The MIDDLE IS GETTING SQUEEZED
TFTT MONDAY BRIEFING | Why the next competitive advantage in fashion may not be scale - but having a reason to be chosen.
What happens when being “good enough” is no longer good enough? We think that is becoming one of the most important questions facing fashion. Because the market is becoming less forgiving. Not necessarily because consumers have stopped spending. And not simply because competition has intensified. But because the advantages that once allowed a business to sit comfortably in the middle are becoming harder to defend. And by “the middle”, we don't mean a particular price point. We mean a competitive position.
A business with meaningful scale, but not enough scale to create a structural advantage. A recognised brand, but not enough differentiation to create genuine preference. Multiple channels, substantial overhead and significant complexity, without a proposition compelling enough to make the customer actively choose you. That is where the pressure is building.
And this week's results give us three signals worth watching.
SIGNAL ONE | SCALE ISN'T A SHIELD
JD Sports is a useful place to start. Last week, JD cut its FY27 adjusted profit guidance from £750m–£850m to £700m–£800m. In the second quarter, group like-for-like sales declined 3.1%, with North America down 6.8%. JD attributed the performance to a combination of weaker consumer sentiment, a slower quarter for high-demand footwear, deferred back-to-school demand and product-cycle pressures across some of its key brand partners. The numbers matter. But the bigger point is what they tell us about scale. JD is not a small retailer struggling to find relevance. It is one of the world's largest sports-fashion businesses. It has buying power.
Distribution.
Technology.
Data.
A significant store estate.
And access to some of the biggest brands in the world.
Those things create real competitive advantages. But they do not create immunity.
Scale cannot manufacture demand.
It cannot guarantee that the right product is available at the right moment. And it cannot eliminate the complexity that comes with running a very large organisation. In fact, scale can create more of it.
More stores.
More stock.
More infrastructure.
More people.
More capital.
More decisions.
So perhaps the question for large fashion businesses is no longer simply:
“How big are we?”
It is:
“Is our scale creating enough advantage to justify the complexity it creates?”
That is a much harder question. Because scale only becomes a competitive moat when the benefits of that scale are greater than the costs of carrying it. JD is not evidence that scale has stopped working. It is a reminder that scale is an advantage, not a strategy in itself.
SIGNAL TWO | DISTINCTIVENESS CAN SCALE
Now look at a very different part of the market. On reported second-quarter net sales growth of 13.5%, while DTC sales increased 26%. DTC represented 45.7% of total sales. Those numbers are interesting. But the more interesting point is what sits behind them. On has built its growth around differentiated product innovation, premium positioning and an increasingly direct relationship with consumers. It is not choosing between being distinctive and being big. It is using distinctiveness to build scale. That matters because fashion has often treated those two ideas as opposites. Scale was associated with efficiency. Distinctiveness was associated with niche. But perhaps that distinction is becoming outdated.
HOKA offers another useful example. For the quarter ended June 30, HOKA sales increased 7.7% to $703.5m, while DTC sales increased 17.3%. Different company. Different history. Different proposition. But the same broader signal:
A clear reason to choose a product can coexist with significant scale. And that changes the equation. Because the question isn't:
“Do we want to be distinctive or do we want to grow?”
It is:
“Can our distinctiveness become the reason we grow?”
That is a much more powerful proposition.
A clear product.
A clear identity.
A clear customer.
A clear reason to care.
Those things can create preference. Preference can create demand. Demand can create scale. And scale can then create further advantages. That is the flywheel. So perhaps distinctiveness isn't the alternative to scale.
Perhaps distinctiveness is one of the ways you create it.
SIGNAL THREE | WATCH THE MIDDLE
And this is where the argument gets more uncomfortable. Imagine a fashion business with:
Significant fixed costs.
Complex inventory.
Multiple channels.
A substantial physical footprint.
A recognised brand.
A meaningful customer base.
But without either:
the structural advantages of the largest players
or
the customer preference created by genuine differentiation.
That is the middle. And it is an increasingly difficult place to occupy. Because businesses in this position can find themselves carrying the costs of scale without capturing all of its benefits. They have enough complexity to make change difficult. But not enough structural advantage to make that complexity worthwhile. They have enough brand recognition to be familiar. But not necessarily enough distinctiveness to be chosen. And that distinction matters. Because recognition is not the same as preference. And preference is not the same as loyalty. And loyalty is not the same as a defensible economic advantage.
