The apparel industry continues to recover from pandemic-influenced global disruptions that upended supply chains, shifted consumer behavior, and accelerated digital transformation. Layer in rapid technological change, tightening regulations, and ongoing geopolitical tensions and you get a perfect storm of operational and strategic pressures that challenge every aspect of the apparel business.
The following challenges highlight the key stress points shaping the industry today, plus guidance on why they demand attention from owners, operations managers, and supply chain specialists alike.
What Are Apparel Industry Challenges?
Apparel industry challenges are the operational, financial, technological, and consumer-driven pressures that companies face, both internally and externally. These challenges impact growth and competitiveness in a fast-changing market.
In 2025, the various pressures are slowing growth in the apparel market, even as the sector is projected to reach a massive $2.6 trillion by 2035, according to Future Market Insights. From increasingly fragile supply chains and unprecedented waste to evolving consumer expectations and trend cycles, business leaders must navigate a market where speed, resilience, and innovation will determine which brands thrive.
Key Takeaways
- The apparel industry is weathering a year defined by rising costs, volatile demand, and mounting competitive pressure.
- Managing global supply chains and complex production networks remains a top industry concern.
- Sustainability and waste reduction have become business imperatives amid regulatory scrutiny and consumer expectations.
- Technology is transforming the apparel industry, beginning with AI-powered demand forecasting all the way to cloud-based platforms that provide visibility into inventory, logistics, and fulfillment.
12 Top Apparel Industry Challenges in 2025
The apparel industry faces no shortage of challenges that can arise anywhere across the value chain—from sourcing and production to logistics, sales, and post-purchase services. Obstacles may stem from long-standing structural issues or newer, unexpected disruptions. While the following challenges may vary in scale and severity, each one can directly affect profitability, efficiency, and brand reputation:
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Changes in Consumer Behavior
Inflation, higher living costs, and ongoing economic uncertainty have made shoppers more cautious about their spending. Deloitte reported that personal consumption expenditures grew just 1.2% in Q1 2025, down sharply from 4% in Q4 2024. This tighter spending environment is pushing consumers to prioritize value—whether that’s in the form of low prices, durability, quality, or cost per wear—and to be more strategic with their purchases. According to the Business of Fashion (BoF) and McKinsey’s “State of Fashion 2025” report, 64% of US shoppers “traded down” in Q3 2024, moving away from expensive, premium, or luxury clothing to cheaper alternatives.
This value-driven mindset is fueling the off-price and secondhand markets. More than 70% of consumers say they plan to buy from outlets or resale platforms, according to BoF/McKinsey. Globally, the secondhand apparel market is projected to reach $367 billion by 2029, growing five times faster than the broader apparel sector, according to ThredUp’s 2025 “Resale Report.”
At the same time, social media platforms are now key entry points and purchase drivers, with 67% of shoppers using them to find new brands and 41% saying influencers have impacted their buying decisions, per PwC. But it goes beyond discovery and influence—social media has also become a direct sales channel, with 46% of consumers saying they now buy products directly through platforms like TikTok and Instagram, according to PwC.
The apparel industry is also being reshaped by today’s eco-conscious consumers. Fast fashion, though still prominent, is losing dominance as shoppers—particularly younger ones—pressure brands to adopt more sustainable and ethical practices, creating tension between affordability and responsible production. This trend of expecting more from brands extends to inclusivity and personalization, with consumers expecting greater size representation in addition to individualized experiences. Similarly, physical retail is shifting from product-driven spaces to immersive brand hubs, with stores increasingly designed to offer unique experiences and knowledgeable staff prepared to create deeper connections than online browsing can provide. These shifts are forcing business and operations leaders to rethink their pricing and product mix, as well as ethical production and the ways they engage with customers both online and in stores.
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Economic Instability
The apparel industry has long been accustomed to navigating the global economy’s ebbs and flows. Today, it faces an environment defined by high inflation, currency fluctuations, geopolitical uncertainty, and global trade tensions—all of which complicate planning, operations, pricing, and profitability.
