High-end brands are slashing ad budgets by 30% to 80% as they shift to digital marketing to reduce costs
ZURICH • The coronavirus is taking a steep toll on magazines and newspapers that relied on Europe’s luxury brands as a last bastion of already dwindling advertising spending.
Stripped of a key source of revenue, fashion glossies have gone on a crash diet. Gone are the days when readers had to flip through dozens of ads for the likes of Cartier International SNC jewellery, Fendi handbags, Gianni Versace Srl dresses or Breitling SA watches to get to the table of contents; now it’s just inside the cover.
With boutiques only beginning to reopen after weeks of shutdown and few people in the mood to splash out, high-end brands have slashed ad budgets by 30% to 80%, according to digital-marketing agency Digital Luxury Group. The pandemic could hasten a shift to digital marketing by one of the last sectors to devote significant ad spending to newspapers and magazines.
“Nobody knows if luxury brands will go back to investing in print ads as much as before the pandemic,” said Digital Luxury Group CEO David Sadigh. “We’re already seeing more flows into digital as it reduces costs. That’s set to continue the more brands build up e-commerce and as they seek more direct return and measurable results from media.”
Luxury brands committed 26% of their US$2.9 billion (RM12.5 billion) ad spending in western Europe to newspapers and magazines last year, according to Publicis Groupe SA-owned media buying agency Zenith SA. That compares to 17% for overall advertising outlays.
Chanel SA, Lancome and Yves Saint Laurent SAS (YSL) perfumes are among the few big brands advertising in last week’s issue of French Elle. That compares to at least 26 pages of ads featuring well- known brands owned by luxury powerhouses Richemont SA, Louis Vuitton SE (LVMH) and Kering SA in the issue published on March 6, shortly before most of Europe and parts of the US started hunkering down at home.
L’Oreal SA, which makes YSL lipstick and Giorgio Armani SpA perfume, has been eliminating costs and investments that aren’t indispensable, including advertising spending during lockdowns.
“When stores are closed it doesn’t make sense to advertise products and it can be even frustrating to advertise products that consumers just cannot buy,” CEO Jean-Paul Agon said on April 16. L’Oreal said it will be ready to reinvest as soon as consumers can shop at stores again.
Burberry Group plc CEO Marco Gobbetti said last week the British label is reinventing the way it communicates, focusing on reaching consumers more directly. A spokeswoman declined to comment on marketing spend.
LVMH didn’t entirely eliminate ads during the lockdowns, but adjusted its product- and travel-themed marketing to acknowledge that distant shores were just a dream. Its print spots featured a shadowy shot of a child holding a kite against a seaside sunset, accompanied by a new slogan, “Imagination Takes Flight”.
With e-commerce the only option for many watch buyers, Swiss watchmaker Breitling shifted its focus from print ads to digital marketing during the lockdowns, a company spokeswoman said in an e-mail. The publisher of Neue Zuercher Zeitung, one of the coun- try’s largest newspapers, said watchmakers have been reluctant to advertise since the beginning of the crisis and that it faces high losses.
Although some brands have said they’ll restart advertising once stores open again, the near-term shortfall will worsen the plight of newspaper and magazine owners.
The sector has already had to resort to job cuts and sales amid cash crunches.
As everything from job and apartment listings to editorial content moved online over the past decade, advertising income declined. Even billionaire Warren Buffett, who owns newspapers across the US, has called most “toast” because of the drop.
The consequences of the advertising revenue losses during the confinement period at magazines and newspapers are going to be the most severe for smaller, regional outlets, according to Ilias Koteas, ED at non-profit European Magazine Media Association in Brussels. A spokeswoman for CMI Media, which distributes Elle in France, declined to comment.
“The print media sector was already struggling before Covid-19, and they’re going to struggle more now,” said Brian Wieser, global president of business intelligence at WPP plc-owned media agency GroupM. — Bloomberg