A recent report from McKinsey and the Business of Fashion reveals that a significant 67 percent of fashion executives view India’s fashion market as a vibrant opportunity for growth by 2025. This perspective is emerging as global fashion brands seek alternatives to the Chinese market, driven by the ongoing challenges to China’s economic stability.
The “State of Fashion 2025” report highlights that alongside India, Japan is anticipated to maintain its luxury market momentum through 2025, buoyed by robust international and domestic spending. Nevertheless, the report forecasts a challenging year ahead for the worldwide fashion industry, underscored by economic and geopolitical hurdles, as well as evolving consumer values.
Only a small fraction of executives—about 20 percent—believe conditions will improve in 2025, with a larger proportion (41 percent) expecting stability and 39 percent predicting a downward trend. A staggering 70 percent of industry leaders expressed that waning consumer confidence poses the greatest threat for the upcoming year, with over 80 percent of consumers planning to maintain or decrease their fashion expenditure.
Interestingly, sustainability concerns seem to have lessened in priority, slipping from 29 percent noted in 2024 to just 18 percent this year among fashion executives. Despite increasing regulations, approximately 63 percent of companies are lagging on their 2030 decarbonization objectives, as consumers show little willingness to pay extra for sustainable options.
Online fashion marketplaces are facing severe hurdles, with an average share price drop of 77 percent from 2021 to 2024. Particularly in Europe, these platforms are challenged by the rise of aggressive competitors like Shein and Temu. On a brighter note, niche sportswear brands are set to become a significant profit driver, expected to account for 57 percent of profits in the sportswear sector, nearly tripling their market share since 2020.
As growth rates in the fashion sector are projected to stabilize in low single digits, brands must adapt to retain their market positions. They are urged to reevaluate their consumer relationships, focus on overlooked demographics, and prove the value of their products.
The report also emphasizes the growing importance of artificial intelligence in transforming the shopping experience. Half of the surveyed executives believe that leveraging AI for customer product discovery will be crucial in 2025. With 41 percent of consumers turning to second-hand markets for fashion bargains, and the popularity of budget replicas rising thanks to Gen-Z, strategies must evolve to meet these shifting demands.
