Expenditure on luxury advertising will rise by 2.9 per cent in 2017, recovering from a 0.5 per cent 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 per cent. The recovery will be led by luxury advertisers in the US, China and Japan, which together account for 80 per cent 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. 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.
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 per cent 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 per cent a year), Latin America (5% a year), and North America and Asia Pacific (4 per cent 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 per cent a year.
Luxury advertising is growing less rapidly than advertising as a whole. Across our top 23 markets, luxury advertising grew by 0.7 per cent each year between 2013 and 2016, compared to 4.8 per cent annual growth for the whole ad market. Even though we expect luxury advertising growth to accelerate to 3.4 per cent a year between 2016 and 2018, it will continue to lag behind the market as a whole, which will grow 4.4 per cent 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 per cent of luxury adspend in 2016, and grew 0.7 per cent that year, while high luxury adspend shrank 3.9 per cent.
“We expect broad luxury to drive most of the growth in luxury adspend to 2018: we forecast it to grow by 3.7 per cent in 2017 and 4.6 per cent in 2018, while high luxury adspend will grow by 0.8 per cent in 2017 and 1.6 per cent in 2018,” the report said.