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The Trouble With Digital Advertising

Marketers are following consumers online, but digital advertising presents a host of problems for fashion brands.
An Instagram feed advert, an Instagram Stories advert, and a Facebook feed advert | Sources L-R: Instagram, Instagram, Facebook.
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According to data presented on Tuesday by Michael J. Wolf, founder and chief executive of technology and strategy consulting firm Activate, the average American currently spends more time on digital media and technology than work or sleep. What's more, time spent on major digital activities like video, audio, social media and gaming is only set to increase. It's not surprising that marketers are following consumers online and investing more in digital advertising.

In fashion and luxury, the budgets being allocated to print advertising are still out of sync with how consumers actually spend their time. Americans spend only 4 percent of their media consumption hours with print, compared to 20 percent on personal computers and 28 percent on mobile, and yet a huge portion of fashion budgets are still being allocated to print. According to Zenith, the amount of money the luxury industry spends on digital advertising hit $1.01 billion in 2016, up 63 percent since 2013. Over the same period, spending on magazine advertising fell 8 percent to $2.6 billion.

This imbalance is due to ingrained habits and a history of quid-pro-quo relationships between brands and powerful magazine editors — but also because digital advertising still presents a series of significant challenges for the luxury industry.

For one, consumer attention is split up across relatively few apps, sites and channels, with a staggering sum soaked up by what Wolf calls the “digital-attention unicorns”, which capture one billion or more minutes of digital attention per week. Google alone attracts 55 billion minutes of digital attention per week, while Facebook commands 51 billion minutes.

As a result, Google and Facebook dominate digital advertising to such a degree — the two collected 77 cents of each new dollar spent on digital advertising in the US last year — that the market has essentially become a “duopoly”. Clearly, this has implications for pricing, which impacts all advertisers, including fashion brands, which are hoping for the rise of a plausible competitor to help keep prices in check. Amazon, Snap and Verizon — which recently merged AOL and Yahoo to form an advertising and content unit called “Oath” — are possible rivals. But for the time being, advertisers are stuck with the reality of two dominant players.

Digital advertising also comes with the headache of unexpected adjacencies, a particular concern for carefully cultivated fashion and luxury brands. While high-end brands are vigilant about placements and adjacencies in department stores and the pages of magazines, it’s impossible for them to fully control where their ads appear online. That’s because a large percent of digital ad buying is automated or “programmatic”.

Programmatic advertising allows marketers to target consumers across thousands of sites, based on factors from demographics to browsing history to shopping habits. It's an approach that is significantly more cost-effective than buying handpicked inventory. But the practice comes with the risk that ads appear in places fashion and luxury brands would rather avoid: sites featuring pornography, fake news — even terrorist propaganda videos.

In July, Twitter users began posting about a Cartier advertisement that appeared on Breitbart News Network, a website known for its extreme, right-wing populism and links to white supremacists. One user, the activist Roger Bell, tweeted: “@Cartier Did you know that your ads appear on racist and xenophobic Breitbart? Not very classy.”

Google-owned YouTube has also faced similar problems; earlier this year several major advertisers, including PepsiCo and Wal-Mart, pulled their ads from the platform after they ran alongside objectionable content. For all brands this presents a serious issue, but for image-conscious fashion and luxury brands the issue is amplified. Some have turned to services like OpenSlate, Integral Ad Science and White Ops, which can help brands monitor where their ads are running, but the risk remains a real concern.

Then there’s the overall issue of effectiveness. Do digital ads even work? Some question the veracity of the data and analytics provided by the big platforms. But one thing’s for sure: engagement rates are low. Despite the rise of ad-blocking software, the majority of digital advertising is still interruptive and offers little value to the consumer.

Compare this to the tremendous power of creating content and earning the consumer's attention on social media. Whether via a brand's own channels or a network of influencers, this approach is proving to be cost-effective, highly impactful and perceived as more valuable and authentic than traditional ads. For fashion and luxury brands, which are natural content creators and have genuine stories to tell, this is the most likely route for achieving the mix of control and results they are looking for as the advertising landscape continues to shift.



