Emmanuel Goulin, President L’Oréal Travel Retail, Interviewed.
17 minutes read
Introduction by: Peter Marshall
Whenever I get together with L’Oréal senior management for an interview, it’s always a special event. And this one with Emmanuel Goulin is no exception. It is as comprehensive as it gets. Topics covered include: reimagining and reinventing travel retail, key market trends, breaking down the long-entrenched industry silos, new brand initiatives, ‘gamified’ marketing, ethical policy regarding teenager advertising, targeting Gen-Z and Gen-Alpha, the advances of beauty tech, sustainability, the Green Joint Business Plan with Gebr. Heinemann and much, much more. It is a thoroughly engaging and must-read interview to appreciate all that is L’Oréal Travel Retail today.
Peter Marshall (PM): Welcome to TRunblocked.com, Emmanuel. The travel retail business is not new to you. It’s been three years to see you return. So let’s start this conversation by asking you what you see are the key trends and changes, if any.
Emmanuel Goulin (EG): I would say, probably, two main things I have noticed since I came back. First, I’m happy to see that the appetite for travel is still there and that the traffic is now, at the worldwide level, back to the pre-COVID level.There are discrepancies from one region to another of course but everywhere still we see a progressive decorrelation between the traffic and the business with a clear conversion issue.
PM: A declining spend.
EG: A declining spend, exactly. So that would be probably the first point of surprise. The second one, for sure, since I left as the head of travel retail Asia-Pacific in 2021, is the change that happened in the Chinese ecosystem. That has been quite massive and that is still going on.
PM: Okay. Just developing this, I want to touch on what you said yesterday in the presentation, at the beginning of the media event. The simple fact now is that there is a blurring between travel retail and the domestic market. I mean, the consensus is that travel retail has lost its USP. That is all about price, that has always been a key driver for success.
And now, also, because everything in Duty-free and travel retail across the world largely looks the same. TR has simply lost its sex appeal. I know that L’Oréal has conducted many internal studies on how to recapture the magic that is sorely needed now. So can you tell us what you have in store from L’Oréal’s perspective and also from an industry perspective? What do you think should change? What can be done to improve things?
EG: Yes, I think because of the decorrelation of traffic on the business, we shouldn’t take for granted anymore that because there will be traffic, there will be business. But I think it’s a major shift because it’s forcing us to really understand better what consumers are looking for, and to try to serve their needs in a better way.
It’s true that before, most of the advantage of travel retail was in the price of not paying taxes and therefore having a price difference versus local market. Today we have seen the local markets have got more and more competitive especially with the influence of pure players online. Price is not and cannot be the only factor of differentiation anymore. I think it’s more and more about experience. The sense of the moment, the sense of place, the differentiation that the travel retail industry is able to provide..
It is becoming even more important because the passenger profile is changing. Before Covid, 22% of the travelers were either Gen-Z or millennials. Now they’re 37%. So, their weight has been increasing. They are looking at experiences – see a time to indulge themselves, a differentiation in the offer, memorable experiences, giftable offers that seems that somehow the travel retail industry needs to reinvent.
The travel retail set, for instance, is a good example to me, I think they were very transactional when they should be, tomorrow, a bit more desirable, a bit more giftable, a bit more different in the content, in the experience versus the local market.
PM: But don’t you think it needs virtually a complete reset, that travel retail needs to be reimagined?
EG: Yes.
PM: That the whole idea about becoming more experiential does get undercut by one key factor. And that’s the business model. You know, retailers pay a lot of money for their space. And because of that, the price to consumers is more, and the pressure is on retailers to meet the minimum annual guarantees to the airports. And therefore, every square meter, every dollar they make per square meter, really does count.
That precludes them from generating spaces that are genuinely experiential, that really excite passengers, invite them in, rather than the standardized approach that we see everywhere at the moment. You want to get retail excitement back into travel retail equation.