Radley is a useful reminder of this. The British accessories brand entered administration in May 2026, with its brand and intellectual property subsequently acquired by Gordon Brothers as the business moves towards a more asset-light model.We should be careful about drawing simplistic conclusions from that. Radley's situation is not proof that heritage doesn't matter. It isn't proof that brand recognition doesn't matter. It is a reminder that neither is sufficient on its own. A brand can have history.
It can have awareness.
It can have loyal customers.
It can have distribution.
And still struggle to convert those assets into a sustainable economic model. The question, therefore, isn't:
“Do people know us?”
It is:
“What does that recognition allow us to do that someone else cannot easily replicate?”
Can you command a premium?
Generate repeat purchase?
Maintain full-price demand?
Acquire customers efficiently?
Build community?
Create scarcity?
Own a category?
Extend into adjacent markets?
Make customers actively seek you out?
If you can, brand equity can become a genuine competitive advantage. If you cannot, awareness may simply be familiarity. And familiarity is increasingly expensive to defend.
THE BIGGER QUESTION
This is why we think the fashion conversation needs to change. For years, the ambition was straightforward:
Get bigger.
More stores.
More markets.
More categories.
More customers.
More revenue.
But growth by itself doesn't tell us whether a business is becoming stronger. The more important question is:
WHAT ARE YOU BUILDING THAT MAKES YOUR GROWTH DEFENSIBLE?
Because scale can create efficiency. Distinctiveness can create preference. But neither works automatically. Scale without sufficient demand becomes complexity. Distinctiveness without economic discipline becomes a beautiful problem. And recognition without preference becomes increasingly expensive to maintain. The strongest businesses increasingly seem to be those where the advantages reinforce one another.
The product creates preference.
Preference creates demand.
Demand creates scale.
Scale creates capabilities.
Those capabilities make the proposition harder to replicate.
And the cycle starts again.
That is the real competitive flywheel.
THE TFTT TAKE
We don't think the future of fashion belongs simply to the biggest businesses. And we don't think it automatically belongs to the smallest, most niche or most fashionable either. The real divide may be becoming something else.
DEFENSIBLE VERSUS REPLACEABLE.
If you don't have scale, build something difficult to replicate. If you don't have distinctiveness, find a reason to be chosen. If you have scale, make sure it is creating an advantage rather than simply creating complexity. And if you have both scale and distinctiveness? That's where it gets really interesting. Because the ultimate question for every fashion business is becoming increasingly simple:
WHY YOU?
Not why you existed twenty years ago.
Not why you have hundreds of stores.
Not why customers recognise your logo.
Not why you have a large social following.
Not why your competitors are more expensive.
Why should the customer choose you now?
And perhaps even more importantly:
Why should they continue choosing you tomorrow?
That is what makes an advantage defensible. And that is why we think the middle is getting squeezed. Not because the market has suddenly decided that being average is unacceptable. But because the cost of carrying complexity without a clear competitive advantage is becoming harder to hide. The businesses that escape the squeeze will not necessarily be the biggest. They will be the ones that understand what they have that customers genuinely value, and competitors cannot easily take away. And ultimately, we believe that starts with something even more fundamental:
KNOWING WHY YOU EXIST.
Not as a slogan. Not as a purpose statement written for the annual report. But as a genuine understanding of your reason for being. Because when a business is clear about its purpose, it can make clearer choices about what it does, who it serves, what it stands for, and importantly, what it refuses to do. Purpose doesn't replace product. It doesn't replace commercial discipline. And it doesn't automatically create competitive advantage. But it can provide the clarity from which distinctiveness, relevance and ultimately defensibility can be built. The strongest businesses don't just know what they sell.
They know why they matter.
And behind that is a clear understanding of why they exist. That may be one of the most powerful advantages a business can have. So this week, we're watching:
Who is building an advantage?
Who is scaling it?
Who is losing it?
And who is discovering that being recognised is not the same as being chosen?
The Fashion Think Tank
Inside fashion. Not observing it.