As inflation and living costs rise, consumer demand is softening. Discretionary categories like apparel are increasingly deprioritized as shoppers focus on essentials, which has led analysts to forecast low, single-digit revenue growth for the apparel market this year, according to BoF/McKinsey. At the same time, industry professionals are contending with rising operating costs. Inflation continues to drive up the price of raw materials, transport, and energy, while currency volatility creates unpredictable swings in profit margins. The result is a powerful financial squeeze due to flagging demand and surging production costs. Even major players have reported declining sales, store closures, and restructuring efforts as they try to adapt to these pressures.
As a result, apparel companies are rethinking their strategies from the ground up. Some are simplifying their product lines to focus on bestsellers, while others are investing in digital sales channels to better meet consumers where they are. Cost optimization, smarter logistics, material innovation, and supply chain diversification are becoming central to survival. For business owners and operations managers, the real challenge lies in building resilience: namely, figuring out how to stay competitive while keeping products affordable, sustainable, and profitable.
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Market Pressures and Shortened Trend Cycles
Fueled by social media and consumers’ insatiable demand for newness, trend cycles have accelerated from a seasonal rhythm to fleeting microtrends that can emerge and fade within weeks. The so-called “TikTok Effect” has democratized fashion trendsetting, allowing niche, user-generated apparel trends to gain widespread attention almost overnight.
Fast-fashion brands exemplify this evolution. Shein, for example, is shortening speed-to-market times to as few as 15 days. Altogether, high-velocity brands are setting a relentless pace that few brands can realistically match, raising industry benchmarks and deepening the divide between agile fast-fashion giants and slower-moving competitors. This rapid cycle also disrupts traditional trend forecasting and inventory planning as it strains every stage of operations from design and sourcing to logistics and retail execution. In 2023, excess stock across the fashion sector was valued at $70 billion to $140 billion, per BoF/McKinsey, underscoring the financial and environmental risks of misaligned demand forecasting. When trends flame out in weeks, production cycles can struggle to keep pace, leaving brands overstocked with yesterday’s looks or understocked on today’s viral hit. These mismatches erode margins, trigger costly markdowns, and undermine customer loyalty.
For business owners, operations managers, and supply chain leaders, enhanced forecasting, flexible production models, and closer coordination across merchandising, sourcing, and logistics are essential for survival in this increasingly fast-paced environment.
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Returns Management
Returns have become one of the apparel industry’s costliest challenges. Last year, US retailers processed an estimated $890 billion worth of returns, with apparel being one of the most return-prone segments. The dominance of online shopping has only exacerbated the issue: The average return rate for apparel bought online is 22%, more than triple that of brick-and-mortar levels (6.2%), according to ICSC’s “2024 Consumer Returns Survey.” Without in-store try-ons, fit and sizing issues typically prompt the majority of these returns. Troubling practices like “bracketing” (ordering multiple sizes or styles of an item with the intention of returning most) and “wardrobing” (buying items for a one-time use before returning them) are also on the rise. Retailers inadvertently fuel these behaviors by offering free returns and exchanges in a bid to stay competitive.
Yet it’s clear why retailers go the free shipping route: More than three-quarters of consumers consider free returns a key factor in deciding where to shop, according to the National Retail Federation. But for businesses, each return adds costs for shipping, inspection, restocking, and inventory management, amounting to 27% of the purchase price, on average, while unsellable items contribute to inventory shrinkage. Retailers also face the growing problem of fraudulent returns, which cost retailers upward of $100 billion annually, according to a report by Deloitte and Appriss Retail.
Beyond the bottom line, returns generate excess carbon emissions due to the need for additional transportation and massive landfill waste. For industry professionals, the challenge becomes balancing customer- and eco-friendly return policies against long-term financial viability. Solutions, such as virtual try-ons, improved sizing guides, and rich product visuals, can help reduce returns by setting clearer customer expectations. Advanced analytics and fraud detection systems, meanwhile, are important tools for managing reverse logistics and spotting bad actors.
