10 Themes Driving Growth in Fashion by 2025
Business of Fashion
The ninth annual State of Fashion report, jointly produced by McKinsey & Company and BoF Insights—the data and advisory team of The Business of Fashion—forecasts a turbulent road ahead for the fashion industry. Shaped by economic and geopolitical uncertainties alongside shifting consumer values, the industry faces significant transformation. As we look toward 2025, we explore 10 key themes poised to redefine the landscape and unlock fresh opportunities for growth.
GLOBAL ECONOMY
1.Trade Reconfigured
©Hanson Lu via Unsplash
The global trade landscape is transforming significantly as major economies diversify their sourcing strategies, favoring countries with stronger political alignment. In 2025, this trend will accelerate within the fashion industry due to rising costs, evolving trade policies, and sustainability targets. Fashion brands are expected to intensify their efforts in diversifying sourcing footprints in Asia and lay the groundwork for nearshoring.
2.Asia’s New Growth Engines
China's economic slowdown, shifting consumer preferences, and the resumption of international travel pose challenges for growth in the country. Consequently, global fashion brands are redirecting their focus towards other Asian markets. India will emerge as a key destination, particularly for high-street brands, while Japan's luxury boom is anticipated to continue into 2025, fueled by robust international and domestic spending.
A staggering 63% of fashion executives believe mature countries in the Asia-Pacific (APAC) region hold promising growth prospects for 2025.
CONSUMER SHIFTS
3.Discovery Reinvented
Fashion shoppers are increasingly overwhelmed by many choices, negatively impacting their engagement and conversion rates with brands. However, a new epoch of brand and product discovery, supported by AI-powered curation across content and search, is on the rise. Half of fashion executives identify consumer product discovery as the primary use case for generative AI in 2025.
4.Silver Spenders
Traditionally, fashion brands have targeted younger demographics. However, in 2025, they may struggle to sustain growth solely from younger shoppers. The "Silver Generation," comprising individuals aged over 50, represents a growing consumer base with a significant share of global spending. Brands that engage this previously neglected demographic while appealing to multiple generations will unlock incremental growth opportunities. Notably, 72% of the total US population wealth is held by those aged over 55.
5.Value Shift
©Bicester Village Shanghai
Macroeconomic pressures and rising prices have prompted fashion shoppers to adopt cost-conscious behaviors, a trend expected to persist even as economies show signs of recovery. This shift is fueling growth in segments offering strong value-for-money perceptions, such as resale, off-price, and dupes. To capture a larger share of consumers' wallets, brands must demonstrate their value proposition. Seventy percent of consumers plan to continue shopping from outlets or off-price retailers in the next 12 months, regardless of their financial situation.
FASHION SYSTEM
6.The Human Side of Sales
Differentiating the in-store experience is crucial to reigniting demand for in-person shopping. Brands can achieve this by empowering their store associates to maximize their potential, as sales staff play a pivotal role in customer engagement. The benefits are substantial, given the inseparable link between customer and employee experiences. Seventy-five percent of shoppers are likely to increase their spending after receiving high-quality service from store staff.
7.Marketplaces Disrupted
Following a tumultuous period for luxury e-commerce platforms, online non-luxury marketplaces are facing their challenges. Share prices have plummeted by as much as 98% since the COVID-19 peaks due to existential business model challenges and disruptions. To survive, non-luxury marketplaces globally must carve out a distinct role within the fashion ecosystem. Between January 2021 and September 2024, the share price of online fashion marketplaces declined by 77% on average.
8.Sportswear Showdown
Challenger brands are forecast to generate over half of the sportswear segment's economic profit in 2024, up from 20% in 2020. This signifies an intensifying battle between challengers and incumbents in the growing sportswear market. To gain market share, brands must develop innovative products and leverage the right ambassadors and channels to activate unique brand narratives. Challenger sportswear brands are projected to generate 57% of the segment's economic profit in 2024.
9.Inventory Excellence
Inventory management remains a significant challenge for the industry, with both excess stock and stockouts impacting brands. In 2025, margin pressures and sustainability regulations will emphasize the importance of end-to-end planning excellence. Brands are increasingly adopting tech tools and adjusting their operating models to support agile supply chains. In 2023, the fashion industry produced an estimated 2.5 billion to 5 billion items of excess stock, worth between 70 billion and 140 billion in sales.
10.The Sustainability Collective
Fragmentation and complexity across the fashion value chain, coupled with consumers' reluctance to pay for sustainable products, pose inherent barriers to achieving sustainability goals. However, with decarbonization efforts falling short of targets and the climate crisis accelerating, inaction is not an option. The fashion sector must act collectively to drive impactful change. For instance, collective energy initiatives in Bangladesh aim to fuel 40% of the country's power with renewable energy by 2041.
These 10 themes will undeniably shape the future of the fashion industry in 2025, presenting both challenges and opportunities for growth. As the industry navigates these turbulent waters, adaptability, innovation, and a focus on sustainability will be paramount to success.
