State of Fashion 2025: Key Circularity Takeaways
New inventory legislations, value-driven growth, and strategies to make more with less.
As the fashion industry grapples with stalled growth amidst mounting political uncertainty, high inflation, and waning consumer confidence, sustainability is falling on the priority list for fashion executives. Despite this, environmental pressures remain, with key legislation set to take effect next year, even as 63% of fashion brands report being behind on their 2030 climate action targets.
We’re summarising our key takeaways from the Business of Fashion McKinsey & Company State of Fashion 2025 Report, exploring how circular business models could offer solutions to the most pressing hurdles facing fashion leaders today.
Prove Your Value
Rising prices are driving cost-conscious behaviour across all income levels.
As we highlighted in our Quiet Luxury, Loud Budgeting: Fashion’s Price-Quality Paradox article last month, brands are increasingly being expected to prove their value—particularly those operating with premium price points. With many consumers indicating an intention to continue to purchase dupes and secondhand products, even as their incomes improve, it is clear that somewhere along the way, the intrinsic value of brand relationships has been lost. To reclaim this, brands must embrace:
Increased transparency - to demonstrate exactly why their products are superior
Responsibility for products in the secondhand market - to not only derive revenue from resale but to control and enhance their brand narrative.
To communicate value, brands will need to consider their customer’s priorities and work to meet their expectations. Premium and luxury brands, in particular, can benefit from investing in owned resale and rental channels, offering better value for money to entice entry-level shoppers who want to buy into the brand but aren’t ready to commit to full-price yet. These initial touchpoints are prime opportunities to demonstrate exceptional quality and superior customer experiences, fostering loyalty in the long run.
Crucially, brands can no longer rest solely on their brand name, heritage, or sustainability credentials to justify higher pricing. Instead, they will need to communicate the tangible benefits of investing in their products (over cheaper dupes), through cost-per-wear savings or embedded services such as free or discounted repairs.
Less Is More
As pricing hike fatigue sets in among consumers, fashion leaders expect to have less pricing power, instead turning to higher sales volumes to fuel growth. However, strategies centered around selling ‘more for less’ remain short-sighted as the industry continues to wrangle with chronic overproduction. In 2023 alone, an estimated 2.5 to 5 billion items of surplus stock were produced— worth up to $140 billion in potential sales. Pumping more products into the industry to fuel growth will undoubtedly perpetuate this issue, exacerbating negative environmental impact as well as causing compliance risks, in the near future.
With the Ecodesign for Sustainable Products Regulation coming into effect in 2025, requiring brands to report on their inventory management and making it illegal to destroy unsold stock; now more than ever, fashion brands must get resourceful and learn to make more with less. Decoupling growth from production volume requires adopting differentiation strategies through circular design and innovative business models, such as resale, rental, or recycling excess inventory to unlock missed revenue opportunities.
By embracing these approaches, fashion leaders can future-proof their businesses, comply with evolving regulations, and deliver value-driven growth in a way that resonates with today’s complex consumer needs.
CircKit.ai helps fashion and textile brands unlock new growth and profitability through circular design and end-of-life initiatives. Get in touch to find out how our circularity toolkit could benefit your fashion business.