In their most recent earnings calls, a number of publicly listed fashion and beauty companies indicated that they’re ready to start spending to various degrees on marketing again, having pressed pause in some capacity during lockdown with stores around the world shuttered and factories producing hand sanitizer instead of handbags.
L’Oréal is increasing its “media investment everywhere”; The Estée Lauder Cos. is “spending more in advertising,” and Ralph Lauren envisions “a continued progression of marketing investment relative to sales compared to the prior year.”
But will all this mean a return soon to the pre-pandemic levels of ad spending for the fashion and beauty sectors overall? The stakes are high since apparel and beauty spent more than $5 billion on advertising in 2019, Kantar’s data showed.
The answer, though, is unlikely, according to Brian Wieser, global president of business intelligence at WPP’s GroupM.
“The categories which have been most heavily impacted are mapping their advertising and their media spending broadly to their business trend,” he said. “You wouldn’t expect these categories to return to normalcy anytime soon, at least as long as consumers are operating under the restrictions of the pandemic.”
Indeed, in its most recent analysts’ call, LVMH Moët Hennessy Louis Vuitton, whose brands include Louis Vuitton, Dior, Givenchy and Sephora, indicated that it would “adjust the level of marketing spend to the level of the business.” “In other words, the business should fund the marketing and not the other way around,” chief financial officer Jean-Jacques Guiony said. “So what you’ll hear is a big discrepancy with a big surge in marketing ahead of the recovery of the business, it is unlikely to happen. We will control the marketing alongside the development of the top line.” The company is betting on a gradual recovery in the second half, led by China, after net profits plummeted 84 percent in the first six months of the year.
MediaVillage analyst Jack Myers doesn’t believe there will be “meaningful growth” in ad spend from fashion until there is a vaccine and “people start reemerging from their cocoons.” Much also depends on a possible second wave of COVID-19 and “the strength and impact of it.”
“On the other hand, once we do see a return, I think there’ll be a significant increase in ad spending as consumers are hungry to look good and go out again, but we may not see that until 2022,” he continued.
As for what companies are spending on right now, the pandemic appears to have accelerated the move to digital, a trend that was already in play prior to March.
According to L’Oréal’s most recent results, there was a significant shift to digital advertising, with e-commerce sales surging 64.6 percent in the first six months of the year. Around 60 percent of the company’s media spend went to digital in the first half, compared to 47 percent during the same period a year earlier.
Natalie Hughes, founder of London-based social media and digital content agency The Fashion Digital, told WWD that the agility of digital ads is highly attractive to brands with increased budget accountability. “We can monitor and tweak campaigns by the hour, to ensure efficient spending,” she explained.
In terms of what exactly digital spend could be, Myers thinks brands are looking at partnerships or cooperative advertising with the online retailers and also digital investments in Facebook. Secondary to that is an effort to connect through Instagram and TikTok.
“It’s a misleading indicator because it’s more commerce-driven than it is traditional advertising-driven,” he said.
This trend will no doubt continue to negatively impact glossy fashion magazines, which are extremely dependent on advertising. In a statement sent to WWD in July, Agnes Chapski, the publisher of InStyle, said that the economic impact in the luxury, fashion and retail markets is “considerable” and will be visible in its just-released September issue, the most crucial issue of the year for publishers.
“These categories drove significant business in previous September issues so this year’s issue will reflect those declines,” she added.
For more, see: