex Relationship 15. Ecodesign for Sustainable
8. Emily Bary, “Less than 25% of Marketing”, November 13, 2023, With Wholesale, Explained”, The INVENTORY EXCELLENCE Products Regulation
Under Armour sales are women’s 23. Shaun Callaghan, Hayley The Business of Fashion Business of Fashion, June 29, 2023 1. Top trends: exploring the fashion
wear. Here’s how its new CEO plans Doner, Jonathan Medalsy, Anna landscape of 2024, Heuritech, 2024 16. Megan Quinn, Cole Rosengren,
to double that.”, MarketWatch, Pione and Warren Teichner, “The 36. Daniel-Yaw Miller, 50. Inti Pacheco, “Nike Reverses “California Gov. Newsom signs and
October 10, 2023 trend defining the $1.8 trillion “Athletes Don’t Want Nike or Course as Innovation Stalls and 2. TikTok Creative Centre, Trend vetoes multiple organics, recycling
global wellness market in 2024”, Adidas Anymore. They Want Rivals Gain Ground”, April 21, 2024 details as of 8 August 2024 bills”, Waste Dive, September 03,
9. Daniel-Yaw Miller, “The Gropcore McKinsey, January 16, 2024 Independence.”, July 15, 2024 2024
Empire Behind Salomon and 51. Katherine Masters, Ananya 3. McKinsey Analysis, Publicly
Arc’teryx”, The Business of Fashion, 24. “Sports Tourism Market Size, 37. Mat Issa, “Dallas Wings Guard Mariam Rajesh, “Investors, analysts available information, expert 17. Jonatan Janmark, Karl-Hendrik
May 6, 2023 Share & Trends Analysis Report Jacy Sheldon Signs Equity Deal question Nike’s wholesale strategy interviews Magnus, Ignacio Marcos and Evan
By Sports Type (Soccer/Football, With HOLO Footwear”, Forbes, amid gloomy North American Wiener, “Sustainable Style; How
10. Marc Bain, “lululemon Is at Cricket, Basketball, Tennis), By August 13, 2024 spending”, June 30, 2023 4. Zeke Hausfather, “State of the fashion can afford and accelerate
a Crossroads”, The Business of Tourism Type (Active, Passive, climate: 2024 now very likely to be decarbonisation”, McKinsey &
Fashion, June 5, 2024 Nostalgia), By Region, And Segment 38. Alan Blinder, “College Athletes 52. Rachel Wolff, “Adidas reverses warmest year on record”, Carbon Company, March 28, 2024
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11. Victor Deng, “Jack Harlow research N.C.A.A. Rules”, The New York March 10, 2023 18. McKinsey State of Fashion 2025
Is Officially a New Balance Times, September 29, 2021 5. Press Office, “UK experiences Executive Survey
Ambassador”, Complex, February 25. McKinsey Value Intelligence 53. Georgia Wright, “Adidas to open coolest summer since 2015”, Met
17, 2022 39. Tim Newcomb, “New Balance first premium UK store format Office, September 02, 2024 19. McKinsey analysis, publicly
26. Roberto Cordero, “Why Luxury Unveils Coco Gauff’s Second ‘The Pulse’”, Retail Gazette, June available case examples
12. Daniel-Yaw Miller, Brands Are Betting Big on Tennis”, Signature Shoe, The Coco CG2”, 25, 2024 6. Choe Mills, “Asos and Boohoo
“Activewear’sBiggest Disruptors”, The Business of Fashion, August August 20, 2024 turn to nearshoring as Red Sea crisis 20. Elizabeth Howlett, “ASOS CEO:
The Business of Fashion, April 18, 31, 2023 54. Mario Toneguzzi, “adidas intensifies”, Retail Week, February Every company makes mistakes”,
2022 40. “5 Student Athletes Join the Launching ‘The Pulse’ Retail 05, 2024 Drapers, April 17, 2024
27. Ezreen Benissan, “Move Over Nike Basketball Family”, Nike Concept in Canada with 4 Stores as
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Celebrities”, Elle, May 31, 2024, 41. WNBA Draft ’24 Question: “Where did you typically sales to EUR 4 Billion by 2025”,
14. “HOKA x Hypebeast” and McKinsey analysis on Google 55. Brin Snelling, “HOKA Unveils purchase clothes, footwear, Hugo Boss Press Release, August
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consumer-led transformation to 28. McKinsey analysis Movement and Storytelling”, June 8. McKinsey analysis, Mckinsey 22. “Hugo Boss announces
ignite its next phase of long-term 6, 2024 56. Cara Salpini, “Nike, Dick’s Global Fashion Index preliminary second quarter results
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Alo debuts its first running shoe, 43. “PUMA announces date”, Retail Dive, June 7, 2023 9. Sarah Kent, “AI, Outlets, outlook”, Hugo Boss Press Release,
16. “Adidas Presents Growth the Alo Runner”, Glossy, August BLACKPINK’s Rose as new global Recycling: Can Luxury Solve its July 15, 2024
Strategy ‘Own the Game’ Until 29, 2024 brand ambassador”, June 17, 2024 57. Cara Salpini, “Nike, JD Sports Billion-Dollar excess inventory
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30. Lucy Maguire, “Why On is a 44. Peter Verry, “Blackpink’s to the US”, Retail Dive, August 2, March 4, 2024 Tim Lange, Tabitha Strobel,
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with Retailers. Now It’s Trying to Vogue Business, December 5, 2023 Ambassador Roster”, Yahoo 10. McKinsey analysis; EDITED; as Savings”, McKinsey & Company,
Win Them Back”, The Wall Street entertainment, June 17, 2024 58. “Brands Realize They Can’t Go of September 2024 August 12, 2024
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Balance Reinvited Itself”, Complex 5, 2023 own Olympic flame across Paris”, 59. Aoife Morgan, “Sports Direct The Business of Fashion, February SUSTAINABILITY COLLECTIVE
Vogue Scandinavia, 7 August 2024 plans for more larger flagships in 02, 2024 1. Sarah Kent, “Where is the
19. Katishi Maake, “Hoka looks to 32. “lululemon Announces a move away from smaller stores”, Money to Make Fashion More
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fortifying DTC business”, Retail Revenue by 2026 to $12.5 Billion”, Culture Aims To Re-energize The $163 Billion Buying and Sizing Fashion, January 31, 2024
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Strengthens U.S. Footprint with September 05, 2024 2. Jonatan Janmark, Karl-Hendrik
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forecasts more stores in the coming years”, Retail TouchPoints, April 23, 2024 13. Savyata Mishra, “Lululemon Wiener, “Sustainable Style: How

