This article was automatically translated from the original Turkish version.
In recent days, I mentioned in my in a text that I annually review the final months of each year and produce a Z report. For some time now, I have been sharing this Z report with you on the KÜRE Blog. But this time, my perspective is not backward—it is forward.
Global warming and the resulting decline in rainfall are well known to everyone. While discussing this topic with my spouse, we talked about how the textile industry already consumes vast amounts of precious water resources, and how producing cotton for a single pair of jeans requires kilograms of water.
Yet despite this, when we shop, we typically gravitate toward cotton products while condemning the rapidly increasing volumes of polyester and similar items. We also complain that the fashion industry, which changes so quickly and drastically, leaves little room for those of us who prefer classic styles. A recent article in Oksijen newspaper, based on a research report, caught my attention. I felt compelled to summarize it and share it with you.
The tenth annual State of Fashion report, prepared by the data and advisory teams of McKinsey & Company and The Business of Fashion, paints a bright but difficult picture for the fashion industry in 2026. While the key word of past years was “uncertainty,” the report identifies the defining term for 2026 as clearer: “challenging.”
Nearly half of executives expect sector conditions to worsen in 2026; one in four still hold out hope for improvement. Thus, expectations themselves are divided. But there is one point on which everyone agrees: the brands that will survive this period will be those that can act agilely and quickly interpret the shifting dynamics—from trade to technology.
According to McKinsey’s growth projections, the global fashion industry will continue to show low single-digit growth in 2026. The sector is not stagnating entirely, but the era of “easy growth” is long behind us.
In the eyes of fashion executives, the greatest risk is overwhelmingly consumer confidence and spending appetite. Nearly eight in ten executives (78%) believe this is the primary brake on industry growth. Second is economic strain, and third is disrupted trade flows and the reversal of globalization. Particularly U.S. tariffs are among the leading drivers of this imbalance.
U.S. President Trump increased customs duties on various countries (Anadolu Agency)
According to the report, U.S. tariffs are reshaping global fashion trade. The weighted average tariff rate on ready-to-wear and footwear imports surged from 13% to 54% shortly after the April 2025 package was announced, then eased slightly to 36%. Even this reduced level represents a dramatic jump compared to previous periods.
This scenario creates a cascading increase in cost pressure across the value chain: in production, logistics, retail, and ultimately consumer prices. Seventy-six percent of fashion executives believe commercial disruptions and rising taxes will be among the most important forces shaping the industry in 2026. Executives in North America, in particular, are inclined to pass these pressures directly onto prices; nearly half (45%) of executives in the region plan to raise prices by more than 5%.
Brands are resisting by altering supply routes, relocating some production to other countries, and tightening operational efficiency. In short, every number on a price tag now reflects a more complex geopolitical equation.
Access to applications within ChatGPT is possible - (OpenAI)
The State of Fashion 2026 report clearly shows that artificial intelligence is no longer a romantic technology in the fashion industry—it has become its backbone.
From the 2026 perspective, the biggest opportunity executives see lies in scaling up artificial intelligence and related digital capabilities. According to McKinsey’s projections, by 2030, about one-third of working hours across many sectors in Europe and the U.S. could be automated by productive AI and similar technologies.
This applies to a broad spectrum within fashion—from design and product development to demand forecasting and supply chain optimization. Companies now must compete not only with rivals within their own industry but also with players from the technology world for talent. Artificial intelligence is no longer merely a competitive advantage—it has become a prerequisite for even entering the game.
In challenging market conditions, reducing costs does not mean simply cutting more staff; it means making operations smarter and more efficient. This is precisely where artificial intelligence steps in—as the most realistic tool for doing more with the same team.
Artificial intelligence is not only transforming internal corporate processes—it is fundamentally changing consumer shopping behavior. Fifty-three percent of U.S. consumers say those who use generative AI for search also use it to seek product recommendations. Consumers are no longer using “search engines”; they are discovering products through conversational interfaces that answer questions.
This creates a new reality for brands:
SEO (Search Engine Optimization) alone is no longer sufficient. A new field called GEO (Generative Engine Optimization) is emerging. Brands must present their content in semantically rich formats that large language models can easily read and understand. Because whether a brand appears in the combination of results shown to a user who types “recommend me a sneaker in X style” on an AI chat screen is now the new battle for visibility.
In the next phase, autonomous AI agents may be able to monitor prices on behalf of users, track promotions, and even execute automatic purchases under certain conditions. Digital commerce could evolve into a stage where transactions are not just initiated by user clicks but negotiated by agents.
While the luxury segment as a whole is slowing, the jewelry category is defying this trend. Annual unit growth in jewelry is projected to be about 4.1%, nearly four times faster than apparel, between 2025 and 2028.
Two main motivations drive this momentum:
First, the desire to make a long-lasting, enduring investment; second, the urge for self-expression. Forty-two percent of women and 35% of men say they are buying more jewelry for themselves than they did two or three years ago. Jewelry is no longer merely a gift—it is increasingly a personal reward.
The rise of lab-grown diamonds, fueled by both ethical arguments and falling prices, is accelerating this trend. According to the report, by 2030, lab-grown diamonds are expected to account for half of all diamond jewelry unit sales.
The secondhand fashion and luxury market will grow two to three times faster than the new goods market over the next few years. Nearly 60% of global consumers say they are likely to shop secondhand in 2026. As prices, tariffs, and cost of living rise, secondhand is no longer just an “eco-friendly” choice—it is also an economic one.
What is interesting for brands is this: secondhand is not merely a price-driven escape route—it is also a customer acquisition channel. The report shows that 43% of consumers who first encounter a brand’s products through the secondhand channel later purchase new items directly from the brand. This compels brands to develop resale strategies within their own operations or through partnerships.
According to the report, “wellbeing” is now at the center of consumer priorities. In 2024, 84% of U.S. consumers and 94% of Chinese consumers identified wellbeing as one of the most important aspects of their lives. This is not a “trend”—it is a permanent lifestyle transformation expected to grow at 5–6% annually.
Consumers are no longer persuaded solely by flashy campaigns or “loud” content. They want to belong to a community of brands that reflect their identity, forge emotional connections, and make them feel good. Nearly nine out of ten consumers say belonging to a brand community that shares their values creates a stronger bond than traditional influencer marketing.
This sends a clear message to fashion brands: selling products is not enough—you must also sell belonging and meaning.
A Challenging Landscape: Growth Exists, But It Is Constrained
Customs Storm: Tariff Waves and Cost Multipliers
Artificial Intelligence Is No Longer “Extra”—It Is Infrastructure
Workforce Rewritten
AI Customers and GEO: The New SEO
Consumer Priorities: Jewelry, Secondhand, and Wellbeing
The Rapid Rise of Secondhand
The Age of Wellbeing: Consumers Seeking More Than a Brand
