Hey Big Spender – How Luxury Brands Raise Auctions on Instagram

PARIS (Reuters) – Top luxury brands like Gucci, Louis Vuitton and Christian Dior have everything to offer, from fashion shows to dance to teams of advisers who target social media platforms in search of young buyers.

Without the barriers to the entry of magazine advertising – where a glossy ad of a page can cost tens of thousands of dollars – sites like Instagram, a fashion favorite, have allowed for unknown brands to find an audience with reckless or eye-catching campaigns.

But a lot of money is changing the game as cash-rich groups of luxury goods, such as LVMH and Kering, are increasing their social media budgets, giving them vast means to thwart their rivals on platforms. once considered a leveler for large and small brands.

While the use of bloggers and influencers is spreading, the fees per sponsored publication ordered by those with four million followers far exceed 20,000 euros, according to marketing experts.

Less active than some small brands on network platforms five years ago, the major players in luxury far outweigh the competition.

Kering, the fastest-growing owner of Gucci, which had the biggest advertising impact on social media last year according to Tribe Dynamics data followers, said Friday that half of its media budget for 2018 was spent on digital advertising, up only 20%. years earlier.

"The way we think about advertising and creating aspirations is changing dramatically," said Gregory Boutte, Kering's chief digital officer, to reporters on the sidelines of Investor Day.

"Now, with every type of social platform, you need different types of videos, pictures. You do not create content on YouTube as on TV. "

Kering does not disclose its total advertising expenses.

Its urban rival LVMH has increased its total marketing spend at the fastest rate in seven years in 2018, reaching 5.6 billion euros ($ 6.3 billion), reaching 12% of group revenue, more than most brands that reveal this budget. Tendel online, private property of Chanel.

Louis Vuitton, LVMH's main sales force, now allocates half of its marketing costs to digital media, said brand CEO Michael Burke at an in-camera briefing this week, Citi analysts said .

LVMH declined to comment.

Vuitton, as well as LVMH brands Christian Dior, Marc Jacobs and Givenchy were among the top 10 brands of Tribe Dynamics last year, followed by Kering's Saint Laurent and Balenciaga brands. The company quantifies the value of the craze for social media, including unpaid content.

EMBRACING THE NEW

Three years later, the Italian Valentino, seven times smaller than Vuitton, surpassed the others in the Instagram, and was the first to appear on a list of Engagement Labs that measured the most effective brands on social networks .

Valentino's formula was simple: mixing fan-generated content with his own professional photos, while responding to online comments – a standard approach for labels at the moment, but which helped drive sales growth. at the company owned by Mayhoola at the time.

Valentino's Instagram subscribers have doubled to 12.4 million since, although revenue growth has slowed; Vuitton fans have almost tripled to 32.1 million, and incomes continue to grow at a steady pace.

Marketing investments are just one of the factors that distinguish high-demand luxury brands from markets like China and those that struggle to stand out, with more funky product designs and store strategies also playing a role.

And the funds only go very far, the knowledge of social media also making the difference.

Gucci co-designed a collection in 2016 with "Guccighost", a street artist who painted quirky versions of his logos around New York and put them online, helping his social media credentials, said the co-founder. from Tribe Dynamics, Conor Begley.

"Gucci has embraced these connections. Usually, a brand would have sent lawyers following him, "said Begley. "It sends a message to other content creators who think, 'Oh, God, I may be able to work with Gucci if I post about them.'

GREAT GROUPS, GREAT MEANS

As digital investments grow, mid-sized luxury brands are becoming increasingly more delicate as they try to stay visible.

"Those who suffer are middle-class, medium-sized, stuck between small, innovative digital players and large, big-box groups," said Michael Jais, CEO of Launchmetrics, which compiles digital data on the fashion industry.

Italian shoemaker Tod's is part of the turnaround brand group that is investing more in social media to boost sales – a strategy well received by analysts but likely to weigh on profit margins, some said.

HSBC analysts, who note "reduce" Tod Tod, said in a note this week that it was losing ground and was "facing intense competitive pressure" while LVMH and Kering were pushing funds towards marketing. line.

According to a report from Launchmetrics, just over 10% of influential people in social media earned $ 100,000 or more a year in 2018, up from 3.7% in 2017, although hiring the most popular bloggers only be one of the costs involved.

"The big groups understood that they had to invest more in the experiments – what's going on around a parade of parades, exhibitions, store openings", said Uche Pezard, CEO of Luxe Corp, which advises brands on strategy. "It's expensive, not technology. This has changed over the last five to eight years. "