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Supply Chain Vulnerabilities
The apparel industry’s supply chain has been challenged by factors that include material shortages, staffing gaps, freight spikes, and sustainability demands. Geopolitical tensions add tangible physical risks, such as port blockages, and the need to diversify sourcing away from high-risk regions. Extreme weather events, such as floods, droughts, and storms, threaten transportation and raw materials like cotton, while labor disputes and regulatory changes in key manufacturing countries further strain operations.
Trade barriers and supply disruptions have surged fivefold since 2015, with roughly 3,000 new restrictions imposed in 2023 alone, per BoF/McKinsey. Meanwhile, 9 in 10 fashion supply chain leaders report operational challenges, yet many still lack effective risk mitigation strategies, according to a separate McKinsey report. When disruptions occur, companies take an average of two weeks to plan and execute a response—far longer than the weekly pace of sales and operations cycles.
Making matters worse, the fashion supply chain spans a dispersed network of manufacturers, suppliers, and retailers. The greater the length and complexity of the chain—and the lack of technology to oversee it—the less contact among the stakeholders and the more difficult it becomes to maintain transparency. The absence of visibility can breed inefficiencies, cause costly delays, and expose companies to compliance risks. At the same time, regulatory and consumer pressures regarding ethical labor and sustainable sourcing continue to force brands to improve how they monitor and manage their extended networks abroad. Still, many suppliers remain reluctant to share details about their practices, wary of losing any competitive advantage.
In response to these pressures—which are compounded by tariff policies—brands are diversifying their sourcing footprints and pursuing nearshoring strategies in hopes of avoiding material supply bottlenecks, minimizing shipping costs, and expediting turnaround times.
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Overproduction and Waste
Most of today’s apparel companies have adopted the fast-fashion business model or have at least integrated its core strategies into their operations. The pursuit of speed and disposable trends has created a monumental overproduction problem, leaving the industry to contend with an unsustainable amount of waste, the vast majority of which ends up in landfills or is incinerated. In 2024, approximately 80% of discarded clothing ended up in landfills or was burned, while less than 1% was recycled into new textile fibers, according to an analysis by the Boston Consulting Group. Many brands also lack a reliable reverse logistics system to collect and reintegrate returned and used garments into the supply chain. The environmental toll of these practices contributes to greenhouse gas emissions, microplastic pollution, and chemical contamination.
This challenge is prompting industry leaders to move away from traditional “take-make-dispose” models and embrace circular fashion and “slow fashion” principles. That means designing for durability and building sustainable systems for reuse, repair, and recycling.
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Demand for Sustainability and Transparency
The apparel industry produces nearly 10% of global greenhouse gas emissions—more than aviation and maritime shipping combined—and consumes the equivalent of 86 million Olympic-size swimming pools of water annually. The sector also contributes to 9% of oceanic microplastic pollution due to its extensive use of petroleum-based fibers, including polyester.
These impacts have become a major force behind consumer purchasing decisions. A PwC survey found that 46% of shoppers are buying more sustainable products, and many are willing to pay a nearly 10% premium for them. At the same time, consumers are increasingly unwilling to accept vague sustainability claims. With 60% of brands behind on their own targets, according to BoF/McKinsey, scrutiny around greenwashing is intensifying, with consumers expecting verifiable proof of ethical sourcing, fair labor practices, low-impact production, and transparency throughout the entire supply chain.
Governments are amplifying the pressure with new mandates, such as digital product passports, which require brands to disclose details on a product’s material composition, supply chain origins, and lifecycle impacts. Similar transparency-focused legislation is emerging globally, forcing brands to invest in new systems for data collection and traceability to stay compliant.
Meeting expectations for sustainability requires more than marketing—it demands systemic change across the supply chain.
