Figures for the year to the end of September show that the value of the fashion sector – which covers clothing, footwear and accessories – has contracted, with sales growth falling by -1.9%.
Kantar said that almost £700m has been been lost from the value of the market compared to this time last year.
“Fashion retailers are still following the same patterns of over-buying and deep discounting and consumers are increasingly reluctant to pay full price,” according to Glen Tooke, consumer insight director at Kantar Worldpanel.
“Retailers have responded to falling sales by investing less in their lines, when what they need to be doing instead is addressing these problems more proactively.
“Rather than chasing after the same ‘micro trends’ as every one of their competitors, they need to work on understanding what their customers really want and to fulfill their needs.”
The decline has been driven by shoppers buying goods less frequently, giving retailers fewer opportunities to push sales in what many are describing as a challenging market.
Last month, the boss of high street chain Next, Lord Simon Wolfson, warned that trading has been “volatile” as it contended with sliding profits.
He also said the unseasonably warm weather had hit sales of winter clothing.
In September, womenswear chain Bonmarche issued a profit warning because of the weather affecting its autumn and winter ranges.
Kantar said that its data does not take into account the collapse of BHS, which closed its doors for the last time in August.
“The retailer was worth over £400m in sales so if this spend isn’t reapportioned throughout the market then we’ll be seeing the decline continue,” Mr Tooke said.