Fashion and luxury will enter 2026 navigating a world where volatility is becoming the baseline rather than the exception. In this challenging environment, only the most agile brands that can quickly adapt are likely to emerge as winners, according to ”The State of Fashion 2026” report by consulting company McKinsey, writes eToro analyst for Romania, Bogdan Maioreanu.
Executives in fashion increasingly describe the current environment as “challenging”, and nearly half expect industry conditions to deteriorate next year, even as a sizable minority sees clear pockets of opportunity in markets like China and in new product categories like the AI-powered glasses.
The global economy is changing, US tariffs are redrawing trade maps and are pushing up input costs, while consumers, squeezed by economic uncertainty, are becoming more value-conscious and selective with every purchase. According to the report, 76% of fashion executives say trade disruptions and rising trade barriers will shape the industry in 2026. Key fashion sourcing hubs are most affected by rising tariff rates — China, Vietnam, India, Bangladesh and Indonesia — which together account for 63%of US textiles.
In the luxury segment, the era of easy price-led growth is fading. According to the report, the number one attribute that high-net-worth customers say epitomizes luxury is “expertise and quality.” Aspirational shoppers are redirecting budgets towards experiences and wellbeing, forcing high-end fashion houses into a reinvention cycle, refocusing on creativity and craftsmanship to rebuild client trust. Companies are also looking at how to integrate product, storytelling and client experience into a cohesive expression of their brand value. The mid-market is emerging as the fastest-growing segment, powered by design-led brands that elevate product and in-store experience while still delivering discernible value.
At the same time, category leadership is up for grabs. Jewellery is set to outpace the wider fashion market through 2028 on the back of demand for pieces that stand the test of time, blending investment logic with self-expression and a rising culture of self-gifting among both men and women. Smart wearables — including smart watches, rings, eyewear and bands — are the fastest-growing accessory category, with growth of 8.3% per year since 2022, which is estimated to continue at 9% annually to 2028. Partnerships like EssilorLuxottica and Meta demonstrate that when technology is wrapped in familiar aesthetics, smart glasses can cross from gimmick to mainstream. As new display-enabled frames roll out in 2026, fashion brands will increasingly be judged on their ability to collaborate credibly with Big Tech without diluting their own design codes.
AI has started to change employment in Western society, and fashion won’t be immune to the effects. By 2030, 30% of employee time across industries in Europe and the US could be automated by generative AI and other technologies, the report notes. In the same time span, the report mentions that up to 40% of workers in developed countries will need to reskill or change roles due to technology. Currently, over 90% of organizations say they will increase investments in generative AI, but only 1 percent describe their rollouts as “mature”. Currently, AI is starting to play different roles in fashion companies, from supply chain management, predicting trends, to shopping assistance and even supporting the creativity processes. This might prompt fashion companies to make AI a strategic priority across their organisations. Agentic AI might reshape how people work and collaborate, so fashion companies will need to figure out how they can harness this emerging technology too.
McKinsey finds that underneath all these demand shifts lies a hard economic imperative: companies must become more efficient to drive growth. With tariffs, labor scrutiny and logistics costs, all squeezing margins, legacy advantages such as cheap sourcing or brute-scale promotion most likely will no longer suffice. In 2026, the winners in fashion and luxury might be those that look at trends early, treat AI as infrastructure, use pricing to gain long-term trust, and align brand universes with a consumer who wants products to deliver not just status, but well-being, community and longevity.
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