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Retaining Talent and Skilled Labor
The talent crisis in the apparel industry is twofold: On the production side, a shortage of skilled labor threatens craftsmanship, efficiency, and the ability to innovate as experienced workers retire and younger generations shy away from manufacturing. At the same time, front-line retail and management positions are increasingly difficult to fill and keep. In countries like France, for example, 60% of luxury houses report challenges attracting boutique staff, while 93% struggle to hire store managers. Similar trends appear in the US, where 44% of front-line retail employees say they plan to leave their jobs within six months, citing low pay, limited career development, and uninspiring leadership, according to McKinsey.
Compensation and working conditions are major sticking points. In a 2025 Fashionista survey, more than half of fashion professionals say their pay is “not very fair,” and nearly three-quarters say they haven’t received a raise this year. Unsurprisingly, burnout and attrition are on the rise. The industry is also dealing with serious skill gaps in digital design, analytics, AI-driven operations, and sustainable production. In fact, nearly half of apparel employees say they do not feel adequately prepared for digital transformation, according to ZipDo research.
Business owners and operations leaders who invest in attracting and retaining existing talent through fair pay, growth opportunities, and upskilling opportunities will be well prepared for the industry’s evolving future.
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Weak Consumer Trust
Fashion ranks among the least trusted industries, according to the “2025 Edelman Trust Barometer.” But for many consumers, trust is now as important to their purchase decisions as price and quality. It should come as no surprise, then, that true brand loyalty fell 5% between 2024 and 2025, according to Emarsys’s “Customer Loyalty Index 2025.”
Greenwashing is a major reason for the decline. According to a report by ESW, 55% of global consumers have become more aware of greenwashing than they were the year before, and 63% want brands to be truthful and transparent about company environmental credentials. Meanwhile, research from YouGov shows that 60% of global consumers are skeptical about brands’ green claims. This lack of trust makes it harder to retain ethically minded shoppers who want proof of sustainable and fair practices. The democratization of information via social media has intensified scrutiny. Consumers now openly debate pricing, quality, and value on platforms like TikTok and Reddit, hindering apparel brands’ ability to manage public perception.
Consumers are also more wary of how companies handle their data. Nearly 68% of global consumers are concerned about online privacy, while 57% view AI-driven data collection as a threat, according to the International Association of Privacy Professionals. For apparel brands that rely on ultra-personalization, loyalty programs, and a seamless checkout experience, these concerns can undermine ecommerce sales and repeat purchases. In addition, 66% of US shoppers say they wouldn’t trust a company that falls victim to a data breach, and 75% say they would stop purchasing from a brand after a cyberattack.
For business owners and operations leaders, regaining trust takes time. Marketing claims must be backed by verifiable, data-driven evidence, whether through third-party certifications, supply chain transparency, or emerging technologies, such as blockchain-enabled product passports. Digital experiences must also prioritize privacy and security to sustain loyalty in a marketplace where switching brands has never been easier.
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Protecting IP
While the fashion industry has always dealt with knock-offs, today’s imitations, or dupes, are easier and cheaper to produce and circulate. Unlike traditional counterfeits, dupes often avoid using protected trademarks and logos, making it difficult to prove infringement under intellectual property (IP) law. Technologies, such as generative AI and image recognition, meanwhile, make it easier for dupe producers to reverse engineer and misappropriate brands’ designs.
This challenge is prompting brands to rethink their value proposition. After all, it’s harder to sell high-value, original products when cheap alternatives are readily available and widely accepted. Indeed, nearly one-third of US adults have intentionally purchased a dupe, with adoption even higher among Generation Z and millennial consumers, according to BoF/McKinsey. The normalization of this so-called “dupe culture” is amplified by the widespread use of social media and online marketplaces, making it harder for brands to protect their designs and creative investments. Popular brands like Quince and Italic have built their entire business models around this trend, producing near-identical “luxury-grade” items at affordable prices by sourcing factories used by established brands and cutting out middlemen.
