---

If the past few years have been about readjusting after a difficult period, 2026 is shaping up to be the year where multiple pressures hit at once.

Technology is moving fast. Regulations are getting tighter. Consumers are asking tougher questions while margins stay thin. And supply chains remain exposed to shocks that brands cannot fully control. 

If you’re working inside a fashion brand, you’re likely already feeling some of that tension in your day-to-day work.

What makes this moment particularly challenging is that these changes aren’t happening in isolation. A sustainability conversation can quickly turn into a traceability and data management challenge. Returns start affecting margins and waste reduction goals. And when teams begin experimenting with AI, gaps in governance and product data start to become very visible.

That can feel overwhelming, but it also makes the path forward clearer. Rather than sounding the alarm, today we’re taking a practical look at what we see happening in the fashion industry in 2026 and where you can focus your efforts to stay prepared.

Why 2026 is a turning point for the fashion industry

Nearly half of fashion executives expect similar or slightly tougher conditions than last year, particularly around costs, demand, and global trade. At the same time, AI, sustainability, and supply chain transparency are becoming central to how brands operate.

AI is already reshaping the way teams work, how customers shop, and how brands interact with both. As it becomes part of everyday workflows, the year ahead will test how well fashion brands are prepared to keep up with that pace of change.

Alongside this, sustainability expectations are increasingly being backed by regulation, and supply chain transparency is moving from a competitive advantage to a baseline expectation. For many brands, that shifts the focus back to getting the operational basics right.

The quality of product data, the clarity of planning processes, and the visibility teams have across suppliers and sales channels will determine how quickly brands can respond.

In other words, success now depends as much on operational readiness as on creative vision.

Fashion industry problems and solutions: What brands are really up against in 2026

Here’s a helpful way to think about 2026: The “solution” is usually not just another tool.

In most cases, it’s a combination of:

• Clearer ownership and governance
  
• Better-connected data
  
• Operational discipline (without sacrificing speed)
  
• Technology that supports how fashion teams actually work

Below are six pressure points we see affecting fashion brands we work with.  

1. AI in fashion: Adoption speed > understanding

AI is already part of the fashion workflow. For many, it’s involved in concepting, design support, demand forecasting, marketing content, customer service, product discovery, and more.

And the adoption curve is steep. Some market estimates put AI in fashion growing at roughly 40% from 2024 to 2025, which signals just how fast these tools are scaling across retail and apparel.

In practice, AI tends to expose the strengths and weaknesses of the systems and data it relies on. For example:

• Inconsistent product data leads to unreliable AI outputs
  
• Unclear accountability becomes unclear governance
  
• Inconsistent product info becomes weaker AI-driven discovery

Because AI also touches sensitive areas such as bias, transparency, labour impacts, intellectual property, and consumer trust, brands can sometimes find themselves adopting the technology faster than they can clearly explain how it’s being used.

For many companies, the harder part lies in getting the foundations right: clear data, well-defined processes, and ownership across teams.

What brands can do to adapt to AI responsibly:

• Treat AI as an enabler rather than a shortcut. Focus on use cases that remove friction from your existing workflows, such as speeding up sampling decisions, improving forecasting inputs, or keeping product content consistent, rather than trying to replace teams altogether.
  
• Put guardrails in place before scaling. As AI becomes part of everyday workflows, teams need clarity around ownership, acceptable use, and how outputs are reviewed. Clear governance helps you avoid confusion as adoption grows.
  
• Start with clear goals. If you’re already experimenting with AI, make sure you have some clear aims in place. With AI, the real value usually comes from improving speed, accuracy, consistency, or decision support.
  
• Strengthen product and operational data. In fashion, AI relies heavily on structured product information for its insights. If attributes, SKUs, or inventory data are inconsistent, those gaps will be quickly seen in AI outputs – and can throw off your entire system.

2. Sustainability in fashion: Marketing versus reality

Sustainability is moving into a different phase for fashion brands. For many, what was once reserved mainly for marketing campaigns is now tied much more closely to credibility and, in many cases, compliance.

Three things are driving this change:

• Consumers are more sceptical of vague sustainability claims, and brands are under increasing scrutiny.
  