Brexit poses serious risk to UK fashion industry, says new report. Restricting free movement will deny access to top-tier talent, as well as slowing the overall UK economy, according to a global talent report produced by the Creative Industries Federation (CIF). The London-based organisation proposed the introduction of a creative freelancer visa, as well as more short-term working permits. The creative sector in the UK — which includes film and music as well as fashion — is worth £87 billion annually, with employment up 5 percent in 2016.

Stitch Fix files for an IPO. The San Francisco-based personal styling service filed for an initial public offering on Thursday. The company set a target to raise $100 million. In its 2017 fiscal year, Stitch Fix generated $977.1 million in net sales, claiming almost 2.2 million active clients, up 30 percent from 1.7 million at the end of fiscal 2016. The public flotation — underwritten by Goldman Sachs and J.P. Morgan — will raise funds to accelerate growth through international and category expansion.

SMCP goes public. The affordable luxury group, which includes Sandro, Maje and Claudie Pierlot, began trading on the Paris stock exchange on Friday. In its IPO, the stock was priced at €22 euros per share, valuing the business at €1.7 billion (about $2 million). Last year, the company — which has 1,223 stores internationally — reported sales of €786 million ($931 million), with EBITDA rising 22 percent to €130 million ($153.5 million). Chinese textile firm Shandong Ruyi remains a majority shareholder with a 55 percent stake, while the founders and managers will retain their stake of around 10 percent. Other co-investors — including London-based investment firm KKR — will exit.

Nordstrom halts search for buyer. In recent months, the Nordstrom family, including co-presidents Blake, Peter and Erik Nordstrom, explored making an offer to buy the 70 percent of the department store's stock it does not currently own. However, around $7 billion was needed to fund the deal and lenders demanded a steep interest rate which the family could not pay, according to sources. The retailer will reportedly resume looking for a private buyer after the holiday shopping season. Shares tumbled 5 percent on Monday after the news broke.

Richemont expects profit jump as trading improves. The conglomerate forecasts an 80 percent increase in net profit during the six months ending September 30. Constant currency sales rose 12 percent in the period, despite the Swiss watch industry suffering a severe downturn in demand. As a result, shares in Richemont — which owns Cartier, Van Cleef & Arpels and Piaget — rose 1.7 percent on pre-market indications.

Puma raises outlook for third time this year. The German sportswear brand reported stronger-than-expected sales growth in the third quarter, growing 17 percent to €1.1 billion ($1.32 billion). The jump was attributed to the brand's revival in the US market and the success of its fashion shoes, including Fenty by Puma. The label has raised its outlook for the full year, estimating a 14 to 16 percent increase in sales, up from its 12 to 14 percent projections.

Victoria's Secret owner to invest $574 million in Crystal International's IPO. L Brands has agreed to take a $10 million stake in the Hong Kong-based garment supplier, which put 509.3 million shares on the market at HK$7.30 to HK$8.80 ($0.93 to $1.13 at current exchange). Crystal International is the biggest apparel maker in the world in terms of volume and seeks to raise as much as $574 million to expand its manufacturing capacity and upstream vertical expansion. Fast Retailing, which owns Uniqlo, also invested, buying $20 million of stock.

Tommy Hilfiger announces adult adaptive clothing collection. Tapping into an underserved area of the market, the designer described the collection for people with disabilities as part of "the democratisation of fashion." The sportswear-inspired range — which follows a collection introduced for children last year — includes magnetic closures instead of zips, velcro fastenings and adjusted seams and openings that allow caregivers to easily dress the wearer. The collection features 37 styles for men and 34 for women.

Asos raises outlook for 2018. The e-commerce giant raised its forecast for the 2018 fiscal year to 25 to 30 percent growth after strong international sales helped bolster market expectations in 2017. Popular with millennial shoppers, the e-retailer reported sales of £1.8 billion ($2.3 billion), an increase of 34 percent. Pre-tax profits more than doubled to £80 million ($105.9 million), while the site's active customer base rose to 15.4 million, up 24 percent.