Brands are turning to multipronged enforcement strategies, including design patents, trade dress registration, trademark protection, and unfair competition litigation, to counter these threats. While fashion IP is notoriously difficult to enforce—due, in part, to the “useful article” doctrine that separates functional garment elements from artistic aspects—brands are not helpless. Recent lawsuits, such as lululemon’s 2025 lawsuit against Costco for lookalike apparel, underscore the growing importance of legal action. For business leaders, protecting IP requires continuous monitoring of emerging threats and a clear understanding of the evolving regulatory and digital landscape.
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Tightening Cybersecurity
The apparel industry is a prime target for cybercriminals drawn to its vast troves of sensitive consumer data and globalized operations. In fact, IBM ranks retail as the fourth most-targeted industry, with the average data breach costing retailers $3.48 million. Beyond the direct financial impact, breaches damage consumer trust, with multiple surveys showing that many consumers would stop purchasing from a brand after a cyberattack.
Recent high-profile incidents underscore the scale of the threat. In 2025 alone, Louis Vuitton, Dior, Adidas, The North Face, and the parent company of Gucci, Balenciaga, and Alexander McQueen confirmed data breaches that exposed millions of customer records, including names, government IDs, addresses, payment data, and purchase histories. Out of the 50 largest fashion companies, 20 have suffered breaches in the past, demonstrating that even the most established players are vulnerable. Luxury and premium brands are at even greater risk, as cybercriminals prize both their high-profile client data and valuable IP.
The threat landscape is also evolving fast. Along with traditional ransomware, malware, phishing, and distributed denial-of-service attacks, sophisticated, AI-driven phishing campaigns and deepfake scams are targeting fashion’s growing volume of online transactions. At the same time, according to Verizon, roughly 30% of reported cyberattacks now originate from a third-party vendor or supplier, exploiting the weakest link in a brand’s extended supply chain.
For business and operations leaders, strengthening cyber resilience requires updating or replacing legacy software with cloud-based systems, enforcing multifactor authentication, tightening third-party access, and investing in modern cybersecurity tools and threat-detection systems. Regulatory pressure adds to the urgency, as stricter enforcement of data-protection laws raises the cost of noncompliance.
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Digital Transformation
The convergence of new technologies and rising consumer demands has apparel brands reimagining their business models. However, the path to digital transformation is often hindered by the industry’s deeply rooted operational and organizational barriers. For example, fashion brands are notoriously slow to embrace new technologies—organizational resistance is real—with many still relying heavily on legacy systems and manual workflows. Outdated tools and processes limit real-time data visibility, risk audit-readiness, threaten cyber resilience, weaken forecasts, and impede interoperability across internal teams, retail operations, and supply chains. Resulting inefficiencies—heightened by the skill gap in AI, analytics, and digital design mentioned above—translate to slower product cycles, higher markdowns and waste, and a reduced ability to respond to market demands, emphasizing the high cost of inaction.
Many brands can also get caught up in the hype of flashy new tools only to discover that they don’t know how to integrate them effectively or use them to their full potential. A recent survey by Nvidia found that 80% of retailers have adopted or are piloting generative AI projects—most often for content generation in marketing and for predictive analytics. Yet without careful planning and change management, these tools may fail to deliver the intended ROI. In fact, a recent MIT report found that 95% of internal generative AI pilots fail, underscoring the challenge of moving from pilot phase to full-scale, profitable deployment.
Consumers are also contributing to the urgency for digital transformation. Deloitte found that 80% of consumers now demand personalized experiences from brands, but only 45% of brands say they’re successfully delivering them. In addition, consumers are actively embracing new technologies, with 72% of luxury shoppers indicating they would shop more with brands that incorporate augmented reality into the shopping journey.
For business and operations leaders, success lies in strategically prioritizing modernization efforts—from deploying apparel ERP software to digital pilots—while aligning people and processes to lay the groundwork for a broader transformation.
What Are the Impacts of Apparel Industry Challenges?
