This study sheds light on the current state of Bangladesh’s knitwear industry in relation to consumer demand, merchandising, sustainability, and issues facing micro, small, and medium enterprises (MSMEs). Prime among the findings are that price, comfort and quality continue to be the primary consumer demands, and that sustainable production is beginning to emerge, especially in export markets. Timely sampling, cost management, and quality control as well as branding and effective merchandising all play a significant role in enhancing global competitiveness. The study also finds an increasing application of technologies such as 3D virtual design, as well as predictive modeling with AI, to help more efficient and sustainable product development. MSMEs face challenges in accessing finance, branding opportunities and digital infrastructure and therefore are behind on leveraging such innovations. Nevertheless, the implementation of circular economy practices is still scarce. The research ultimately points towards the role of innovation and technology accessibility for the country’s MSMEs as a way to remain ahead and points to the need for supportive policies that focus on inclusive and environmental sustainability within the sector as imperative for achieving sustainable growth for the knitwear industry in Bangladesh.