Interview: Israel Assa on leading The Estée Lauder Companies’ travel retail business

There’s a lingering croakiness in Israel Assa’s voice as he speaks to The Moodie Davitt Report by video link in New York. That’s down to a recent encounter with a certain well-known coronavirus, an ailment that has prevented him from joining fellow senior management from The Estée Lauder Companies, retailer clients, media and other special guests at the 7 June inauguration of the US beauty house’s state-of-the-art new distribution centre in nearby Galgenen.

The centre is designed to accommodate – in fact double capacity output – the anticipated dynamic growth of its key global travel retail business and there’s no mistaking the disappointment felt by the recently appointed head of that channel in not being able to make this landmark occasion.

Assa’s recent appointment as Global President, Travel Retail Worldwide underlined ELC’s belief not only in his worth as an executive but in the value of continuity within a complex channel where relationships and insider knowledge are of critical importance. He joined the US beauty giant in August 2001 and during the intervening 21 years has enjoyed a constant involvement with travel retail, including his most recent stint as President, Commercial from July 2019 until his promotion this May.

[Click on the Podcast icon to hear The Estée Lauder Companies Travel Retail Worldwide Global President Israel Assa talking with Martin Moodie]

Before we get down to talking about the Gelgenen project, we chat about the ‘state of the nation’ in terms of how travel retail – historically so vulnerable to global events – is faring some 28 months into the most sustained and severe crisis in the sector’s history.

“Obviously if you look around the world, it’s a little bit of a different picture depending on what area you’re talking about,” he comments. “But first and foremost, the first message I want to give to you is that we are 100% committed to this channel and that The Estée Lauder Companies, including our management and our board, is incredibly supportive of travel retail. So I am super excited to have the opportunity to lead it.

“From a geographic challenge and opportunity perspective, we’re really excited about what’s already happening in terms of traffic recovery. In Europe and in North America, the results have been really beyond anybody’s expectations – ours or our retail partners. And it’s not just the traffic levels which, depending on the airport, are approaching 2019 levels. The spend per head is higher, and that’s really great news for us as an industry.

“You and I have been involved in this industry for so long so we know that the resilience of the travel retail channel has always been there. And this is yet another moment where you can see that people really do enjoy shopping while they travel, it’s part of the experience. And you really start to see that now.

“Asia is a little bit of a different story. It’s just starting to reopen. But again, there are some really positive traffic and retail figures in terms of what’s happening in Asia outside of China. I was recently in Singapore and had some great conversations with Changi Airport and with Shilla there. So we expect similar scenarios throughout Asia in terms of the types of rebounds that we saw this past year in Europe and in North America. I think you’ll see them as connectivity grows between countries and traffic starts to flow. Again, I think we’ll see some very, very quick hockey stick-type recoveries.”

What of China, in terms of outbound travel and related shopping the engine room of travel retail through much of the 21^st century until things came to a shuddering halt in early 2020? “With the recent easing of the restrictions [in Shanghai and elsewhere -Ed]… we’re super bullish that it is also going to recover quickly in terms of domestic travel,” Assa replies. “And when the Chinese will travel internationally again, that will be yet another boon or another layer to our channel and to the industry.

“So we’re super excited. And I really think that we’re going to see a fantastic summer of travel and see some really incredible results as an industry.”

Certainly, I suggest, those sentiments are supported by my experience over recent weeks, as I have travelled through Hamad International, Dubai International, Riyadh, Tan Son Nhat International (Ho Chi Minh City) and Zürich airports. In each case passenger volumes are growing but spending is outstripping that growth, thanks largely to higher average transaction values. And that’s being achieved without the benefit of Chinese traffic or – in most cases – significant Russian spend.

“One thing that’s clear about travel retail is that there is always volatility,” Assa responds. “So there are always the short-term moments that you have to live through. But what’s also clear about travel retail is this resilience and ability to bounce back. So everybody should be super excited about what the potential holds over the next two years because frankly this return to travel is going to be quite strong. And we’re already seeing it, to your point.”

How does he see the group’s approach to the business within both a historical and forward-thinking context? “We definitely see that the role of The Estée Lauder Companies and travel retail is to inspire this next generation of travellers because really this is about creating consumer-facing experiences that enhance the journey,” Assa replies. “It’s about innovating around the touch points of the journey for consumers.

“Those consumers have a choice. Even when they’re travelling, they don’t necessarily have to buy with us and in travel retail. So we need to be able to inspire them, working together with our airport and our retail partners and ourselves as brands to be able to inspire consumers to continue to trust us and to spend with us as part of their journey.”

Assa relates an anecdote from his youth in the 1980s when he worked one summer with a travel retailer at JFK Airport in New York. “I was working behind the counter and a gentleman came in and he looked rather frantic. So in the 80s, if you remember, the ‘go to’ market for the retailers was the Japanese market and this gentleman was travelling to Japan. He happened to work for IBM and I could tell by the look on his face that he needed help.