Collective pressures on the apparel industry are creating a ripple effect of impacts across every part of the value chain. On the financial side, rising costs, tariffs, inefficiencies, and high return rates erode margins and weigh heavily on profitability. Operationally, supply chain disruptions lead to costly delays, higher procurement and inventory-related expenses, and little visibility. The environmental impacts are equally significant, with overproduction fueling unprecedented waste and pollution, and resource depletion straining global ecosystems.
Brands’ reputations are also on the line. Missteps around sustainability claims or customer data handling can quickly diminish consumer trust. At the same time, stricter regulations on labor, environmental practices, and cybersecurity are raising the stakes of compliance failures. When it comes to the workforce, many apparel companies are hampered by trying to recruit and retain employees with the digital and sustainability skills needed to support long-term transformation. Notoriously high turnover and limited digital literacy slow brands’ progress even more.
Taken together, these impacts underscore how today’s challenges are not just operational obstacles but interconnected forces threatening profitability, resilience, and industry credibility.
What Is the Future of the Apparel Industry?
The future of the apparel industry is unfolding in real time, shaped by unpredictable markets, evolving consumer tastes, and rapid technological change. But even amid much uncertainty, the industry shows resilience, with steady—if not stellar—growth forecasted. Global apparel sales are projected to hit $2.6 trillion by 2035, up from $1.9 trillion in 2025, reflecting a compound annual growth rate of 3.3%. That said, to truly move forward, the industry must first address immediate concerns, such as supply chain disruptions and declining consumer trust.
At the heart of long-term growth is the shift from transactional business models to experience-driven ecosystems. Ecommerce is expected to expand into immersive channels where virtual try-ons, augmented reality, and digital fashion unlock new engagement opportunities and reduce return rates. Social media will continue to feed trends, influence purchasing decisions, and serve as a direct point of sale. Meanwhile, adoption of AI and predictive analytics will also increase, helping brands anticipate demand, optimize inventory, defend against dupes, and personalize customer journeys at scale.
Even as short-term pressures have led some executives to deprioritize sustainability, it is expected to continue fueling long-term strategic decision-making across the industry. From circular economy models, such as rental and resale, to regulatory frameworks, such as extended supplier responsibility, apparel companies will be compelled to embed environmental and social responsibility into their core strategies. This shift, encouraged by more eco-conscious consumers, helps mitigate risk and opens up new premium and niche growth segments.
The Right ERP System Can Help Overcome Hurdles
Apparel businesses navigate complex supply chains, fragmented operations, and shifting consumer demand. By adopting a unified, cloud-based ERP system, such as NetSuite Apparel ERP, they can centralize data across finance, inventory, orders, and production, while gaining real-time visibility into both high-level performance and granular operational details. Built-in automation helps reduce manual workflows, improve order accuracy, and streamline inventory and warehouse management—key areas where apparel companies using legacy systems often encounter inefficiencies and costly errors. AI-fueled insights support demand forecasting, inventory planning, and supply chain optimization, helping brands respond quickly to market shifts, minimize waste, and maintain customer trust. With integrated operations and analytics in one place, teams can make better-informed decisions across multiple locations, subsidiaries, or sales channels.
A mix of economic pressure, technological disruption, environmental reckoning, and regulatory change is creating a new kind of turbulence for the apparel industry in 2025. The risks may be higher, but so are the rewards for businesses that adapt. Success will hinge on not just understanding individual challenges but seeing how they all interconnect—and investing in the modern strategies and tools required to navigate this fast-changing, customer-driven landscape.
Apparel Industry Challenges FAQs
What is the outlook for the apparel industry?
Despite slowing growth amid rising economic turbulence, the global apparel market is projected to reach $2.6 trillion by 2035, according to Future Market Insights.
What is the single biggest challenge in the fashion industry?
Among the fashion industry’s biggest challenges is the ability to adapt to constant change—including new technology, volatile markets, and consumer behavior—while staying competitive and relevant.
What is the bottleneck effect in the apparel industry?
The bottleneck effect occurs when a delay or inefficiency in one part of the supply chain—such as sourcing, production, or logistics—clogs the entire flow of goods, slowing operations and delivery.