The State of Fashion 2025 151

fashion can afford and accelerate an average sized tier-two cotton MCKINSEY GLOBAL
decarbonization”, McKinsey & supplier in one of Asia’s largest FASHION INDEX
Company, March 28, 2024 manufacturing countries 1. Inditex FY2023 results, March
13, 2024
3. Kendall Ludwig, Miranda Rack, 16. Veronica Bates-Kassatly,
Dr Sheng Lu, “How to improve Dorothée Baumann-Pauly, 2. “Levi Strauss & Co. Reports
US apparel production, export “Amplifying Misinformation: The Fourth-Quarter and Fiscal Year
strategies in 2024”, JustStyle, Case of Sustainability Indices 2023 Financial Results”, January
December 8, 2023 in Fashion”, Geneva Center For 25, 2024
Business & Human Rights, January
4. Statista, 2022, Sales of Leading 18, 2023 3. “Zalando Sees Strong Sports
Fashion Brands Globally Growth, Expands Quality
17. Hannah Abdulla, “COP 28: Assortment, Invests in AI-powered
5. Kenneth Pucker, “Don’t believe Fashion’s Failure to engage suppliers Inspiration and Records Double-
What Consumers Say When it on green plan hinders 1.5°C target”, Digit B2B Growth to Deliver Higher
Comes to Sustainability”, The Just Style, November 29, 2023 Profitability and Accelerating Sales
Business of Fashion, November in Q2”, Zalando website, August
24, 2023 18. Renewable Energy Initiative, 6, 2024
Global Fashion Agenda
6. Don-Alvin Adegeest, “61 percent 4. “Zalando evolves strategy to
of fashion shoppers prioritise cost 19. “Major brands commit to cover larger share of fashion and
over sustainability”, Fashion United, innovative collective financing lifestyle e-commerce market with
October 5, 2022 model to decarbonise the fashion pan-European ecosystem for
sector”, The Fashion Pact Journal, customers and partners”, Zalando
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Survey
20. “The Brand Playbook For 5. Pamela N. Daziger, “With
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Net-Zero Climate Commitments”, Apparel Impact Institute, New Leadership, Gap’s Turnaround
The Business of Fashion, May 12, September 17, 2024 Begins”, Forbes, June 1, 2024
2023
21. Ben Unglesbee, “PVH Launches 6. “American Eagle Outfitters
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fashion suppliers have rolled back sustainability goals”, Supply Chain Power Profitable Growth; Clear Path
climate commitments. What’s going Dive, May 1, 2023 to $5.7 to $6.0B in Revenue and an
on? ”, Vogue Business, September Approximate 10% Operating Margin
19, 2024 22. “H&M Group and Vargas Rate”, AEO INC. website, March
Holding launch Syre, a new venture 7, 2024
10. “Re:NewCell decides to file to scale textile-to-textile recycled
for bankruptcy”, Renewcell Press polyester”, H&M News Article, 7. AEO Inc. FY 2023, Form 10-K
Releases, February 25, 2024 March 6, 2024
8. Lauren Thomas, “American Eagle
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global champion for renewable Shortlists Vietnam and Iberia for vertical logistics to its retail peers
cotton”, Altor, June 4, 2024 first gigascale plants”, Vargas, May — and it’s paying off”, CNBC, April
23, 2024 22, 2022
12. Sarah Kent, “Bolt Thread Pauses
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Mylo”, The Business of Fashion, Million to Build Circularity press release
July 4, 2023 Ecosystem in the Fashion Industry”,
Ambercycle, January 4, 2022 10. Elizabeth Segran, “How
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non-woven textile bio-material 25. “Far Eastern Group and most hated retailer to a Gen Z
announces successful pre-seed and Ambercycle Partner to Decarbonize favorite”, Fastcompany, January
seed round”, TomTex Seed Funding Fashion”, Ambercycle, November 22, 2024
Press Release, November, 2023 2, 2023

14. “The Intersections of 26. Corina Pons, Helen Reid,

Environmental and Social Impacts “Zara-owner Inditex to buy recycled
of the Garment Industry”, Clean polyester from US start-up”,
Clothes Campaign, August, 2022 Reuters, October 25, 2023

15. McKinsey analysis based on

The State of Fashion 2025 152

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