Sri Lanka’s economy is growing again, but the recovery has not translated evenly into retail demand.
The domestic fashion sector continues to face selective consumer spending, expensive working capital, inflationary pressure and changing demographics. Export-oriented apparel businesses are also navigating sourcing costs, tariff uncertainty and a volatile global trade environment.
These challenges were examined at SLABA Fashion Forward 26, the annual flagship forum of the Sri Lanka Apparel Brands Association.
In “Economic Recovery Yet to Translate into Fashion Retail Growth,” published by Daily FT on October 28, 2026, author Safna Malik reported on the economic, regulatory, digital and consumer forces shaping the future of Sri Lanka’s fashion and apparel sector.
Speaking on“What’s Next: The Forces Reshaping Fashion in Emerging Markets,” Madhulika Tiwari, Partner at The Knowledge Company, identified the central challenge confronting fashion brands: consumers are becoming more selective. They are buying less, but increasingly expect the products they do choose to deliver quality, durability, versatility and credible value.
For Sri Lankan fashion businesses, economic recovery alone will not create sustainable growth. Brands must still give consumers compelling reasons to purchase, return and recommend.
Economic Recovery Does Not Automatically Create Fashion Demand
Improving economic indicators can strengthen business confidence, but fashion retail does not always respond immediately.
Consumers emerging from periods of inflation and financial uncertainty may continue to protect household budgets. Discretionary purchases can remain delayed, reduced or concentrated around products that offer obvious utility and value.
Fashion brands must therefore distinguish between macroeconomic recovery and actual category demand.
A larger addressable market or improving GDP outlook does not tell a business which products consumers will choose, how frequently they will purchase or how much they will be willing to pay.
Sustainable growth depends on the brand’s ability to understand where consumers are trading down, where they are postponing purchases and where they remain willing to invest in quality.
Consumers Are Buying Less, but Buying Better
The shift toward “buying less but buying better” does not necessarily mean consumers will always choose the most expensive product.
It means purchasing decisions are becoming more deliberate.
Consumers increasingly expect a product to justify its place within a tighter discretionary budget. Quality, durability, versatility, fit and responsible production all contribute to the perception of value.
Price remains important, particularly in markets where household budgets are under pressure. However, competing only through lower prices can weaken margins and limit investment in design, materials, customer experience and brand building.
Sri Lankan fashion brands need to compete on value, not simply on cost.
Value is created when the consumer understands why the product is worth choosing and can continue using it across multiple occasions.
Relevance Is Becoming as Important as Reach
Digital platforms can expand a brand’s potential audience, but broader reach does not guarantee relevance.
Global trends now move rapidly through social media, creator content, marketplaces and entertainment. Consumers in emerging markets can observe new aesthetics almost as quickly as consumers in established global fashion capitals.
Directly copying those aesthetics, however, does not create a differentiated brand proposition.
As Madhulika noted at Fashion Forward 26, brands need to interpret trends through local culture, identity, occasions and consumer needs. Sri Lankan businesses have an opportunity to combine international design sensibilities with local fabrics, prints, silhouettes and cultural codes.
A global silhouette may need a different fabric weight for Sri Lanka’s climate. An international color trend may need adjustment for local preferences. A product developed for one market may require changes in fit, sizing, styling or price before it becomes commercially meaningful elsewhere.
The strongest brands will not simply follow global trends. They will translate those trends into locally relevant products.
Digital Discovery Is Changing the Competitive Environment
Artificial intelligence, social media and digital marketplaces are changing how consumers discover and validate fashion products.
The customer journey no longer progresses predictably from advertising to store visit to purchase. A consumer may encounter a product through creator content, compare it across marketplaces, search for reviews, examine the brand’s social presence and then purchase through a physical or digital channel.
This makes discovery more fluid, but it also raises expectations.
A brand that is not visible, comparable and credible across relevant digital touchpoints may be excluded from the consumer’s consideration set before the consumer reaches a store.
Digital visibility must therefore be supported by accurate product information, strong visual presentation, reliable sizing, credible reviews, consistent pricing and dependable fulfillment.
Visibility creates consideration. Credibility converts it into purchase.
Customer Experience Is Now Part of the Product
Fashion businesses have traditionally concentrated on design, quality and in-store presentation. These remain fundamental, but consumers now evaluate the complete journey.
The experience begins with discovery and continues through comparison, purchase, payment, delivery, returns, exchange and after-sales service.
A well-designed product can still create a weak brand experience if sizing is unreliable, delivery is delayed, returns are difficult or customer support is unresponsive.
This means the customer experience cannot be managed only after the product has been developed. It must be designed alongside the proposition.
A seamless journey builds confidence. Confidence increases the likelihood of repeat purchase. Repeat purchase creates the foundation for sustainable growth.
Digitalization Must Support the Entire Business
Digitalization should not be interpreted only as launching an e-commerce website or strengthening social-media communications.
