Luxury advertising spending is on the rise after what was described as a disappointing year in 2015 — and digital is forecast to take a bigger chunk of ad budgets, new research shows.
Spending on luxury advertising is expected to rise 3 percent this year to $10.9 billion, up from 1.9 percent in 2015, according to media agency Zenith’s Advertising Expenditure Forecasts, released Tuesday.
The forecasts are based on ad spending for luxury cars, fragrances and beauty, fashion and accessories, and watches and jewelry, in 18 key markets around the world.
Slow economies in Brazil, Russia, India and China, as well as conflicts and terrorism in other countries, led to companies tightening their advertising spending in a number of markets in 2015.
China and U.S. to drive growth.
Over the next two years, spending is forecast to grow by $705 million, driven by the U.S. and China, the first and second largest lux ad markets respectively, as well as by recoveries in Asian and Eastern European economies.
Lux ad spend is expected to grow by $346 million in the U.S. and $228 million in China.
Digital advertising continues to soar.
The research suggests digital advertising is growing consistently at double digit rates and will be responsible for 97 percent of total growth between 2015 and 2017, equaling $837 million.
Between 2015 and 2017, spending on television, radio and cinema advertisements will rise by $26 million between them, but outdoor and print will have their share cut by $10 million and $150 million respectively.
In a year’s time, print’s share of advertising is predicted to fall almost 3 percent to 28.6 percent, and TV’s market share is also expected to take a 2 percent hit in the same period.
Digital is expected to be the single largest medium for lux advertising in 2017, at 32.1 percent.
Digital biggest in China.
China is the biggest spender on digital and will continue to be the forerunner into 2017, but not all markets spend the most in that medium. In Mexico, Singapore, South Africa and Peru, for example, digital advertising accounts for less than 5 percent of market share.
Print still extremely important for high lux brands.
Despite digital’s rapid growth, print remains the most important medium for high luxury advertisers, including fashion, accessories, watches and jewelry businesses. Last year, they spent more than 60 percent of their ad budgets in print.
Television and digital media are much more important for broad luxury brands — cars, cosmetics and perfume — with advertisers spending 42 percent of budgets on TV and 30 percent on digital, according to the research.
Car brands on the other hand, spent nearly a third of their budgets in digital.
Digital ad market share in these industries is predicted to increase slightly each year, but the growth rates at which that’s occurring is slowing down.