THE MIDDLE ISN’T DISAPPEARING. IT’S CHANGING.
Is the middle being squeezed? After watching the signals through the week, we think the answer is becoming more nuanced. The middle isn't necessarily disappearing. What is changing is the amount of pressure being placed on businesses that don't have a sufficiently clear reason for the customer to choose them. And there is another part of this story that we think is critical: the pressure isn't only on the consumer. It is on the business as well.
The UK consumer is in a very different place from the peak of the cost-of-living shock. Confidence has improved, with GfK's August consumer confidence index reaching -14, its highest level in two years, while confidence about making major purchases reached its strongest level since December 2021.
But improved confidence doesn't mean the financial pressure has disappeared. The latest House of Commons Library analysis says the effects of the 2021–24 inflation shock continue to affect household incomes, spending, savings and debt. In July, 56% of adults in Great Britain said their cost of living had increased, and among those experiencing an increase, 59% said they were spending less on non-essentials and 41% said they were shopping around more.
At the same time, retailers are dealing with a higher cost base. From April 2026, the National Living Wage increased by 4.1% to £12.71 an hour. Employer National Insurance is now 15%, compared with 13.8% previously, and the threshold at which employers begin paying it was reduced from £9,100 to £5,000. In England, the previous retail, hospitality and leisure business-rates relief was also replaced by new RHL multipliers from April 2026.
For a labour-intensive industry such as fashion retail, those pressures matter. The customer is asking whether something is worth their money. The retailer is asking whether it can sell that product at a price that generates enough margin. And sitting between those two pressures is the middle. That is why this week's three signals matter.
SIGNAL ONE
SCALE ISN’T THE SAME AS VALUE
The first signal came from one of the biggest disruptors in fashion: Shein.
This week, Shein moved closer to its Hong Kong listing at a valuation of around $26.5 billion, with the IPO expected to raise approximately $1.7 billion. The order book has reportedly been covered. That is still an extraordinary valuation. But the context is what makes the story important. Shein was valued at almost $100 billion in 2022. Its proposed IPO valuation is therefore roughly 73% below that private-market peak. And this isn't a story about Shein suddenly becoming irrelevant.
It remains one of the world's most powerful digital fashion businesses, with extraordinary scale, reach, product breadth and a highly sophisticated digital customer proposition. But the market is asking a different question. Not simply:
How big can Shein become?
But:
How much is that growth actually worth?
That distinction matters because fashion has spent years celebrating scale.
More customers.
More products.
More markets.
More revenue.
More digital reach.
Scale absolutely matters. But scale isn't automatically value. And the Shein story is a useful reminder that eventually the market looks beyond size and asks about the quality, durability and economics of the proposition underneath it.
THE INSIDER’S PERSPECTIVE
For us, the lesson isn't that scale has become unimportant. Quite the opposite. The lesson is that scale needs to create an advantage.
If your size allows you to buy better, move faster, offer better value, invest more heavily in technology, reach customers more efficiently or create capabilities competitors cannot easily replicate, then scale becomes a genuine strategic asset. But if growth simply creates more products, more stores, more markets and more complexity, being bigger doesn't automatically make the business better. And this is particularly important for the middle.
A mid-market business may not have the purchasing power, technology investment or global reach of the largest players. But it may also lack the distinctiveness, scarcity or brand authority that allows a differentiated proposition to command preference. That is where the pressure begins.
Not because the middle is inherently weak, but because being difficult to distinguish is becoming increasingly expensive.
And this is where our Friday TikTok signal becomes particularly important.
Scale ≠ Value.
The question isn't how big you are. It is what your size allows you to do better than somebody else.
SIGNAL TWO
MORE CHOICE ISN’T NECESSARILY BETTER
The second signal came directly from the customer.
New research commissioned by ASOS and conducted with Attest among 1,952 UK consumers found that 64% believe fashion offers too many options and not enough guidance. A further 68% said knowing what to buy is easier than knowing how to wear it, while 86% said they are more interested in clothes that reflect their personal style than simply following trends.
There are some particularly interesting numbers underneath that. One third of respondents said they had abandoned a purchase because they couldn't picture how they would wear it. Forty-five per cent had bought something without knowing what to wear it with, while 39% said they had bought clothes they rarely wore because they struggled to style them. Think about what that tells us. Fashion has spent years building more.
More brands.
More products.
More drops.
More trends.
More content.
More inspiration.
More choice.
But the customer's problem may no longer be finding something. It may be deciding what is actually right for them. That is a very different problem.
And ASOS itself is responding to it, introducing more outfit-led shopping, styling support, AI-powered styling and personalised discovery. Its new positioning is effectively moving from simply presenting customers with products towards helping them navigate those products. That is an important shift. Because when everybody can offer more choice, more choice stops being a differentiator.
