.png)
The apparel industry entered 2026 with a fundamental shift: risk is no longer abstract.
For years, fashion brands optimized primarily for growth—marketing efficiency, sell-through, and top-line revenue. Those metrics still matter, but they are no longer sufficient on their own. In today’s environment, retailer stability, operational discipline, compliance complexity, and channel concentration now determine whether a brand can scale—or stall.
The situation surrounding Saks Global has become a defining moment for the industry. Not because Saks is the only retailer under pressure, but because it demonstrates how quickly a major retail partner can move from a growth opportunity into a credit, inventory, and operational risk for apparel brands.
This State of the Apparel Industry 2026 report covers:
- Where apparel sales actually happen (apparel-only data)
- Why software infrastructure now determines who survives volatility
- How to interpret retailer risk scores from a vendor perspective
- What the Saks bankruptcy update practically means for brands
- Why avoiding major retailers is often a costly mistake
- Which sales channels fashion brands should sell in
- How AIMS360 Apparel Management Software enables safe omnichannel scale
Where Apparel Sales Actually Happen (Apparel-Only, 2025–2026)
Despite the rise of social commerce, influencers, and direct-to-consumer narratives, most U.S. apparel revenue still flows through retailer-controlled channels.
Omnichannel Fashion Sales Distribution 2025 & 2026
Sales channels handled in AIMS360 apparel management software. We handle all sales channels.
(Includes apparel-only percentages and dollar volumes by channel, with examples and descriptions)
Apparel Industry Analysis: What this distribution actually tells us
1. Retailers still control demand
Big box, off-price, department stores, specialty chains, independent boutiques, and retailer-owned ecommerce collectively account for well over 60% of U.S. apparel sales. Even as discovery shifts online, retailers remain the gatekeepers of scale.
2. DTC growth is real—but limited
Brand-owned ecommerce continues to grow, but it does not replace wholesale volume. For most brands, DTC is a margin and customer-data engine—not the sole growth engine.
3. Retailer ecommerce is not DTC
Ordering on sites like Target.com or Nordstrom.com falls under retailer ecommerce, not brand-owned DTC. Even when fulfilled via dropship, the retailer is typically the seller of record and enforces pricing, routing, labeling, and chargeback rules.
4. Off-price is structural, not cyclical
Off-price is no longer a temporary release valve. It is a permanent part of the apparel ecosystem that provides inventory liquidity during uneven demand cycles.
Key takeaway:
Relying on one or two channels isn’t just a strategy choice—it’s accepting concentration risk. In 2026, diversification is a risk-management decision.
Return Rates by Apparel Sales Channel (2025–2026 Benchmarks)
Return rates vary widely by sales channel. As a baseline, online apparel return rates are materially higher than in-store due to fit uncertainty, size bracketing, and convenience-based purchasing behavior. These ranges are industry benchmarks; actual results vary by category, fit consistency, return policy, and customer mix.
Apparel Industry Returns Analysis: What This Tells Us
Online apparel is a returns business
If you sell meaningful volume online (DTC or marketplaces), returns are not an exception — they are a core operational reality that must be built into margin and inventory planning.
Channel mix changes true profitability
Two channels can generate the same revenue but very different net profit once returns, restocking labor, shipping, write-offs, and deductions are included.
Returns amplify inventory accuracy risk
In apparel, a return is not “one unit” — it’s a specific style, color, and size that must be received, inspected, and made sellable quickly or it becomes dead inventory.
Retailer channels trade returns for compliance risk
Wholesale and retailer-led channels usually have lower return rates, but profit leakage often shows up through chargebacks, deductions, and routing violations instead.
Better data reduces future returns
Brands that track return reasons, fit feedback, and size mapping over time consistently reduce online return rates — especially in DTC.
Retailer Risk Scores: The 2026 Reality Check
A retailer risk score is not a prediction of bankruptcy. It is a vendor-side exposure framework used to determine how much inventory and credit risk a brand should take with a given retailer.
When you ship wholesale on terms, you are extending credit. Risk scores help manage that exposure before it becomes late payments, deductions, or write-offs.
Retailer Risk Score Definitions (Vendor Perspective)
- 1–2 | Very Low Risk: Strong liquidity, predictable payments, resilient demand.
Operational action: normal terms, scalable programs.
- 3–4 | Low Risk: Generally stable retailers with manageable exposure.
Operational action: standard limits, routine monitoring.
- 5–6 | Moderate Risk: Margin or traffic pressure, but still viable partners.
Operational action: tighter receivable caps, closer review.
- 7–8 | High Risk: Clear stress signals—slower payments, financing pressure, vendor disputes.
Operational action: reduced exposure, smaller shipments, stricter terms.
- 9–10 | Severe Risk: Active or imminent restructuring.
Operational action: treat shipments like credit exposure; cap or pause.
Important apparel-specific insight:
In apparel, risk usually appears before headlines—late payments, more deductions, term-extension requests, delayed POs, or routing issues. Brands running a strong apparel ERP see these signals earlier because A/R, deductions, compliance, and inventory are visible in one system.
