Fashion at a turning point: CIRQUEL's take on the State of Fashion 2026 and the rise of afterlife responsibility
This summary is based strictly on the BoF x McKinsey “The State of Fashion 2026” report. The report is led by Imran Amed (Founder, CEO & Editor-in-Chief, The Business of Fashion), Gemma D’Auria (Senior Partner, McKinsey & Company; global leader of Apparel, Fashion & Luxury), and Anita Balchandani (Senior Partner, McKinsey & Company; co-lead of Apparel, Fashion & Luxury in EMEA). The acknowledgements also reference interviewed industry leaders including Michelle Gass, Rati Sahi Levesque (President & CEO, The RealReal), Alexis Nasard, Joshua Schulman, Ahmed Zaidi, and others.
CIRQUEL’s afterthoughts on the state of fashion in 2026 published by McKinsey & Company x BoF
Macro and consumer reality check: “The Age of Volatility” is the operating system
The report’s framing is clear: fashion is now operating in “The Age of Volatility” with geopolitics, trade, consumer behaviour and technology evolving simultaneously. The executive mood has shifted: “Challenging” overtakes “uncertainty” as the most common word executives use to describe 2026, with tariffs cited as the number one hurdle. The sentiment split is one of the most decision-relevant metrics in the report: 46% of executives expect industry conditions to worsen (up 8 percentage points YoY), while 25% expect improvement (up 5pp), signalling a more polarised market where “winners win harder.” Trade pressure is no longer niche: 40% of leaders cite “disrupted trade flows/deglobalisation” among their top-three growth risks (up 25pp YoY), driven by tariffs reshaping supply chains and input costs.
The cost/pricing outlook is equally pointed. In 2026, nearly three-quarters of executives expect to raise prices, a +19pp jump from 2025. In North America specifically, 45% plan to raise prices by more than 5% to offset tariff-driven input costs, and nearly one-quarter expect COGS to rise by more than 9%. These numbers matter because they imply a tough loop: rising prices meet “critical consumers,” pushing shoppers toward value and alternatives (including secondhand), while brands must protect margins through productivity and inventory discipline.
Technology is the other big structural shift. The report argues AI moves from “nice-to-have” to necessity under slow growth and cost volatility; executives identify scaling AI and related digital capabilities as the single biggest opportunity for 2026. Meanwhile, the consumer funnel itself is changing: the report introduces Generative Engine Optimisation (GEO) as an essential counterpart to SEO, as “fashion brands’ presence in AI chatbot responses [becomes] the new SEO.”
Resale, second-hand, vintage, recycle - trends of 2026 that will sky-rocket
Resale and secondhand: “Resale Sprint” goes mainstream and gets profitable at scale
The report treats resale as a foundational shift in the fashion system, not a trend. It forecasts the secondhand market will grow two to three times faster than the first-hand market from 2025-2027, as consumer appetite expands and scale + technology unlock profitability. The headline market number is explicit: the global secondhand apparel market is expected to reach $317 billion by 2027 (source: ThredUp, GlobalData). Within that growth story, the channel mix is heavily digital: online marketplaces account for 88% of resale spending in the US in 2024, and US online resale is forecast to grow 16% annually to reach $34 billion by 2027.
Consumer intent is equally strong and geographically uneven: 59% of global consumers say they are likely to purchase secondhand in 2026, and the figure exceeds 70% in China. The report also flags that Asia is now the largest and fastest-growing resale region, with China as a key driver and points to a luxury resale market in China expected to reach $33 billion by 2025 (cited in the report).
Resale demand is not only about price. The report shows motivation splits by age and psychology: beyond budget pressure, 61% of consumers say they would continue to buy or sell via resale even if they had more money to spend, often due to the “thrill of the hunt,” uniqueness, and identity. It also gives a tariff-linked behavioural signal: ThredUp reports nearly 60% of consumers would seek more affordable options like secondhand if tariffs increase apparel prices; as early signs, Depop app downloads rose 125% in Q1 2025 vs the previous quarter as tariff discussions intensified.
The report provides hard evidence that resale platforms are moving into an “inflection point” where operational maturity drives profit. It notes Vinted grew net profit more than 330% from 2023 to 2024, supported by continued investment in services like Vinted Go and Vinted Pay. It also highlights how authentication and quality assurance are being re-engineered with AI. In a case study, The RealReal uses proprietary tools to “save time and money on authentication,” including Shield (a counterfeit inspection model using 50+ product attributes) and Vision (photo-based AI examining fine details such as leather grain and threading) to predict counterfeit likelihood.
One of the most “taggable” executive quotes in the report comes from Rati Sahi Levesque (President & CEO, The RealReal): “There’s always going to be people who want the real deal.” Strategically, the report recommends brands define their resale model (from platform partnerships to brand-led offerings powered by Resale-as-a-Service providers), prioritise categories with strong resale value (e.g., outerwear, bags), and use resale to build “loyalty loops” and a brand halo around quality and durability.
Sustainability, AI and circular solutions: pressure rises even as momentum stalls
A key paradox in the report is “Sustainability Stalemate”: sustainability momentum slows, but pressure rises via regulation and consumer expectations. This is where AI intersects with sustainability, not as “innovation theatre,” but as infrastructure for compliance, cost management and customer experience.
