BDO Australia partner Salim Biskri unpacks the winning strategies for fashion retailers.
Fashion has always been an industry built on change – change in taste, change in culture, change in identity. But we are now seeing something different with structural changes.
Fashion has now moved beyond uncertainty, but the operating environment remains challenging, driven by economic volatility, trade disruptions, shifts in consumer priorities and rapid technological change – all happening at once.
Winning in a market where instability is the new baseline is the new challenge but also opportunity for fashion retailers.
The big picture
Over the past five years, Australia’s fashion sector has grown steadily, averaging around 3 per cent annual growth. Online sales now account for around a quarter of all fashion sales, with e-commerce revenue reaching $11.6 billion in 2025. The level of online penetration is a critical shift, as the channel is now a business in its own right.
Yet even with this digital expansion, the long-term trajectory remains relatively modest with roughly 2.5 per cent to 3 per cent growth forecasted to 2030.
On the surface, the sector appears to be performing well, but cost-of-living pressures continue to weigh on discretionary spending, while digital channels are redefining how and where consumers spend. Rather than lifting all parts of the market, growth is being redistributed across categories, price points and channels.
Not all fashion is moving the same way
The retail market continues to expand, but not all segments of the fashion sector are growing at the same pace.
Women’s apparel, the largest segment by revenue, is growing modestly, with pricing pressure from fast fashion continuing to weigh on performance.
By contrast, children’s wear is emerging as one of the strongest-performing categories, with growth driven by repeat purchasing behaviour, as well as increasing demand for quality and sustainability.
Accessories are also outperforming, supported by higher margins and resilient demand linked to impulse and gifting.
Athletic footwear and athleisure continue to benefit from long-term casualisation trends, while non-athletic footwear and formalwear remain under pressure.
It is now a market splitting into different speed lanes. Categories linked to casual lifestyles, value and convenience are performing well, while mid-market apparel is being squeezed between low-cost fast fashion and premium brands.
Profitability is the real pressure point
With revenue growth harder to win, margin pressure is also becoming structural.
More than 95 per cent of fashion products sold in Australia are imported, leaving retailers vulnerable to changes in the Australian dollar, supply chain disruption and changing trade conditions. Competition continues to increase, with ultra-fast fashion players such as Shein generating an estimated $1.5 billion in Australian revenue in 2025 and pushing price expectations lower across the market.
At the same time, heavy promotional activity, rising wage and occupancy costs, and higher logistics expenses are making it harder to protect margins. The growth of online shopping is also changing the economics of fashion retail, with apparel return rates estimated at around 35 per cent and consumers continuing to expect easy, low-cost returns.
The challenge is not a lack of demand, but the cost of capturing it. As margins come under pressure and profitability squeeze is being driven by several forces at once, retailers need to be disciplined about where they invest, how they compete and which opportunities are worth pursuing.
Choosing where to compete
The market is creating clear opportunities, but not for everyone.
Categories such as premium athleisure, quality children's wear, accessories and direct-to-consumer brands continue to attract strong consumer demand. Sustainability is also becoming a bigger influence on purchasing decisions, with more than half of consumers factoring it into their buying choices. At the same time, resale and recommerce are moving beyond sustainability initiatives and becoming genuine growth opportunities for retailers. Consumer interest in local and Indigenous-owned labels also points to an opportunity for brands with clear stories, strong community connections, and a distinct place in the market.
Other categories face a tougher outlook. Mid-market apparel remains caught between low-cost fast fashion and premium brands, while formalwear and retailers that rely heavily on physical stores are finding it harder to maintain momentum.
This means retailers need to make deliberate choices about where to invest, where to optimise performance and where it may make sense to pull back. Trying to compete on both price and brand value is becoming harder. Store networks and digital channels can no longer operate in isolation, and careful management of costs such as logistics, occupancy and returns is essential to protecting margins.
Technology is also playing a bigger role in retail performance. Tools such as AI-driven personalisation, virtual try-on and customer data platforms are helping retailers improve conversion rates, reduce returns and better understand their customers.
Where the opportunities lie
The Australian fashion sector is not standing still. It is being reshaped by technology, consumers, margin pressure and a new competitive landscape.
Some categories are accelerating. Some are declining. Some business models are strengthening.
But for brands willing to adapt, this is not a story of decline. It is a story of separation. A separation between brands that react and brands that reposition. Between brands that chase volume and brands that build value. Between brands that wait for conditions to improve and brands that decide what they want to become.
In this environment, success will not come from pursuing growth at all costs.
The market will reward fashion retailers who are deliberate in their choices, willing to adapt fastest, positions clearest and execute with the most discipline.
This is a partnered content series with BDO Australia, the platinum partner for Ragtrader's Breakfast of Big Ideas in Sydney this year.
A note from our sponsor: As growth becomes more uneven across the sector, retailers need a clear understanding of where opportunities exist and how to pursue them profitably. BDO's retail specialists work with businesses to assess performance, identify growth opportunities and build strategies that balance customer demand, operational efficiency and long-term profitability.