• Overproduction and waste are being discussed more as structural business problems (forecasting, planning, inventory, accountability), not just environmental ones.
  
• Many brands are investing more seriously in understanding their environmental impact and improving how they source, produce, and manage products.

From the consumer’s perspective, it’s not surprising that another tension is emerging: sustainability fatigue. Many still care about sustainability, but the cost, complexity, and sheer volume of sustainability messaging can make it harder to translate those values into everyday purchasing decisions.

This comes down to the so-called attitude-behavior gap. People express strong concern about sustainability, yet under financial pressure, or when messaging feels unclear, those intentions can go out the window. In that environment, vague or poorly substantiated claims can actually be more of a risk than a boon.

How brands can turn sustainability claims into operational reality

• Prioritize traceability and verifiable data. As scrutiny grows, credibility increasingly comes from what you can demonstrate. “We believe” doesn’t hold up the same way “we can show” does.
  
• Align messaging with actual operations. Treat sustainability metrics with the same discipline you apply to financial or operational data so your claims can be supported.
  
• Improve visibility across materials, production, and lifecycle. Make sure you can clearly trace where materials come from and how products move through production so sustainability decisions can be backed by evidence.
  
• Reduce waste through better planning and accountability. Rather than aiming for perfect forecasting, your focus should be on better visibility, faster feedback loops, and clearer ownership across teams so overproduction can be addressed at its source.

3. E-commerce returns: The hidden cost draining margins

Returns often get discussed as a customer experience challenge. In reality, they’re also hitting margins, complicating inventory, and adding to the sustainability conversation.

Returns themselves aren’t the problem. The bigger challenge is that many brands don’t yet have a clear view of:

• Why items are coming back
  
• Which products / fits / fabrics have the highest return risk
  
• Where returns pile up in reverse logistics
  
• What the downstream impact is on stock planning

Without that visibility, it’s difficult to even begin to fix things. Teams often end up reacting to returns rather than learning from them. The result is higher operational costs, slower inventory cycles, and valuable stock tied up longer than expected.

How brands can regain control of returns and reverse logistics

• Improve product information and consistency. Make sure your fit guidance, sizing logic, product info, and imagery are clear and consistent across channels so customers know exactly what to expect.
  
• Build feedback loops from returns into planning. Use return data to inform design, sizing, and assortment decisions so the same issues don’t repeat season after season.
  
• Make the returns process efficient without making it impersonal. Design a clear and well-structured return flow so you can protect the customer relationship while keeping operational costs under control.
  
• Get inventory visibility right. Track returned items clearly so your team can process them quickly, restock sellable products sooner, and avoid inventory sitting in limbo.
  

4. Digital transformation in fashion: Too many tools, not enough connection

Fashion teams work with a lot of tools, many of which don’t play all that nicely together.

Teams add software solutions to solve specific problems, but the overall effect is often:

• Siloed data
  
• Duplicate work
  
• Inconsistent reporting
  
• Different versions of “the truth” across regions and teams

The result is blind spots across the business. And when the pressure increases (because of tighter margins, compliance deadlines, or supply disruptions), those gaps become a much larger problem.

How fashion brands can move toward a more connected setup

• Align processes and ownership before adding more tools. Make sure your teams agree on how workflows should run and who owns key data before introducing new systems, otherwise new tools will simply replicate the same confusion.
  
• Reduce duplication and manual work by consolidating core operational data. Bring product, order, and inventory data into a shared foundation, so your teams spend less time reconciling information and more time acting on it.
  
• Connect tools around a clean data foundation. For many fashion brands, that foundation is an ERP software built for the fashion industry, like Itsperfect, that brings together colors, sizes, seasons, wholesale and retail operations, traceability, and multi-channel inventory in one consistent structure.

5. Sustainability regulations are coming fast

If you’re operating in Europe, sustainability regulation is about to become much more specific.

Both the Ecodesign for Sustainable Products Regulation (ESPR) and the Digital Product Passport (DPP) will play a key role here. Together, they aim to make product sustainability more transparent by requiring brands to track and share information about materials, sourcing, and lifecycle impact.

