How on earth do I keep towels looking and feeling nice?

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See photo attached.

On left - new, unwashed, super soft to the touch

On right - same type of towel after one wash. The piling has ruined and its not half as soft

I followed the instructions on the label. 40 degrees, colour safe detergent, no fabric softener (as this affects absorbency). Washed with an older towel, couple or hand towels and teatowels

Any tips on how to keep towels nice?

I only ever buy white towels. I wash at high temp and put on washing line to dry. Mine are still lovely after several years.
I would try rewashing your at a higher temp. Towels only. Never mix colours then you dont need to faff with special colour safe detergents. Put some conditioner in every 3 or4 washes.
Mist important tumble dry for a few minutes before putting them away. Then they will be lovely and soft.