China, Japan and the US to drive a bounce back in luxury ad spend in 2017

The report examines expenditure on luxury advertising in 23 key luxury markets (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).

Eastern Europe is set to be the fastest growing market, at an average of 10% a year, followed by Latin America (5% a year), and North America and Asia Pacific (4% a year each) bringing up the rear. The Middle East and North Africa will continue to shrink at 6% a year, as the regions are beset with political instability and low oil prices.

Luxury advertising is still lagging behind advertising as a whole, as the report notes that the growth of 0.7% between 2013 and 2016 still falls behind the 4.8% annual growth across the whole ad market. Even as luxury advertising grows to 3.4% a year from 2016 to 2018, it will still lag behind the 4.4% a year growth the entire market is forecasted to see, across all categories.

Luxury goods can be divided into two subsections, high luxury (watches, jewelery, fashion and accessories) and broad luxury (luxury automobiles, cosmetics and perfumes). Broad luxury accounted for 74% of ad spend and grew 0.7% in 2016, while high luxury shrank 3.9%. Zenith expects broad luxury to drive growth in luxury ad spend to 2018, with a forecasted growth of 3.7% in 2017 and 4.6% in 2018, while high luxury will only grow 0.8% in 2017 and 1.6% in 2018.

Print will no longer be the dominant advertising medium for the luxury market in 2018, according to the forecast, with the Internet slated to take over as the top dog. This mimics the forecast from last year’s study.

Print currently accounts for 32.7% of ad spend in 2016, with television at 31.3% and the Internet at 25.8%. However, with almost all new luxury advertising going to internet advertising, Zenith forecasts the internet to account for 87% of ad spend growth between 2016 and 2018. Internet is forecasted to become the dominant advertising medium in 2018, with forecasts of 30.6% of ad spend, with TV (29.9%) and print (29.7%) following closely behind. Print, however, will still remain more important to the luxury market than the ad market as a whole, with 13.8% of ad spend across all categories going to print in 2018, compared to 16.7% in 2016.

Broad luxury will be fuelling the ascent of Internet advertising, as high luxury is overwhelmingly print-based and is likely to remain so for the foreseeable future. In 2016, 73% of all high luxury ad spend when to print, and 70% is still forecasted to go to print in 2018.

“Luxury advertisers are having to respond to consumers’ changing expectations,” said Vittorio Bonori, global brand president, Zenith.

“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," he added