Challenges to China’s economic growth are leading international fashion brands to look to other Asian markets, and India will be a focus, with 67 per cent of respondent fashion executives citing promising growth prospects in the country in 2025, according to The State of Fashion 2025, the annual report by McKinsey and Business of Fashion (BoF) Insights.
Japan’s luxury boom is expected to continue into 2025, fuelled by strong international and domestic spending.
However, economic and geopolitical challenges, combined with shifts in customer values, will define a turbulent year ahead for the $2.5-trillion global fashion industry, the report notes.
A deep sense of uncertainty persists amongst fashion industry executives. Just a fifth of them expect conditions to improve in 2025 compared to this year, 41 per cent think conditions will remain the same and 39 per cent predict conditions to worsen.
Seventy per cent of fashion executives cite lack of consumer confidence and appetite to spend as the biggest concern for the year ahead, with over 80 per cent of shoppers planning to spend the same or less on fashion next year, boosting opportunities for discount retailers.
Sustainability has fallen off the agenda, with only 18 per cent of fashion executives citing it as a top three risk for growth in 2025—down from 29 per cent in 2024. Despite growing regulation, 63 per cent of brands are behind on 2030 decarbonisation targets. Customers are unwilling to pay a premium for more sustainable products.
Online fashion marketplaces are struggling, with share prices declining by 77 per cent on an average between 2021 and 2024. The next year will force brands to adapt or become obsolete, McKinsey and BoF said in a release citing the report.
Share prices of online fashion marketplaces declined by 77 per cent between 2021 and 2024. In Europe especially, online marketplaces are increasingly challenged by high-growth players such as Shein and Temu.
Challenger sportswear brands will offer a bright spot in the market, predicted to generate 57 per cent of profit in the sportswear segment—nearly tripling their share since 2020.
With industry growth predicted to stabilise in the low single digits, fashion brands will need to fight for market share by reevaluating their relationship with customers, prioritising overlooked demographics and demonstrating their products are worth paying for, the report notes.
The rise of artificial intelligence (AI) could also empower shoppers and change discovery journeys, helping customers to combat ‘choice paralysis’ while shopping online, the report observes. Half of fashion executives surveyed see customer product discovery as the key use case for AI in 2025.
The report found that 41 per cent of consumers look to second-hand outlets when seeking apparel deals. While ‘dupe’ culture has previously been taboo, the purchasing of cheaper replicas has grown in popularity thanks to Gen-Z.
Fibre2Fashion News Desk (DS)