For brands looking to stay ahead, this often starts with a few practical steps:

• Mapping product and supply chain data
  
• Building repeatable reporting logic
  
• Establishing traceability across materials and production
  
• Preparing for digital product documentation

How to prepare for ESPR/DPP and what comes next

• Start mapping required data early. Identify what product, sourcing, and material data already exists in your systems, what’s missing, and which teams are responsible for maintaining it.
  
• Break compliance into operational steps. Instead of treating regulation as a one-off project, integrate data collection and reporting into everyday workflows across product development, sourcing, and production.
  
• Invest in traceability foundations. Tools can support traceability, but they rely on structured product and supplier data. The clearer your underlying data model, the easier it becomes to meet reporting requirements.
  
• Explore where DPP support fits. If you’re already improving product traceability, Digital Product Passport functionality (like Itsperfect’s DPP module) becomes a natural extension rather than a separate initiative.

6. Supply chains under pressure: Transparency, speed, and risk

Even in the “post-pandemic” world, supply chain disruption hasn’t really disappeared. It has simply taken on new forms: geopolitical tensions, tariffs, shifting sourcing hubs, and ongoing volatility in costs and lead times.

Many industry leaders are already flagging trade disruption as one of the defining forces shaping 2026, which shows how structural these pressures have become.

At the same time, expectations for transparency continue to rise, not just from regulators, but also from consumers and retail partners who increasingly want to know where products come from and how they’re made.

So, to recap, brands are trying to balance:

• Speed to market
  
• Cost control
  
• Sustainability expectations
  
• Traceability requirements

No easy task!

How fashion brands can build more resilient supply chains

• Improve visibility across the entire supply chain. Go beyond tier-1 suppliers and start mapping the materials, partners, and processes further upstream so potential disruptions become visible earlier.
  
• Strengthen collaboration with suppliers. Share timelines, production updates, and key data with your partners so you can react faster when delays or changes occur.
  
• Build risk awareness into planning. Scenario planning becomes far easier when your sourcing, production, and logistics data live in consistent systems with clear ownership.
  
• Create flexibility in planning and production. When planning cycles are connected to real demand and inventory signals, you can reduce overstock, markdown pressure, and unnecessary waste.

FAQ: Fashion industry challenges in 2026

What are the most common fashion industry challenges in 2026?

Some of the most common fashion industry challenges in 2026 include AI adoption, sustainability scrutiny, rising return volumes, fragmented digital systems, new regulations such as ESPR and Digital Product Passports, and ongoing supply chain disruption.

Why is operational readiness becoming important for fashion brands?

Operational readiness helps fashion brands respond faster to changes in demand, regulation, and supply chain conditions by improving data visibility, planning processes, and coordination across teams.

How is AI affecting the fashion industry?

AI is increasingly used for design support, demand forecasting, marketing content, and product discovery, but it also highlights gaps in product data, governance, and operational processes.

Why are sustainability expectations changing for fashion brands?

Sustainability is shifting from marketing messaging to operational accountability, with regulators, consumers, and partners expecting clearer data on materials, sourcing, and product lifecycle impacts.

How can fashion brands improve supply chain resilience?

Fashion brands can strengthen resilience by improving visibility across suppliers, connecting planning and inventory data, collaborating more closely with partners, and building flexibility into production and sourcing decisions.

---

The takeaway: From fashion industry challenges to long-term readiness

Many of this year’s challenges have something in common: short-term fixes don’t tend to hold up for long.

The brands having an easier time are usually the ones putting more structure in place early. Cleaner data, clearer processes, stronger traceability, and better-connected operations all make it easier to respond without slowing everything else down.

And that matters when conditions change. Whether:

• Consumer confidence wobbles
  
• Trade rules shift
  
• Regulations tighten
  
• AI reshapes your workflows and how your products are found

These shifts don’t happen in a bubble, and they rarely wait for the right moment.

Which makes the real question less about reacting, and more about whether your current systems give you the visibility and control to keep moving when they do.

If you’re starting to look more seriously at operational readiness, a useful place to begin is by understanding how connected your product, stock, order, and reporting data really are.

And if that’s something you’re exploring, Itsperfect is built to support exactly that – helping fashion brands manage complexity across colors, sizes, seasons, traceability, logistics, wholesale, and retail in one place.