THE INSIDER’S PERSPECTIVE
We think this is one of the most important changes happening in fashion. For years, choice was the proposition. Now, choice may be the problem that the proposition has to solve. That doesn't mean retailers should necessarily offer less product. It means they need to make the product they offer more useful.
Better curation.
Better styling.
Better personalisation.
Better discovery.
Better recommendations.
Better content.
Better understanding of the individual customer.
And this connects directly back to the financial environment. When consumers are more conscious about discretionary spending, the question isn't simply:
“Do I like it?”
It becomes:
“Do I like it enough to spend my money on it?”
That is a higher bar. The purchase needs to feel relevant. It needs to feel useful. It needs to feel like the right decision. And that means the retailer that helps the customer make the decision could increasingly have an advantage over the retailer that simply gives them more decisions to make.
More choice ≠ better choice.
The opportunity may be to turn abundance into relevance.
SIGNAL THREE
THE CUSTOMER IS STILL SPENDING - BUT DIFFERENTLY
This is perhaps the most important signal of the three.
Because when the retail environment becomes difficult, there is a temptation to say that consumers simply aren't spending. The latest data doesn't support such a simple conclusion.
UK retail sales volumes fell 0.5% in July, but were still 1.6% higher than a year earlier. Across the three months to July, sales volumes were 3.0% higher year-on-year. The ONS said the July fall in non-food retail was partly attributed by retailers to demand being brought forward into June because of earlier promotional activity. So the customer hasn't disappeared. But neither is this a straightforward growth story. Clothing and footwear were among the weaker areas in July, and the wider data shows how uneven consumer demand remains.
JD Sports gives us another useful example. Its Q2 group like-for-like sales fell 3.1%, with North America down 6.8% and Europe down 2.7%. But the picture was not uniform: JD reported good performance in apparel and accessories across regions, while its Sporting Goods & Outdoor business delivered 5.0% like-for-like growth in Q2. That is important. The customer isn't simply saying:
“I don't want to buy.”
They are becoming more selective about what they buy, where they buy it and why they buy it.
And that brings us back to the financial environment. Households are still dealing with the accumulated effect of several years of higher prices. The latest House of Commons Library analysis says that although inflation has fallen substantially from its 2022 peak, the cumulative rise in prices means households face a much higher cost of living than in 2021. In July 2026, 59% of adults whose cost of living had increased said they had reduced spending on non-essentials. At the same time, businesses are carrying higher costs. The National Living Wage has risen. Employer National Insurance is higher. The structure of business rates has changed. And retailers still have to manage rents, energy, logistics, technology, marketing and inventory. So there is a very difficult equation developing.
The customer wants more value.
The business needs more margin.
And the retailer is being asked to deliver both.
THE INSIDER’S PERSPECTIVE
This is where we think the real pressure on the middle becomes clear. The customer hasn't disappeared. Their money has simply become more contested. Fashion isn't competing only against other fashion businesses. It is competing against every other demand on the household budget. And that makes the concept of value much more interesting than simply being cheap.
A £20 purchase can be good value.
A £100 purchase can be good value.
A £300 purchase can be good value.
The question isn't simply what does it cost?
The question is:
Does the customer believe it is worth it?
That is why the middle has a particularly difficult job. A value player may have scale and purchasing power. A differentiated brand may have enough customer preference to protect its pricing. But the mid-market business can find itself caught between the two. Its costs are rising. Its customer is more selective. Its competitors are increasingly sophisticated. And its proposition still needs to justify the price. This is why we think the third TikTok signal is so important:
The customer is still spending - but differently.
The opportunity isn't necessarily to become cheaper.
It is to become more compelling.
THE OTHER SIDE OF THE SQUEEZE
And this is the part of the conversation we think deserves much more attention. When we talk about the middle being squeezed, we shouldn't only look at the customer. The business is being squeezed too.
On one side, customers are scrutinising discretionary purchases more carefully. On the other, the cost of serving those customers is increasing. For a store-based fashion retailer, labour is a major cost. From April 2026, the National Living Wage increased by 4.1% to £12.71. Employer National Insurance is 15%, with the secondary threshold reduced to £5,000. And in England, the business-rates system for qualifying retail properties changed from April 2026 following the end of the previous RHL relief.
These measures do not affect every retailer in exactly the same way. The impact depends on workforce structure, pay levels, property values, location and eligibility for reliefs. But the direction of travel is clear. The cost base matters. And that creates a difficult commercial equation. You can't necessarily pass every cost increase on to the customer. You can't necessarily absorb every increase through margin. You can't discount your way out of every problem. And you can't assume that simply selling more will solve it.
