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Fashion Slows Its Stride: Adapting to a Prolonged Low-Growth Era

The global fashion and luxury retail industry is entering a structurally different phase, one defined not by rapid expansion but by persistent low growth and heightened volatility.

February 04, 2026 • Estimated Reading Time: 5 minutes

After years of disruption driven by pandemics, geopolitical shocks, and supply chain realignment, the industry is now confronting a more sobering reality: macroeconomic uncertainty and value-conscious consumers are no longer temporary headwinds but enduring features of the landscape.

Europe illustrates this shift clearly. As shown in the chart above, fashion retail sales growth decelerated sharply from double-digit levels in 2022 to low single digits by 2024, with projections suggesting continued stagnation through 2026. While GDP growth across the region is expected to remain broadly stable, supported by resilient labor markets, consumer behavior tells a more cautious story. Shoppers are trading down, delaying discretionary purchases, and prioritizing essentials and experiences that align with personal well-being. For fashion executives, this means growth will be harder won and margin pressure will remain elevated.

The United States presents a different but equally challenging growth profile. After a dip into negative territory in 2023, fashion retail sales rebounded modestly in 2024. However, forward-looking projections indicate that momentum will soften again, settling into the low single digits by 2025 and 2026. This trajectory reflects mounting strain on the American consumer. Confidence fell to its lowest level since mid-2020 following tariff announcements, while higher unemployment, slowing labor supply growth, and persistent inflation continue to erode discretionary spending power.

Even upper-income households, historically the engine of US consumption, are showing signs of retrenchment. As Bain highlights, a growing “flight to value” is pushing shoppers toward private-label and lower-priced alternatives, potentially dampening nominal sales growth despite modest inflation. Offsetting forces such as tax reductions, easing fuel prices, and potential interest rate cuts may provide some relief, but they are unlikely to restore the robust growth patterns of the past decade.

China remains the most complex and nuanced market. Following a strong rebound in 2023, when fashion retail sales surged as post-pandemic demand was unleashed, growth slowed sharply in 2024 and is expected to moderate further through 2026. Slower GDP expansion and declining disposable income growth are tempering consumer enthusiasm, even as certain segments, most notably sportswear, continue to outperform.

That said, sentiment toward China is improving relative to recent years. Fewer industry leaders now view the market as unpromising, suggesting cautious optimism that the worst of the slowdown may be behind it. However, the era of easy growth is over. Success in China will increasingly depend on precise localization, brand relevance, and a clear value proposition rather than scale alone.

Across all regions, the luxury segment offers a partial counterbalance. After a difficult 2025, modest improvements are expected as brands pursue creative resets aimed at reigniting consumer excitement. Notably, luxury players are reinvesting in physical retail in the United States, where square footage expanded significantly in early 2025. These moves signal confidence that experiential retail, when executed well, can still drive growth even in a constrained environment.

Looking ahead to 2026, fashion executives are coming to terms with what many now describe as a “challenging” rather than merely “uncertain” environment. Trade policy shifts, including US tariffs, have redrawn sourcing maps and forced rapid supplier diversification. At the same time, artificial intelligence is reshaping everything from demand forecasting to design and merchandising, raising both productivity potential and execution risk.

Yet within this low-growth reality lie opportunities. Agile brands that sharpen their customer value proposition, reinvest AI-enabled productivity gains into their people, and maintain tight C-suite alignment around strategy are best positioned to win. In a world where growth is scarce, competitive advantage will belong not to those chasing scale at all costs but to those capable of adapting quickly and executing with discipline.

Sources & References

Bain. (2026). 2026 Global Retail Sales Outlook. https://www.bain.com/insights/2026-global-retail-sales-outlook-snap-chart/ 

McKinsey. (2026).The State of Fashion 2026: When the rules change. https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion