US, China and Japan to drive recovery in luxury adspend
Expenditure on luxury advertising will rise by 2.9% in 2017, recovering from a 0.5% contraction in 2016, according to the new edition of Zenith’s Luxury Advertising Expenditure Forecasts, published today. The market will strengthen further in 2018, growing by 3.9%. The recovery will be led by luxury advertisers in the US, China and Japan, which together account for 80% of the growth in luxury adspend to 2018.
This is the third annual edition of the Luxury Advertising Expenditure Forecasts, which examines expenditure on luxury advertising in 23 key luxury markets.* As with Zenith’s long-‐established Advertising Expenditure Forecasts, it provides historic expenditure figures and forecasts by medium. However, this report focuses specifically on luxury advertising, together with the sub-‐categories of luxury automotive, fragrances & beauty, fashion & accessories, and watches & jewellery.
Consumer spending on personal luxury goods was stagnant in 2016, according to Bain & Company’s Luxury Goods Worldwide Market Study, Fall-‐Winter 2016. This was the first year without growth since 2009, as spending by tourists declined: the number of tourists fell after terrorist attacks in Europe, and spending per tourist also fell, particularly among Chinese tourists. This led to the 0.5% drop in luxury adspend in 2016.
As the luxury ad market recovers in 2017 and 2018, the fastest growing regions will be Eastern Europe (which will grow at an average of 10% a year), Latin America (5% a year), and North America and Asia Pacific (4% a year each). The Middle East and North Africa, suffering from political instability and low oil prices, will continue to shrink, at an average rate of 6% a year.
Luxury advertising is growing less rapidly than advertising as a whole. Across our top 23 markets, luxury advertising grew by 0.7% each year between 2013 and 2016, compared to 4.8% annual growth for the whole ad market. Even though we expect luxury advertising growth to accelerate to 3.4% a year between 2016 and 2018, it will continue to lag behind the market as a whole, which will grow 4.4% a year across all categories.
‘Broad luxury’ is driving growth
Luxury goods advertising can be divided into two categories: high luxury (watches & jewellery and fashion & accessories) and broad luxury (luxury automobiles and cosmetics & perfumes). High luxury brands are among the most iconic in the industry, but broad luxury accounted for 74% of luxury adspend in 2016, and grew 0.7% that year, while high luxury adspend shrank 3.9%. We expect broad luxury to drive most of the growth in luxury adspend to 2018: we forecast it to grow by 3.7% in 2017 and 4.6% in 2018, while high luxury adspend will grow by 0.8% in 2017 and 1.6% in 2018.
The internet will overtake print to become the main luxury advertising medium in 2018
Print is currently the principal medium for luxury advertising, accounting for 32.7% of adspend in 2016, compared to 31.3% for television and 25.8% for internet advertising. However, almost all new luxury advertising goes to internet advertising – we forecast it to account for 87% of adspend growth between 2016 and 2018. By 2018 we forecast the internet to be the biggest advertising medium for luxury, accounting for 30.6% of adspend, compared to 29.9% for television and 29.7% for print. Print will nevertheless remain much more important to luxury than for the ad market as whole: 13.8% of adspend across all categories will go to print in 2018, down from 16.7% in 2016.
The ascent of internet advertising can be largely attributed to broad luxury advertisers; high luxury is overwhelmingly print-‐based, and will remain so for the foreseeable future. 73% of all high luxury adspend went to print in 2016, and we expect 70% to go to print in 2018.
“Luxury advertisers are having to respond to consumers’ changing expectations,” said Vittorio Bonori, Zenith’s Global Brand President. “Consumers are now looking for luxury experiences that are personal and relevant to them, and targeted brand communication is central to creating this extra brand value.”
*The 23 markets are Australia, Brazil, China, Colombia, France, Germany, Hong Kong, Italy, Japan, Malaysia, Mexico, Netherlands, Peru, Russia, Singapore, South Africa, South Korea, Spain, Switzerland, Taiwan, the United Arab Emirates, the United Kingdom and the United States of America.
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Zenith is The ROI Agency. The first agency to apply a rigorous and objective approach to improving the effectiveness of marketing spend, Zenith transforms businesses and brands through evidence-‐ led thinking. Zenith is part of Publicis Media, one of four solution hubs within Publicis Groupe [Euronext Paris FR0000130577, CAC40], and has offices within Publicis One. As a leading global media services network, Zenith has over 5,000 people working across 95 markets. Supported by Publicis Media’s Global Practices, Zenith offers its clients a full range of integrated skills across communications planning, value optimisation, performance media, content creation and data & analytics. We work with some of the world’s leading global brands including AstraZeneca, Coty, Farmers Insurance, Georgia-‐Pacific, Hospital Corporation of America, JPMorgan Chase, Kohl’s, Sonic, Toyota, Verizon Wireless and 21st Century Fox.