The answer has to be better economics and a stronger proposition.
More productive stores.
Better inventory management.
Better buying.
Better conversion.
Better customer retention.
Better use of technology.
Better productivity.
Better product.
And ultimately, a stronger reason for the customer to choose you. That is why the financial climate isn't a separate story from the three signals we have discussed.
It is the pressure that makes those signals matter.
SO, WHAT DOES THIS MEAN FOR THE MIDDLE?
This is where our thinking has moved on from Monday. We still believe the middle is under pressure. But we don't think the story is simply that consumers are trading down, Shein is taking share or premium brands are winning. It is more complicated than that. The middle is being squeezed by several forces at once.
Customers have more choice.
Customers are more selective.
Scale is creating structural advantages.
Operating costs are rising.
Digital channels make comparison easier.
And the strongest propositions are becoming increasingly clear. At one end, scale can create a powerful cost and capability advantage. At the other, differentiation can create customer preference and pricing power. The middle therefore needs to answer a much more fundamental question:
What makes us worth choosing?
Not just once.
Repeatedly.
And not just when we are on promotion.
THE FIVE QUESTIONS WE THINK FASHION LEADERS SHOULD BE ASKING
First: What do we actually win on?
Not what are we good at. Not what do we sell. Not what does our brand presentation say.
Why does the customer choose us?
And would they still choose us if they had 100 alternatives in front of them?
Second: Is our scale creating a genuine advantage?
Scale should improve buying, economics, technology, distribution, customer acquisition or service. If it doesn't, growth can simply create complexity.
Third: Are we making choice easier?
If customers already have endless options, the opportunity may not be to offer more. It may be to curate better, personalise better and help customers make better decisions.
Fourth: What makes our proposition difficult to replace?
Promotions can be copied. Products can be copied. Content can be copied. Store concepts can be copied. The strongest businesses build something deeper: brand authority, product expertise, community, service, customer relationships or proprietary capabilities.
Fifth: If the customer becomes even more selective, what protects us?
If household budgets remain under pressure, competition intensifies and customers have even more alternatives, what makes them stay? If the answer isn't immediately obvious, that may be the most important strategic question of all.
THE BIGGER PICTURE
Put the three Friday signals together and we think they tell a much bigger story.
Shein: scale can create enormous demand, but scale alone doesn't determine value. Its proposed IPO valuation is dramatically below its 2022 private-market peak.
ASOS: customers have more fashion choice than ever, but many increasingly want help understanding what is relevant to them.
The consumer: spending hasn't stopped, but demand is uneven and customers are becoming more deliberate about where their money goes.
And underneath all of it, retailers are operating with a more demanding cost base. That combination changes the game. Because the middle can't simply rely on being broadly good. It needs to be meaningfully valuable. And that value has to work for both sides of the equation. It has to feel worthwhile to the customer. And it has to work economically for the business. That is the real challenge.
THE INSIDER’S PERSPECTIVE
So, after watching the market through this week, our view has shifted slightly from Monday. We still believe the middle is under pressure. But we don't think the middle is disappearing. It is changing.
The businesses that thrive won't necessarily be the biggest. They won't necessarily be the cheapest. And they won't necessarily be the most premium. They will be the businesses that can create a proposition customers genuinely value — while building the economics and capabilities to deliver that proposition profitably.
That could come through scale.
It could come through product.
It could come through brand.
It could come through service.
It could come through technology.
It could come through relevance.
Ideally, it will come through a combination of them. Because in a market where consumers have more choice, more information and more alternatives than ever before, the hardest thing to create is preference. And preference is ultimately what protects a business.
THE TAKEAWAY
On Monday, we asked:
Is the middle getting squeezed?
After this week's signals, we'd frame the question slightly differently.
The middle isn't disappearing.
It's changing.
The pressure isn't coming from one place. It is coming from the combination of a more selective customer, more choice, powerful scale players, rising operating costs and an increasingly competitive market. That doesn't mean the answer is to become cheaper. It doesn't mean the answer is to become bigger. And it doesn't mean the answer is to become more premium.
It means becoming clearer.
Clearer about the customer.
Clearer about the proposition.
Clearer about the value.
Clearer about the economics.
And clearer about the reason you deserve to win. Because when the customer has more choice and the business has less room for error...
“Good enough” becomes a much harder place to be.
And perhaps that is the biggest signal we take from this week. The question for every fashion business is no longer simply:
“How do we compete?”
It is:
“Why should the customer choose us?”
The Fashion Think Tank
Inside Fashion. Not Observing It.