But how do you do it when retailers are just putting shackles on you? Because you are a business, a dynamic business that wants to affect change. How do you see it? Collaboration is great, but seeing new things appear takes a lot of time.
EG: I think first, that the industry is not limited to brands and retailers. We have to think beyond that and to look at something bigger that also includes the airlines, the airport, and the digital ecosystem that is gravitating around. The solution is there. It’s one of the data-richest ecosystems I’ve ever seen that, if it’s activated properly, can generate a massive amount of value because it will allow a more personalized experience for the passengers. I’m convinced that this can then make the equation financially viable for all.
PM: But we’re not very smart at data sharing as a business, historically. I think it’s beginning to change. There are companies out there that have models that are helping brands, like what Pi Insight is doing, for example, that actually help brands understand more about their position. And this data collection has the potential to create better collaboration and leverage for brands with their retailer partners because of what’s actually happening on the shop floor.
But it still comes back to the question about the silos. They are still there. You know, the different airlines, airports, brands, retailers, they are still largely mutually exclusive in terms of data sharing. How do you ever get over that?
EG: I feel the silos are not as long as they were historically. The industry is understanding that this decorrelation that is taking place between traffic and business is forcing us to change the way we work together. We have to leverage the data of the ecosystem to create value, a more experiential approach, to serve the consumer in a better way.
At L’Oréal Travel Retail, we’ve been testing and learning quite a lot recently, challenging this ecosystem. I take the example of Yves St Laurent, in Qatar. By leveraging the data of the airline, the airport, the retailer on all data, you can really serve the consumer in a better way and create value.
You can also see other initiatives, like Aéroports de Paris/ Lagardère/ Extime have done together in Paris Charles de Gaulle or Lagardère and Vinci have done in Kansai.
These are examples that show that there is still room for creativity, daring – an entrepreneurial attitude. These results are quite convincing when you look at what they’re delivering after a couple of months. Also, because the business is tougher, the industry has to move. And I remain extremely confident in the ability of the industry to grab these opportunities in the interest of the value creation for the future.
PM: I think two things come out of that. Firstly, the Qatar Duty Free, Qatar Airways and Hamad International Airport example is a good one, yes. But all parties essentially come under one umbrella. It’s one business entity. But it’s a great starting point nevertheless.
But surely what we really want to see is a different airline, a different airport and a different retailer, because that really will show the muscle behind the idea. And what happens in this business is, if an execution like this works successfully and the commercial reality is that it delivers robust results, that there’s a domino effect within the wider business. You know, it’s a me-too industry. Businesses do copy each other. But if it works, it will spread. Why not? That can only be good news.
The other point is that I really do admire what Aéroports de Paris and Lagardère have done. It’s a joint venture approach between airport and retailer where the risk and reward are shared. That gives ‘partnership’ a real meaning.
Now I know this doesn’t always apply to, say, smaller regional or local airports – it kind of points to the bigger hubs. But I’d still like to see more of that because it does make a difference. As we all know, what is showcased in Paris is quite remarkable. And at Kansai, too.
EG: I know, it’s good, because you take the example of Kansai or Paris, you take big, well-established airports or hubs and they prove, through this very close collaboration that is very innovative in the form it took, which is different in Paris and in Kansai, that they can the challenge the status quo.
So it shows it is not a matter of being big or small. All good ideas are worth being tested and if they work, then scaled. The entrepreneurial mindset has always been there in the travel retail industry, that is expressing itself through these initiatives. And the more we can test and learn together, the better for the industry.
PM: Okay. Let’s drill this down a little. Where do you see the new growth areas in beauty in travel retail and what are the new strategic initiatives the group is taking to tackle the changing pax structure you referred to earlier?
EG: Yes, so there are different elements in your question. First, it’s true that the pax numbers have been changing quite a lot over the last couple of years. Probably we move from what I would call the global shopper approach to local shopper focus, meaning that we need to be more targeted, more personalized in our offer. These new consumers are the Indonesian, the Indian, people from the Middle East, and the numbers are quite fascinating.