Major Retailer Risk Scores (Vendor View – 2026)
(Includes big box, department, off-price, specialty, marketplaces, and EDI-active retailers with risk scores and vendor guidance)
Saks Bankruptcy Update: What Matters for Apparel Brands
The Saks situation matters because it reinforces a reality many brands ignore until it’s too late: wholesale is a credit business, not just a sales channel.
On January 14, 2026, Saks Global announced it commenced voluntary Chapter 11 cases and disclosed a $1.75B committed financing package, including up to $1B in DIP financing (subject to court approval).
From a brand perspective, the pattern is predictable:
- refinancing pressure
- liquidity tightens
- vendor payments slow
- shipments are reduced
- assortment gaps appear
- sales weaken
- restructuring accelerates
Brands with diversified channels, exposure limits, and operational visibility are far more resilient when this sequence unfolds.
Why Avoiding Major Retailers Is a Mistake
Caution is justified—but fear is often expensive.
Even with the rise of DTC and marketplaces, retailer-controlled channels still represented approximately $364 billion in U.S. apparel sales in 2025, growing to an estimated $369 billion in 2026.
Avoiding major retailers entirely means walking away from:
- massive demand pools
- brand visibility and credibility
- downstream DTC lift driven by retail presence
The real fear: EDI chargebacks
Many brands avoid retailers because of EDI chargebacks. That fear is understandable—but the issue is rarely EDI itself. It’s how EDI is managed.
Most chargebacks stem from operational breakdowns:
- missing or late ASNs
- carton labeling errors
- routing guide violations
- shipment data not matching EDI documents
- invoice mismatches
These problems occur most often when EDI is handled in a separate portal from core operations.
How AIMS360 reduces retailer EDI chargeback risk
AIMS360 Apparel Management Software includes AIMS360 EDI bulk & dropship software inside the same apparel ERP that runs inventory, warehouse, production, and invoicing.
That eliminates the two-system problem where brands:
- run operations in one ERP
- then re-key data into portals like SPS Commerce, DiCentral, or Orderful
- then deal with mismatches and deductions
With AIMS360, EDI documents are generated from what actually ships—not what someone manually typed—dramatically reducing compliance errors.
What Sales Channels Fashion Brands Should Sell In (2026 Strategy)
The strongest brands treat distribution like a portfolio, not a bet.
DTC-first brands should add:
- retailer ecommerce (Target.com, Nordstrom.com)
- selective wholesale partners
- marketplaces for controlled discovery
- brand stores or pop-ups when operationally viable
Wholesale-first brands should add:
- brand-owned ecommerce for margin and data
- selective marketplace presence
- off-price as a controlled inventory outlet
- specialty and boutiques for diversification
The common requirement across every strategy:
centralized inventory, allocation, compliance, and financial control.
Software for Apparel Industry: Why Systems Decide Who Wins in 2026
Before discussing retailer risk, it’s critical to understand why software is now the first layer of risk management in the apparel industry.
Apparel operations are fundamentally complex:
- inventory exists by style, color, and size
- seasons are short and unforgiving
- wholesale, DTC, dropship, and marketplaces compete for the same units
- retailers enforce strict compliance and EDI rules
- materials, production, and landed cost directly affect margin
Generic ERP systems struggle with this complexity.
A true software for apparel industry solution—often referred to as a clothing ERP or apparel ERP—must support:
- style–color–size inventory logic
- omnichannel allocation and reservations
- wholesale + dropship EDI workflows
- warehouse execution (WMS software)
- production, WIP, and materials management (including HTS codes)
In 2026, brands without centralized systems are exposed when:
- a retailer slows payment
- inventory must be rerouted quickly
- compliance rules change
- demand shifts across channels
This is why ERP for fashion industry is no longer a back-office decision—it is a survival decision.
How AIMS360 Apparel Management Software Supports This Strategy
AIMS360 Apparel Management Software is built as:
- software for apparel industry
- a modern clothing ERP
- a full apparel ERP
- advanced apparel inventory software
- a true ERP for fashion industry
It unifies:
- style–color–size inventory and allocation
- wholesale + EDI (bulk and dropship)
- warehouse execution (WMS software)
- production, WIP, and materials management
- invoicing, payments, and operational reporting
This gives apparel brands the control required to scale through volatility.
FAQs
Why do major retailers still control most apparel sales?
Major retailers control most apparel sales because they combine physical store networks, online traffic, logistics infrastructure, and consumer trust at scale. Even as discovery shifts to social media and online ads, retailers remain the primary place consumers complete purchases—especially for apparel where fit, returns, and immediate availability matter. Their ability to move high volumes across stores and ecommerce keeps them central to the apparel ecosystem.
Are online apparel sales really more profitable than in-store sales?