Aldo Group calls off Camuto Group acquisition. Less than three months after announcing plans to acquire the Camuto Group's footwear and accessories business, the privately held company will no longer pursue the deal. The acquisition would have given Aldo a much larger scale as part of expansion plans: the vertically integrated company, which owns multiple brands including Call It Spring and BBX, currently operates more than 2,000 stores, and annual sales are estimated at around $1.5 billion.

Vogue and Vice partner on editorial project. The Condé Nast fashion title and new media digital giant will launch "Projects Vs" in 2018, a 100-day collaboration that will include a new website and content across both media brands. The collaboration will be produced by editors from both companies and will appeal to advertisers that want to leverage traditional media's influence with new digital platforms.

Rent the Runway targets millennials with new clothing-rental offering. The online clothing rental service announced a new, less expensive subscription plan, "RTR Update", which will cost $89 per month and include four pieces from over 200 brands. The original service, "Unlimited", will increase in price, offer a wider selection of brands and continue to offer unlimited item exchanges throughout the month.

US online retail sales expected to surpass $1 trillion by 2027. Online sales will grow at a compound annual rate of 12 percent through 2020, according to a new report from business advisory firm FTI Consulting Inc, after which they will decelerate to 9 percent over the following decade. Amazon's share of those sales is predicted to hit 53 percent by 2027, up from 34 percent in 2016.


Phoebe Philo | Source: Indigital

Phoebe Philo is said to be leaving Céline. While LVMH categorically denies the designer's imminent departure, industry sources with direct knowledge of the matter say interviews are underway for her replacement. Philo is said to be leaving the brand by the end of the year and the terms of her departure are thought to have been agreed before the summer. Philo joined Céline in 2008. During her tenure, revenues from about €200 million a year to more than €700 million, according to analysts.

Christy Turlington discusses sexual harassment in the fashion industry. The supermodel stated that while she is "fortunate" to have never have experienced it, sexual harassment and misconduct has long been tolerated. "The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experienced at some point in our careers," she said. Turlington added that more protections need to be implemented in the industry to protect young male and female models. Meanwhile, model Cameron Russell shared scores of models' stories of sexual assault and harassment through Instagram.

Lena Dunham's Lenny Letter is heading to Condé Nast. The weekly feminist newsletter, founded by the creator of HBO's hit show "Girls" and her creative partner Jenni Konner, is switching publishing partners after failing to renew its agreement with Hearst, which has syndicated and monetised its content since October 2015.

Kate Lanphear joins Maire Claire as creative director. The well-respected editor, known for her personal style as well as her distinctive approach to editorial projects, is succeeding Nina Garcia at Hearst's Marie Claire US magazine. (Garcia was named editor-in-chief of American Elle in September.) Lanphear has most recently been consulting with Google on its fashion portal. She left men's magazine Maxim in 2015 after a short but highly publicised stint as its editor-in-chief following roles at Elle, T and other titles.


eBay launches authentication programme. In order to better compete with luxury fashion resale sites that authenticate goods such as The RealReal and Vestiaire Collective, the online marketplace is launching an opt-in service for sellers to have their handbags and wallets verified. The program will initially focus on 12 luxury brands — including Chanel, Gucci and Balenciaga — and items valued over $500. eBay will take a 20 percent commission on authenticated goods sold.

Lululemon's lack of tech patents may make it vulnerable to an Amazon attack. The athletic brand — which has focused on patenting the design elements of its garments — lacks the intellectual property claims needed to mount a defence against Amazon. The e-commerce giant recently started using Lululemon's top supplier to manufacture its private label activewear range. The Taiwanese vendor — Eclat Textile Co — helped Lululemon create its signature Luon fabric. Shares in Lululemon fell 4 percent following the news.

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