They are young, they are connected. They will probably be having different needs than before. So, first we need to leverage our knowhow of these consumers from a geographical footprint, to serve them better, and to customize and personalize the offer.
But then, from a category standpoint, I foresee in the next couple of years that there’s still a lot of growth for a category like fragrance, that is growing quite fast at the moment and still has a fantastic potential for not only the new passengers of tomorrow that I mentioned, but also the Chinese.
I also foresee opportunities of growth for a category such as dermocosmetic. We’ve seen that there is a need for skincare that is, at the same time, more technical, more efficient and more affordable. And the dermocosmetic category has been on the rise everywhere in the world.
We are the undisputed leader of beauty worldwide, well-positioned to bring these new categories with brands like La Roche-Posay, Vichy or Skinceuticals to the travel retail industry, which will also help reboost the skincare category and help the penetration. And you have many other categories of products that today are not dealt with in the beauty offer of travel retail – such as hair care, which is a huge market. Kérastase, for instance, is a fantastic opportunity to bring the hair care offer to the travel retail business.
So frankly speaking I think the appetite for travel is just going to grow as I mentioned earlier and so will the appetite for beauty! Beauty is something rooted in the DNA of everyone. The quest for beauty is universal and it will just keep going. Beauty doesn’t limit itself to makeup or skincare, it can go beyond that.
PM: Moving on, let’s not dwell on everyone’s issues in China, we all know what the score is there. Yet the domestic market is growing. The new generation of Chinese seem to have more interest, and we touched on this before, on local brands. What is your strategic take to make the classic brands of L’Oréal, like Lancôme, Armani and YSL, appeal to the new generation of Chinese?
EG: Yes, but the fact that you have some more local brands that are popping up here and there, is not new. This is today true in China. This is even more the case in mass than in selective. But it has been true in Japan, in Korea, in the past and we always welcome a strong competitor. They are a way to challenge us and make sure that we get better. I see that as an opportunity to keep challenging ourselves. We are a very strong leader in the China local market.
If I look at the selective market, the L’Oréal Groupe has never been so strong with a market share close to 34%. They are some of the fastest growing brands of the China local market right now. YSL, for instance, is on fire. It’s stimulating and challenging to have good competitors – they are forcing us to see things differently.
In the same way in travel retail, if I go beyond the Chinese ecosystem, when you have new entrants, it’s a way to get better and to keep learning. And I’m confident we will do it the same way we’re doing it right now in China, where again, the appeal of our brands has never been so strong.
PM: Now, we’ve recently seen an interesting and significant initiative with the group’s admiral ship brand, Lancôme, with Génefique’s Ultimate Travellers’ Repair Clinic at Changi Airport. How has this worked for you?
EG: Well, it will have finished on October 19th. (this interview was recorded on October 3, PM.) So it’s early to have the complete readings of the results.
PM: Initial readings?
EG: Initial readings are very positive. First, the initial intention before the reading was to leverage the beauty science, on the beauty tech, to improve conversion. How do we do that? It’s not only by launching Genifique’s Ultimate Travellers’ Repair Clinic which is per se, a fantastic product innovation, but also to leverage on the scientific approach around it to encourage consumers and passengers to try and, hopefully, to buy.
So how do we do that? We have imagined, for instance, 100% the customer-made, AI beauty consultant for travel retail. That is analysing the needs of the passengers, depending on the length of the flight that he or she is taking, the weather on arrival, etc., to help provide the best beauty routine. And then we do a skin diagnosis that is helping us to leverage, on the whole, the beauty tech assets that we have in that is giving a reading of your skin condition in the best possible way in the travel environment.
So, by leveraging this, we see that, first, people are curious because, it’s unique, it’s new. We have never been seating so many people in our pop ups during this special event. And the level of conversion of this skin diagnosis tool are very high – 78% – and the echoes of the consumers seem to be very positive indeed, which makes us believe that it’s a great initiative that we want to keep going on and scaling.