“So when I approached him, he was the victim of I guess his own poor planning, and he needed to buy a series of gifts. Omiyage. He was going to a big meeting, and he hadn’t done it. And we were able to take care of all his different needs through the different components of luxury that existed with the retailer, because I was working for them at the time between fashion, watches, and luxury skincare, etc. And he walked away relieved and satisfied and, I think, a very happy customer.

“It dawned on me then that we’re really an industry that helps make memories. We’re an industry that actually helps enhance that journey. So we need to continue to be that. And in my role as the travel retail head of The Estée Lauder Companies, I believe that we really need to continue to invest in those types of experiences, in those consumer-facing moments with our retail partners and with the airports so that consumers continue to make us part of their journey. So it’s about making and enhancing those memories. If you look at the big picture, that is really what we need to do.”

I put it to Assa that one of the more intriguing dynamics of the pandemic age, especially in Hainan, is that the traditional ‘shop window’ role of travel retail has been enhanced rather than eroded. That is down to the growing influence of social and digital media channels in general and livestreaming in particular. Some of ELC’s travel retail activations, for example, have reached audiences stretching into the millions thanks to the power of digital.

“Absolutely. We would love for the types of omnichannel campaigns that we’ve been doing in Asia, not just in Hainan but elsewhere during the pandemic, to be leveraged across the board. So that we get the same type of activity, or at least work towards it, in North and South America, Europe and the Middle East.

“You are right that we have seen a huge growth of online domestically. Consumers who weren’t shopping generationally, let’s say, online previously have been forced to because of the pandemic. So now we need to spend together with our retailers and with the landlords for consumers to be able to experience that [online dynamic] as well when they’re travelling. To your point, this is already happening in places like Asia, most notably in Hainan. But that’s definitely part of what the industry needs to accomplish to be able to keep relevant and to keep that resilience moving.”

And so to the opening of the Gelgenen distribution centre, a major occasion for the company as reflected in the presence of CEO Fabrizio Freda but not alas Israel Assa. Media coverage of travel retail tends to focus on the more glamorous aspects of the business, such as in-store and digital engagement, activations, brand launches and more. But the supply chain is the engine room from which all else flows. You can have the greatest product in the world but if it doesn’t get to market you come unstuck.

“The Galgenen distribution centre is a symbol of our belief in travel retail as an industry and as a channel for The Estée Lauder Companies,” Assa comments. “And frankly, it positions us super well for the ever-changing needs and demands of consumers going forward.

“It’s incredibly impressive… I mean, it’s an over 300,000sq ft facility so it’s massive. But it’s also flexible, it’s modular. It really means we are able to deliver a best-in-class experience from a supply chain perspective. And when we built it, obviously we built it with sustainability in mind. So that means everything in terms of renewable energy, best-in-class environmental design, being able to reduce energy and reduce water consumption.

“And we’re also hoping by the end of this calendar year to be LEED certified. So that would be a great boon as well. Given the fact that consumers are travelling again, this opening couldn’t come at a better time for us.

“It really is going to position us to be able to help grow along with the growth of the industry. So we’re super excited about it, and we’re really proud of it.”

[Click on the icon to discover more about  The Estée Lauder Companies’ state-of-the-art distribution centre in Galgenen]

“We have thousands of SKUs… we’re in the colour business, the skincare business, the fragrance business, the hair care business, so we have a very wide portfolio of brands. So to have a facility that’s got incredibly trained executives who are able to enhance and harness the power of automation, and to have such flexibility right down to the picking and packing at SKU level… it’s just incredible. And again, it’s done in a way that’s completely in line with the company’s ERG standards. So the modularity of the facility is definitively one of its key points for us.”

With our time up, I ask Assa if he has a single overarching message for the trade at the moment, as he begins the latest and most stellar chapter in his career, heading the biggest player in travel retail’s biggest category.

“I think that we’re in this recovery moment,” he replies. “It’s unique. We’ve done it before as an industry for sure, right? But this one [crisis] has been over a longer period and the recovery a longer time coming. And as travel returns, we have a chance to reintroduce ourselves as an industry, to consumers as a channel to consumers.

“It’s not just brands and retailers. It’s the whole idea of shopping while travelling and making that part of the journey. And I think that’s critical. If I had one message it is that we really need to put consumers first, working together with the common goal of putting that experience they have of shopping while they travel at the centre of our objectives. I think that’s what is going to take travel retail to the next generation of growth. And that is what I am super excited and super committed to be able to help lead.

“I’m super blessed and thankful for the opportunity. As you noted, stability is something that The Estée Lauder Companies prides itself on and frankly I’m very grateful and appreciative for the opportunity to be able to lead this fantastic team.”