Covid-fuelled cuts to luxury ad spending worsen magazines' plight

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 jewelry, Fendi handbags, Versace dresses or Breitling 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 per cent to 80 per cent, 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 chief executive officer 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 per cent of their US$2.9 billion ad spending in western Europe to newspapers and magazines last year, according to Publicis SA-owned media buying agency Zenith. That compares with 17 per cent for overall advertising outlays.

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French Elle Chanel, Lancome and Yves Saint Laurent perfumes are among the few big brands advertising in last week's issue of French Elle. That compares with at least 26 pages of ads featuring well-known brands owned by luxury powerhouses Richemont, LVMH and Kering 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 Yves Saint Laurent lipstick and Giorgio Armani 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," chief executive officer 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 chief executive officer Marco Gobbetti said last week that the British label is reinventing the way it communicates, focusing on reaching consumers more directly.

LVMH's Louis Vuitton 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.

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-email. The publisher of Neue Zuercher Zeitung, one of the country'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 that 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.

The consequences are going to be the most severe for smaller, regional outlets, according to Ilias Koteas, executive director at non-profit European Magazine Media Association in Brussels. BLOOMBERG