I think the challenge on this is that the more that people use it, the more they can go through the consultation and then the better the experience is and the more convincing it is.
And one other thing. All the people are taking pictures of themselves in front of this Genifique’s Ultimate Travellers’ Repair Clinic because it is very instagrammable. So, it’s advertising for the airport, too.
PM: Let’s move on. I’ve been looking at studies recently for the coming generation of Gen- Z and, most importantly, Gen-Alpha. Gaming, apparently, is the number one source of entertainment. Now, Chanel has launched their own gaming app, Chance. It comes as a surprise to see such a traditional luxury brand taking an initiative like this in the vertical.
So, the question that needs to be asked of you: can we see some exciting initiatives by L’Oréal Travel Retail in this area to reach and engage these two generations through ‘gamified marketing’ campaigns? Perhaps, even a gaming app by L’Oréal TR to capture the attention of the mainly Gen-Z and Gen-Alpha travelers?
EG: For sure, gamification marketing campaigns are something we’re exploring, as we want to be where our consumers are. As you’re saying, the gaming opportunity is massive and that’s why we are doing it. Prada, for instance, is on Candy crush, Armani is working with Fortnite. So, we are trying to engage our audiences through the gaming opportunity.
We take gaming as a way to connect with our audience, as an opportunity to talk to our consumers. How to adapt that to the playground of travel retail, for me, it’s still a question. So, we have a very pragmatic approach on when we might do this in the future. Honestly, I don’t know what we will explore.
PM: Just developing this, then. There is something of a concern about marketing to teenagers. I mean, just look at some of the brands currently sitting on Sephora’s shelves. What is L’Oréal’s position here? Do you think the beauty marketing to teenagers or younger age groups is actually ethical?
EG: We have a very clear policy at the Group level which is to not engage any targeted advertising or marketing campaign for those under 16. With one exception, which is when we address very specific skin needs such as eczema, acne or suncare protection. So, I think this is very clear. By the way, as a group, we’ve been launching a kids’ campaign with our brand Kiehl’s.
It’s about leaving kids where they should be and not engaging them in any marketing campaigns that they don’t belong to. So that’s our view and our values and we stick to them.
PM: Travel Retail is known to be around 90% luxury retail. Yet L’Oréal Group has been introducing new categories and brands for the pharmacy channel. You know, it’s the crossover that you mentioned earlier. Now, with standalone boutique brand Aesop, which I covered separately with Baptiste Beau, what strategies do we expect to see in the near future to increase non-luxury beauty brands in travel retail?
EG: I think for consumers there is no luxury, pharmacy or standalone boutique, there is simply a beauty offer.
PM: So it’s not compartmentalized.
EG: I am not in the mind of the consumers, but I believe when they go to a beauty store, they want to see a beauty offer that is as wide as possible. It is interesting what you are saying that the current offer is perceived as 90% luxury, then it is certainly preventing many people from entering the shop because they believe there is nothing for them to buy – nothing they can afford. Making the beauty offer more inclusive, more appealing, more exciting, should be one of the focus of us all in the industry. In that sense, we can bring some new categories or new brands then, because it will help to make the beauty offer more appealing overall.
PM: Well, let’s stay with that for a second, because you mentioned this slightly earlier. There is an increasing convergence between beauty and science, a morphing of sorts, and it almost represents 10% of the business at the moment. Do you see that increasing?
EG: Yes, of course, because when you buy beauty products you expect results, and the science is helping to get the best technology and the service of the product efficiency. And this is one thing that has always been one of our major drivers at L’Oréal. Our founder Eugene Schueller was a scientist himself.
We’ve always been considering that research and innovation were the key drivers of product innovation. We are still investing more than €1.2 billion euros a year on research. We have more than 4000 scientists working on this to bring the best that science can offer to the consumer.