For emerging fashion businesses, digital capability should connect product development, inventory planning, warehousing, supply chains, customer engagement, order management and after-sales service.
Capturing and using data early can help smaller brands understand which products are attracting interest, which sizes are selling, where returns are concentrated and which customers are purchasing again.
This can improve assortment decisions and allow businesses to correct problems before they are repeated across a larger network.
The strategic value of digitalization lies in faster learning, not technology adoption alone.
Proof of Demand Must Come Before Scale
Emerging fashion brands often face pressure to expand quickly.
New stores, wider distribution and international entry can demonstrate ambition. But expansion before demand is proven increases fixed costs, working-capital requirements and inventory complexity before the commercial model is ready.
Madhulika’s core advice was to stay close to the customer, focus on product and value, use feedback to improve the offer, establish evidence of demand and only then scale.
Initial sales are not sufficient proof on their own.
Brands need to understand whether customers are purchasing without excessive discounts, whether products generate repeat demand, whether returns remain manageable and whether inventory is selling through at viable margins.
Expansion should follow a consumer response that can be repeated across locations or channels. It should not be used as a substitute for establishing product-market fit.
Sustainability Is Becoming a Credibility Requirement
Sustainability is moving beyond campaign messaging and becoming a requirement influencing regulation, business relationships and consumer trust.
Fashion businesses need to consider sustainability across sourcing, manufacturing, packaging, traceability, durability and post-purchase services.
Consumers may not always pay a higher price solely because a product is described as sustainable. But unclear claims, weak traceability or irresponsible practices can damage brand credibility.
For Sri Lankan apparel businesses, sustainability can be connected with existing strengths in manufacturing, materials, craftsmanship and production capability.
The strongest proposition will not present sustainability as an isolated claim. It will show how responsible sourcing and production improve product quality, durability and long-term value.
International Expansion Requires Localization
Sri Lankan fashion brands may need to look beyond the domestic market because of limitations in local purchasing power and demographic growth.
But global expansion requires more than taking an existing local assortment into a larger market.
The Fashion Forward 26 discussions highlighted the importance of consumer research, product testing, fit adaptation, compliant materials and clear positioning. [ft.lk]
India provides a useful example. The market offers substantial scale, but consumer needs differ across climates, body shapes, price points, regions and purchase occasions.
A fashion proposition that performs in one Indian city or channel may not translate uniformly across the country.
Successful international growth therefore requires adaptation in fit, sizing, colors, product categories, channel selection and price architecture. It also requires sufficient time to establish recognition and consumer trust.
Global opportunity is attractive. Localization determines whether it converts into sustained demand.
Distribution Channels Need Distinct Commercial Roles
A diverse market cannot always be served through one channel.
Boutiques can build brand image and provide a controlled experience. Multi-brand outlets can widen physical reach. Marketplaces can generate discovery. Owned digital channels can support retention and customer data.
However, placing every product in every channel can increase cost and complexity.
Brands should define what each channel is expected to accomplish.
A flagship store may establish the brand and showcase the full proposition. A marketplace may recruit first-time customers. An owned digital channel may encourage repeat purchase. A multi-brand retailer may expand geographic reach.
The objective is not maximum presence. It is a distribution system in which every channel has a clear consumer and commercial purpose.
#TKCPerspective: Five Priorities for Emerging-Market Fashion Brands
The first priority is to compete on value rather than price alone. Quality, durability, fit and versatility must provide consumers with a clear reason to choose the product.
Second, brands should localize global trends rather than reproduce them directly. International design influences need to be interpreted through local culture, climate, identity and occasions.
Third, digitalization must become an operating capability. Data should support decisions across product development, inventory, supply chains and customer experience.
Fourth, brands should establish proof of demand before scaling. Product-market fit, repeat purchase and viable sell-through should guide expansion.
Finally, sustainability must be embedded throughout the value chain. Responsible sourcing, traceability, durability and after-sales support should reinforce the brand promise rather than sit outside it.
From Economic Recovery to Sustainable Fashion Growth
Economic recovery can improve the conditions for fashion retail, but it cannot replace consumer relevance.
Sri Lankan brands still need to create products that customers find worth purchasing, wearing and recommending.
That requires strong product quality, credible value, local relevance and a customer experience that works consistently across channels.
The same principle applies to international expansion. Brands should not scale before the proposition is proven. The strongest businesses will establish demand, learn from consumers, strengthen the operating model and then expand with discipline.
Growth should be the outcome of relevance and repeat demand, not a substitute for them.
How TKC Supports Fashion and Apparel Businesses
The Knowledge Company works with fashion brands, retailers, manufacturers and investors across:
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Read Safna Malik’s complete report in Daily FT: https://www.ft.lk/apparel__fashion__design/Economic-recovery-yet-to-translate-into-fashion-retail-growth/10404-799269#
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