On the consumer side, AI is reshaping discovery and conversion. In the second quarter of 2025, 53% of US consumers who used generative AI for search also used it to help them shop. Shopping-related searches on GenAI platforms grew 4,700% between 2024 and 2025, and 85% of GenAI shoppers report higher satisfaction with AI-assisted shopping journeys than conventional ones. Trust in AI search is also climbing: 41% of consumers say they trust generative AI search results more than traditional paid search ads.
The report’s SEO-for-AI theme is highly tactical. It advises companies to audit digital infrastructure for “agent interaction,” structure product catalogues and data-sharing feeds so AI agents can interpret and display products, and treat AI ecosystems as a new marketing channel requiring dedicated budget and strategy. It notes that even today, AI is already a measurable traffic source: ChatGPT accounted for 16% of Zara’s inbound referral traffic, and 8% for H&M and Aritzia (June–August 2025).
At the same time, the report argues that “circularity” is increasingly being pulled into the operating model by regulation. It explicitly cites the EU’s Ecodesign for Sustainable Products Regulation (ESPR) and California’s Responsible Textile Recovery Act as examples of legislation that will penalise unsold or obsolete stock, impose recycling and take-back obligations, and raise non-compliance costs. The sustainability implication is blunt: in 2026 and beyond, circular flows (repair, resale, take-back, recycling) increasingly become a regulated, measurable requirement - not just a brand narrative.
Inventory excellence: demand-driven supply chains become margin protection and regulatory risk control
Inventory is one of the most operationally “load-bearing” themes of the report. It cites McKinsey Global Fashion Index analysis showing days inventory outstanding reached all-time highs in 2024, meaning companies held stock longer before converting it into sales. In a world where demand is volatile, trade is disrupted and price increases are constrained by value-seeking consumers, inventory becomes both a margin drain and a strategic liability.
The report frames “demand-driven inventory optimisation” as a central lever to protect margins and reduce exposure. Technologies such as digital textile printing combined with AI tools that analyse demand and optimise production workflows are making on-demand and lower-risk approaches more viable. It cites Nike ‘s SNKRS Reserve (select customers preorder sneakers before they are made) as an example of experimentation in demand-led production.
There’s also a clear pricing/inventory feedback loop in the “Efficiency Unlocked” section: AI enables real-time integration of cost, competitor and customer data to optimise pricing, and supports more targeted promotions by channel/product/store to clear inventory where needed while avoiding unnecessary discounting. The report’s core message for operators is that static pricing and periodic manual reviews are structurally too slow in 2026 conditions and that inventory performance is increasingly tied to data fluency.
A leadership-level case also appears in the report’s interviews: an executive describes taking “decisive action” through deep markdowns to clean up inventory and finish a fiscal year with 7% less inventory, enabling investment back into “the new.” The operational lesson is that inventory clean-up, cost discipline and customer closeness are increasingly linked and slow-moving inventory constrains the ability to invest in growth.
Returns and afterlife responsibility: why reverse logistics becomes a strategy, not a cost centre
While the report’s most explicit circularity framing is around regulation, resale, and inventory (rather than a dedicated “returns” chapter), the direction is unambiguous: afterlife responsibility is becoming enforceable, and inventory/unsold stock becomes financially riskier due to take-back obligations and penalties. This shifts the operating question from “How do we handle returns?” to “How do we design a post-purchase system that protects margin, customer experience and compliance?”
The resale chapter shows the blueprint: brands must decide whether to partner with marketplaces, run brand-led resale, or use resale-as-a-service providers; then focus on categories with strong resale value; then use resale to bring in new customers and create loyalty loops. The-But the hidden complexity in all those models is reverse logistics: inspection, authentication/quality grading, routing, pricing, and speed-to-relist. The RealReal case illustrates how AI systems are being built precisely to reduce the cost and time of verification, prioritising higher-risk items for the most experienced inspectors.
Regulation makes this even more urgent. The report explicitly links 2026 legislation (ESPR in the EU, Responsible Textile Recovery Act in California) to penalties and obligations around unsold/obsolete stock and take-back/recycling. The executive implication is that brands need a repeatable, auditable afterlife system: what happens to returned goods, how they are processed, which pathways are chosen (resale, repair, donation, recycling), and how data is captured to prove compliance.
In practical terms, the report pushes leaders toward a combined playbook: inventory excellence + resale strategy + AI-enabled operations + regulatory readiness. That combination is what will determine which brands can turn volatility into advantage - and which ones pay for excess in both margins and compliance exposure.
Why CIRQUEL’s work matters now more than ever?
The State of Fashion 2026 makes one thing unmistakably clear: fashion is entering an era where afterlife responsibility is unavoidable. Products no longer stop mattering at the point of sale, they continue to shape environmental impact, regulatory exposure, and consumer trust long after purchase.
As inventories grow, regulations tighten, and consumers become more critical, brands are being asked a new question: what actually happens to products once customers return them or discard them? Historically treated as operational noise, returns and unsold items are now moving into the spotlight - measured, audited, and increasingly regulated. This is precisely where CIRQUEL operates. By bringing intelligence, traceability, and decision-making into reverse logistics, we help ensure that no product is written off before its potential is understood, whether it can be repaired, resold, repurposed, or responsibly recycled. For consumers, this means trust and transparency. For the planet, fewer unnecessary shipments and less waste. And for brands, a way to meet rising expectations without pushing the problem downstream.
In a system defined by volatility and accountability, managing the afterlife of products is no longer a niche capability - it is core infrastructure. The future of fashion belongs to brands that design not just for sale, but for what comes after. Read the full State of Fashion 2026 report here.