What is new over the last couple of years is that this innovation is not only within the formula or the texture but is also with the tools that are allowing us a better, holistic and personalized beauty experience. I’m thinking of the beauty AI system that was presented by our CEO, Nicolas Hieronimus, at CES in Las Vegas at the beginning of this year. Typically, it’s another way of considering the science or the technology at the service of a better consumer experience. This has been new and we try to champion that because we believe that the future of beauty lies not only in the efficiency, but also in our capacity to personalize and adapt the offer to everyone’s needs.
PM: I want to move to another area where you are leading the industry and that is in the area of sustainability. It’s a two part question, really. The first part is that we know the travel retail industry is, unfortunately, one that is a big contributor to CO2 emissions. Are there any new policy changes by L’Oréal that you can share to reduce the industry’s negative impact on the environment?
EG: Well, first, I think that as a group, we are extremely clear about our commitments to sustainability. We set the program that is called L’Oréal For the Future which is very clear on measurable objectives for the Group by 2030. In the field of travel retail, we’re trying to have a very pragmatic approach to working on probably four different areas.
The first one is, directly, together with our retailers. We’ve been discussing it this week around the supply, how to improve the carbon footprint of our industry by managing our supply in a more efficient way. The second one, is how to make our point of sale more eco-friendly and how to build pieces of merchandising that are recyclable. The third one is about the refill opportunity – how to reduce the carbon footprint due to the packaging, and we believe very much that travel retail can play a massive role in recruiting consumers to the refillable offer, especially in fragrances. And last, but not least, is how to reduce the carbon footprint of our employees, and we do that by reviewing the way we travel together. We have been dropping our carbon emissions of our travel retail employees by more than 25% since pre-COVID.
PM: Moving swiftly on. The second part of the sustainability question, actually, was to do with the Green Joint Business Plan that you launched last year here in Cannes with Heinemann. How much traction has that collaboration got since then?
EG: We’ve been making great progress, together with Heinemann, starting to deliver very concrete results. That is going beyond our expectations. Because it’s not in the results delivered so far, but in the capacity of collaboration that a topic like sustainability can bring. Sustainability is an easy topic to align everyone.
PM: I know, everyone operates at different speeds.
EG: Exactly. I’ve known Heinemann for many years. I think this common walk that we’ve tried to initiate together is opening many opportunities, many new doors that are making, somehow, the possibilities of this Green Joint Business Plan much bigger than we initially thought. We are now in each of the regions, where every Plan is customized for different participating companies. This recognizes that not all companies are at the same level of maturity. But wouldn’t it be great to unlock the business and move towards a collective approach. That would be a good conference topic for TFWA.
PM: So, get yourself a platform! Now, you have vast experience of the group within very competitive markets like the domestic market in Europe – notably France and Italy – as well, of course, in Travel retail. Now, as the global head of TR, what challenges are new to you?
EG: What I think is interesting in TR is the speed and the capacity to scale initiatives worldwide. This is putting responsibilities on our shoulders. Any good idea could be scaled very quickly across the world. And I find that very energizing and exciting.
PM: Well, Vincent Boinay led the channel for L’Oréal for ten years. What new initiatives are you planning to put in place and are there any strategic shifts based on your own internal workings that you can actually share with us?
EG: Well first, as you said, over the last three years, and between the moment when I was working with Vincent and then came back, many things have changed. We are trying to adapt to the new reality of our market, of our consumers, and adjust in order to serve the consumer better and to create value in the long term. So, addressing the conversion issue is becoming of critical importance today and is becoming more focused than it was before. Our view, as the one of the leading groups in the travel retail industry, is to make sure that we address the right topic, to create value for the future of the industry, serve passengers in a better way tomorrow and improve their satisfaction.
PM: One last question, Emmanuel. This has really been a very comprehensive interview and thank you for your time. If you had to change one single dynamic in travel retail, what would it be?
EG: Ensure we break the silos and make collaboration better between all the players of the industry. Because I believe that’s where the solution lies to create the opportunities for our channel for tomorrow.
