The Executive Briefing: Reading the Tariff Tea Leaves

Business of Fashion

6 days ago

Tariffs Have Retailers Bracing for a Potentially Grim Year
The story: Major US retailers including Macy's, Victoria's Secret, Abercrombie & Fitch and Lululemon reported strong holiday sales. But they also said the year was off to a weak start. As they contemplate whether to pass on the cost of tariffs to consumers, many downgraded their outlook for the remainder of 2025, sparking a selloff in retail stocks.
It's not all in their heads: Consumer sentiment has also nosedived, with the Conference Board's closely watched index hitting a 12-year low last week. Tariffs are largely to blame, fuelling renewed inflation fears (even though few brands have actually raised prices, predictions of hikes to come from CEOs, economists and investors are percolating into consumers' consciousness).
Not everyone agrees: 'We have to distinguish between feelings and reality,' said BMO Capital Markets analyst Simeon Siegel. 'It's not to say one can't turn into the other, but it hasn't yet. The idea that consumer sentiment is a survey and doesn't always align with retail sales.' Indeed, a similarly grim outlook this time last year turned out to mostly be a false alarm.
Pain now, gains later: In our executive memo on tariffs, experts recommend keeping inventory 'lean and mean,' eating the extra cost – for a little while at least – and investing in high-quality products and experiences that help brands stand out at any price point. Materials and product features can be tinkered with to reduce duties at the border. In other words, the only way to win a tariff-induced price war is not to play.
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AI Marketing Campaigns Are Here. Not Everyone Is Happy About It
The story: Brands have quietly been inserting AI models and art into their ads, social accounts and websites for a couple years now. But this month, that practice broke out into the open. The Estée Lauder Companies is partnering with Adobe to use its AI platform, Firefly, to create and edit imagery. H&M will use digital twins of its models in generated photoshoots that appear indistinguishable from the real thing. And Sybille de Saint Louvent's fake AI-generated campaigns are starting to get attention from the luxury brands she's mimicking.
Heading off criticism: The business case for AI is obvious: why send a model to Fiji when you can insert their digital likeness into a generated image of an island paradise? However, it's telling that both Estée Lauder and H&M emphasised that they took great pains to incorporate AI in a way they believe will minimise potential harm. Estée Lauder is only using AI to generate images of objects, not people. Models will own the rights to their AI doppelgangers created by H&M.
Good luck with that: It's still a tough sell. BoF's Instagram post on Sybille de Saint Louvent received over 1,000 comments, the vast majority negative. In 2023, Levi's quickly backed off plans to use AI models. Makeup artists, stylists and others who work on photoshoots were quick to point out that H&M's plan will do little to help them if AI puts them out of work.
Maybe it's inevitable: The industry isn't exactly ignoring all those Instagram comments, but it clearly sees itself moving towards a world where AI and human models co-exist. Fast fashion is well on its way to embracing its generative future; perhaps then real humans shot by real photographers will become another luxury signifier.
Succeeding in China Is Harder in 2025, but Not Impossible
The story: BoF's latest case study goes deep on how Western brands succeed in China today. The old days of rapidly expanding demand and even middling American brands enjoying a certain cachet with Chinese consumers are long gone.
Who's Winning: At first glance it's hard to draw links between Lemaire's quiet luxury, Lululemon's yoga pants, Hermès' craftsmanship and, well, Crocs.
Flood the zone: Instead of diving in with Tmall, the most successful brands in China are often establishing a presence through Xiaohongshu and Douyin first. But establishing real world storefronts alongside digital ones is proving a key differentiator. That's true for big brands like Ralph Lauren, but smaller labels like France's American Vintage have found success with their own stores too. Second-tier cities, historically ignored by many Western brands, are particularly promising.
Don't coast on reputation: Brands can no longer count on selling the same products in Shanghai that they do in Paris or New York (or worse, using China as a dumping ground for whatever fails to move in their home market). More than one-third of Luluemon's assortment in China is modified in some way to specifically appeal to shoppers there, including plenty of items made exclusively for the Chinese market. The same is true behind the scenes: Crocs struggled in China for years with a traditional strategy built around joint ventures with retailers. Once it built its own team on the ground, armed with the same data and insights used in other markets, sales took off.
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Jolting Luxury Out of Its Creative and Commercial Rut
The story: This year may feature more designer debuts at major brands than any in the history of modern luxury. Why? Because the sector is in crisis, and it's not just a macroeconomic issue. With prices sky-high, many believe big luxury's value proposition is broken and key players are betting on new creative energy to boost desirability and kickstart growth cycles.
More than musical chairs: Speculating about who will land where has been fun. But now that most of the big jobs are taken, industry watchers are wondering, when global luxury sales fell 2 percent last year, and consumers seem simultaneously overwhelmed by the amount of noise brands emit, and underwhelmed by what they sell, how much any one designer can do.
Veblen goods no more: The term refers to items that become more desirable the higher their price. Most luxury brands flattered themselves that they fell in that category as they doubled or even tripled prices on their most coveted products. But in doing so they turned an aspirational dream into an impossible one for most consumers. Higher prices and the ubiquity of the biggest brands have also given some teeth to the gripe that luxury goods aren't worth the money. Shoppers get less of a thrill owning a $5,000 bag if they know it was mass produced, and potentially in a sweatshop.
The Loewe method: It's no coincidence Jonathan Anderson is headed to one of fashion's biggest brands. His method of building buzz around Loewe – one tomato-scented candle and Luca Guadagnino film at a time – is widely seen as a template for the industry to escape its current treadmill of cookie-cutter runway shows and ad campaigns. It's an example of turning a luxury brand into a 'cultural brand,' a badge that says you have currency because you've navigated a cultural maze, and not just that you're rich enough to afford the clothes.
Fashion's Innovators
The Story: In a sea of sameness, designers who dare to try something different can still make a splash – even if what they're creating is as simple as a sweatshirt. In a series of stories this month, BoF took a look at how designers and brands are rethinking three categories that haven't seen much innovation of late: handbags, dress shirts and, yes, sweatshirts.
Innovation with purpose: In the high stakes game of handbags, which drive the lion's share of profits at plenty of luxury brands, finding the balance between trying something new and staying true to a brand's codes is key. That's why the Alaïa Teckel became a sensation last year, its elongated shape standing out amid all the totes and helping establish Pieter Mulier's ultra-femme, yet modern vision for the brand.
A style evolution: It's no coincidence that dress shirts are making a comeback just as companies are forcing more workers back to the office. But like so many other things, the white collar uniform was changed by the pandemic. Dress shirts now prioritise comfort, coming in oversize fits that appeal to Gen Z, or taking a page from the activewear boom's obsession with fabric innovation.
About those sweatshirts: Speaking of Gen Z, they're setting alarms and lining up outside pop-ups to snag limited edition sweatshirts. The phenomenon is almost entirely a creation of TikTok, where popular creators have launched their own brands, which they flog ceaselessly to followers. Here the innovation is mostly marketing. If they want staying power they'll need to find ways to differentiate their product. Otherwise they may end up like the countless luggage brands struggling to sell slickly branded hardshell suitcases even amid an unprecedented travel boom.