Recovery in Asia to drive 3% growth in luxury ad spend
Expenditure on luxury advertising will rise by 3 per cent in 2016, up from 1.9 per cent in 2015, according to Zenith’s new Luxury Advertising Expenditure Forecast. This acceleration will be driven by recovery in Asia and Eastern Europe after a tough year in 2015. Luxury advertisers will spend a total of USD 10.9 billion across the top 18 markets in 2016, up from USD 10.6 billion in 2015.
The luxury advertising market slowed from 2.9 per cent growth in 2014 to 1.9 per cent growth in 2015 as advertisers reacted to slowdown in the BRIC markets as well as to local conflicts and terrorism. Adspend shrank by 1.4 per cent in Asia and by a massive 20.3 percent in Eastern Europe (mainly the result of the oil crisis and Rouble devaluation in Russia), but the global total was buoyed by strong growth in North America (3.6 per cent) and Western Europe (4.7 per cent).
In a region-wise break up, Zenith forecasts Asia to return to 2.9 per cent growth in 2016, while the decline in Eastern Europe slows to 2.8 per cent. North America will stay strong, with 3.9 per cent growth, but Western Europe will slip back to 1.7 per cent. Overall a 3 per cent growth is forecasted in luxury adspend across Zenith’s top 18 markets in 2016.
Luxury advertising however is growing less rapidly than advertising as a whole. Luxury advertising grew by 2.9 per cent in 2014, compared to 5.6 per cent for advertising as a whole, and 1.9 per cent in 2015 (compared to 4.1 per cent). Zenith forecasts this under-performance to continue, with luxury advertising growing 3 per cent in 2016 compared to 4.5 per cent growth across all categories.
USA and China driving luxury advertising
Between 2015 and 2017, Zenith forecasts luxury advertising to grow by USD 705 million. 82 per cent of this growth will come from the USA (USD 347 million) and China (USD 228 million). The USA and China are the largest and second-largest luxury ad markets respectively, accounting for 45 per cent and 21 per cent of luxury adspend in 2015. Germany is third, followed by France and the UK. Zenith expects to see very little growth from France, which is suffering from persistent unemployment, low confidence and low economic growth. The agency forecasts the UK to overtake France to become the fourth-largest luxury ad market this year.
Digital: Largest luxury ad medium in 2017
Digital advertising is by far the biggest contributor to the growth in luxury advertising, growing consistently at double-digit rates. “We expect digital media adspend by luxury advertisers to increase by USD 837 million between 2015 and 2017. Over this period, television, radio and cinema will increase by a total of USD 26 million between them; outdoor will shrink by USD 10 million; and print will shrink by USD 150 million,” quoted the report.
By 2017, print will account for 28.6 per cent of total luxury adspend, down from 31.9 per cent in 2015. TV’s market-share will also decline over the same period, from 32.7 per cent in 2015 to 30.7 per cent in 2017. Digital’s market-share will increase from 26.3 per cent in 2015 to 32.1 per cent in 2017, when it will overtake TV and print to become the single largest medium for luxury advertising.
Print remains the most important medium
Despite its decline in market-share, print remains particularly important to luxury advertisers, specifically those in the fashion & accessories and watches & jewellery sub-categories. In 2015, fashion & accessories advertisers spent 83 per cent of their budgets in print, and watches & jewellery advertisers spent 60 per cent. Print titles –especially glossy magazines – provide high-quality, immersive yet relaxed reading experiences, a particularly suitable environment for luxury advertisers wishing to showcase their brand values.
Zenith’s top 18 markets include China, Colombia, France, Germany, Hong Kong, Italy, Malaysia, Mexico, the Netherlands, Peru, Russia, Singapore, South Africa, South Korea, Spain, Taiwan, the United Kingdom and the United States of America.
This is the second annual edition of the Luxury Advertising Expenditure Forecasts that examines expenditure on luxury advertising in 18 key luxury markets. As with Zenith’s 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.
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