Not always. While online channels can show higher gross margins, they typically have much higher return rates, shipping costs, and restocking labor, which reduce net profitability. In-store channels usually have lower return rates but come with different costs such as wholesale discounts or compliance requirements. True profitability depends on net margin after returns, deductions, and operational costs, not just top-line revenue.
How should apparel brands use retailer risk scores in practice?
Retailer risk scores should be used to set credit limits, shipment sizes, payment terms, and monitoring frequency by account. Lower-risk retailers can support larger programs and longer terms, while higher-risk retailers require tighter exposure caps and faster inventory turns. The goal isn’t to avoid higher-risk retailers entirely, but to manage exposure intentionally instead of reacting after problems appear.
Which apparel sales channels have the highest return rates and why?
Online channels—especially marketplaces and brand-owned ecommerce—have the highest return rates due to fit uncertainty, size bracketing, and ease of returning items. In-store channels generally have lower return rates because customers can try products before buying. Understanding which channels generate the most returns helps brands plan inventory, pricing, and reverse logistics more accurately.
How do returns and retailer deductions affect inventory planning?
Returns and deductions both create inventory and cash-flow distortion if they’re not planned for. Returns tie up inventory that must be inspected and reprocessed, while deductions reduce expected cash receipts from wholesale shipments. Brands that don’t model these impacts by channel often overestimate sell-through and profitability, leading to excess inventory or margin erosion.
What Does EDI Stand For?
EDI stands for Electronic Data Interchange.
It is the standardized way retailers and brands exchange business documents as electronic transactions (system-to-system), instead of emails or PDFs.
The most common apparel EDI documents are:
- EDI 850 – Purchase Order
- EDI 856 – Advance Ship Notice (ASN)
- EDI 810 – Invoice
These three documents form the backbone of wholesale apparel operations.
What Is EDI?
Retailers do not want to manually process products into their warehouses, distribution centers, or stores. Manual receiving is slow, costly, and error-prone.
EDI transactions allow retailers to:
- receive orders automatically
- scan cartons quickly
- route inventory accurately
- match orders, shipments, and invoices
- enforce compliance consistently
In order to comply with retailer EDI requirements, apparel brands need EDI software to process transactions. Many brands struggle because EDI is managed separately in portals like SPS Commerce, DiCentral, or Orderful, creating manual work and mismatches.
AIMS360 EDI software processes EDI inside the same apparel ERP that manages operations, reducing manual entry and chargebacks.
What Is Materials Management in Apparel?
Materials management controls everything that goes into making a garment—and the data retailers and customs require about those materials.
This includes:
- fabrics and trims
- bills of materials (BOMs)
- work-in-process (WIP)
- fiber content and percentages
- country of origin
- care instructions
- HTS codes (Harmonized Tariff Schedule codes) used to calculate import duties
Retailers require this data for compliance, labeling, customs, and product setup.
AIMS360 centralizes materials management so required information flows automatically into production, wholesale orders, and EDI—without spreadsheets or manual lookup.
Final Takeaway: What the 2026 Apparel Data Is Really Telling Us
The 2026 apparel landscape isn’t defined by one failing retailer, one winning channel, or one business model. It’s defined by how well brands manage complexity and risk across channels.
Five clear signals emerge from the data:
1) Major retailers still control demand at scale
Even with the growth of ecommerce, social commerce, and DTC, the majority of apparel dollars still move through retailer-controlled channels. Brands that avoid these channels entirely aren’t eliminating risk—they’re often limiting access to the largest pools of demand and visibility.
2) Every sales channel carries a different kind of risk
Online channels expose brands to higher return rates and reverse logistics costs. Wholesale and retailer-led programs expose brands to credit risk, deductions, and compliance requirements. The strongest brands don’t chase “low-risk” channels—they build the operational discipline to manage each type of risk intentionally.
3) Retailer risk shows up operationally before it becomes headline news
Late payments, rising deductions, inconsistent ordering patterns, term-extension requests, and routing friction are early warning signs. Brands with clean data across inventory, receivables, shipments, and EDI can spot risk earlier and adjust exposure before losses compound.
4) Diversification is financial discipline, not just marketing strategy
Over-reliance on any single channel—DTC, marketplaces, or wholesale—creates concentration risk. Diversified brands can redirect inventory, protect cash flow, and maintain momentum when one channel tightens or demand shifts.
5) Net profitability matters more than channel popularity
High-growth channels can quietly erode margin through returns, deductions, shipping costs, and operational inefficiencies. The most resilient brands measure success using net margin after all operational costs, not just revenue.
Apparel brands that win will:
- Manage retailer risk proactively using risk scoring, exposure caps, and disciplined terms
- Diversify sales channels intelligently so no single channel can stall the business
- Handle returns efficiently in an apparel software like AIMS360, so returned inventory gets inspected, restocked, and resold quickly by style/color/size
- Centralize operations under a true apparel ERP like AIMS360, so inventory, EDI, warehouse workflows, deductions, and financial visibility live in one system
The Saks situation didn’t create risk. It revealed it.
