According to a recent McKinzie article, the state of fashion for the year 2025 is going to be difficult and tricky with challenges at every turn. They are also calling it a sluggish growth for the fashion industry.

The reason for this sluggish growth is simply because of economic challenges, shifting consumer behaviors, sustainability pressures, and geopolitical tensions.

Why is growth for fashion brands an issue in 2025?

70% of fashion executives identified low consumer confidence and reduced spending appetite as their top concern for the year ahead.

There are multiple reasons contributing to this sluggish growth. Here is what we found along with our take on the issue.

1. Production costs: With inflation rates reaching 5.9% globally and inevitable increasing prices for production and labor, it gets difficult for brands to be consistent with their prices year on year. This is where brands compromise on quality or value of their products in order to maintain the prices of their products.
   
   

   

   Graph of global inflation rates (Source: statista.com)

   
   

2. Customer expectations: With the value of the products declining due to rise in production costs, buyers have shifted from loyalty to actual value of the product. Buyers want quality and they no longer care about the brand like how they used to.

3. Sustainability goals: Governments and consumers are pushing for stricter sustainability regulations, requiring brands to invest in circular fashion, eco-friendly materials, and transparency but balancing profitability with sustainability efforts remains a challenge.
   
   

   

   Rack full of eco-friendly clothes

   
   

4. Geopolitical & Supply Chain Disruptions: Trade shifts, potential tariffs, and geopolitical instability in key manufacturing hubs are complicating sourcing strategies.

Best practices for fashion brands in 2025 to grow effectively

1. Use of AI - 70% of brands according to the McKinzie article have already mentioned that they would turn to AI to help with business with various AI tools that can help with eCommerce. AI is set to redefine the fashion industry.
   
   

   How will AI help?

   With AI brands can save up on operational costs such as creative costs on promotional material, save on manufacturing with smart inventory management and help users with choice paralysis. 82% of consumers want AI to help them shop

   faster with a personalized touch.

   

   AI fashion model made with Ayna

   
   
   

2. Retail experience - Customers aren't loyal to a brand anymore; they seek value more. Give consumers the feeling of getting more than what they paid for.
   
   In-store experiences, exclusive benefits, and hybrid online-offline strategies will help retain customers.
   
   

3. Diversifying supply chain - Brands must diversify supply chains and invest in nearshoring and digital production to remain competitive.
   
   

4. Multiple GTMs - Localized GTMs, and positioning to target a wider market and focus on acquiring a strong customer base is essential in this time of need.
   
   

   

The New Playbook for 2025

The fashion industry cannot rely on old strategies. With AI-driven solutions, data-backed decision-making, and a strong sustainability strategy, brands can survive and thrive despite global challenges.