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China leads the world as luxury brands invest in digital channels

China is leading the world for luxury brands digital advertising expenditure

China is the most advanced digital market for luxury advertisers, attracting more than 50% of ad spend, according to research by Zenith.

The Luxury Advertising Expenditure Forecasts 2018 report, which compares luxury advertising expenditure in 23 markets, revealed 53% of all luxury ad spend in China in 2017 was invested in digital channels.

Zenith predicts this will increase to 68% of ad expenditure by 2019 as luxury brands embrace China’s digital and e-commerce channels such as Alibaba’s Tmall Luxury Pavilion and JD.com’s luxury experiences.

China is currently the world’s second-largest market for luxury advertising, behind the US which attracted $5.2bn in ad spend in 2017, compared to China’s $2.1bn. However, together these two markets accounted for 61% of luxury advertising expenditure across the 23 markets included in the Zenith report.

The report also revealed a global shift towards digital media investment by luxury brands, which are playing catch-up after being slow to adopt digital advertising.

Luxury brands will invest 33% of advertising spend in digital channels this year, an increase of 3% on last year. However, the figure lags behind overall brand advertiser’s which are forecast to invest 42% of spend in digital channels.

Luxury hospitality is the leading category with 50% of ad expenditure to go to digital this year, followed by luxury automotive brands (39%), watches and jewellery brands (28%) fragrances and beauty (27%), and fashion and accessories (13%).

Unsurprisingly, digital advertising is driving all the growth in luxury ad spend, and is expected to account for 35% of total luxury expenditure by 2019. Overall luxury ad spend is forecast to rise 2.4% in 2018 and 2.8% in 2019.

Jonathan Barnard, head of forecasting at Zenith, said, “After a relatively slow start, luxury advertisers are now committing to the digital future, led by luxury hospitality brands.

“Luxury brands face unique challenges online, such as the need to maintain exclusive brand values while communicating with potential customers at scale. By using personalised digital communications and high-quality e-commerce experiences, luxury brands can generate new sales while preserving their exclusive appeal.”

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