For more than a century, Swarovski has churned out crystals in every imaginable shape and form, from sparkling dolphin figurines to encrusted fountain pens to glittering mobile-phone cases. An affordable indulgence rarely costing more than a few hundred dollars, Swarovski trinkets have invaded every corner of the world, providing a comfortable life for the family behind the empire and for the people of Wattens, the small town in the Austrian Alps where the company is based.
But as Swarovski celebrates its 125th anniversary, there’s little cause for jubilation. Revenue is set to take a hard hit this year, falling by a third to about 2 billion euros ($2.4 billion); management has announced 6,000 job cuts; and the family risks ceding some control should the new chief executive eventually prevail with his plans for a possible stock-market listing or a strategic partner.
The cracks in the crystal kingdom have exposed a deep rift in the sprawling Swarovski family, consisting of more than 200 individual members, many of whom are spread between Austria and Switzerland. It’s from here, on the shores of Lake Zurich, that the company runs its main corporate functions under CEO Robert Buchbauer, himself a member of the clan. For his relatives and the residents of Wattens opposing the radical overhaul, Buchbauer has a tough message: get on board or risk being swept away by the market forces that Swarovski chose to ignore for too long.
“It’s very painful for everybody, but we have to take the steps that we should have taken years ago,” said Buchbauer, 54. In the future, Swarovski will focus on higher quality products with unique designs rather than trying to offer everything for everybody, he said. “Swarovski crystals on a 10-euro T-shirt don’t add to our profitability and hurt our brand image.”
Swarovski offers a cautionary lesson in the pitfalls of globalization. Rapid expansion elevated the business from its Austrian backwater onto the world’s red carpets and prime shopping streets, but then turned on the company when changing consumer trends blindsided the family long accustomed to profitable payouts. The coronavirus pandemic has only amplified the crisis, laying waste to the sprawling network of Swarovski boutiques in now deserted shopping malls and airports around the world.
Best-known for crystal trinkets like animal figurines and ornaments, Swarovski’s 30,000 employees churn out a vast array of sparkling adornments. There are shimmering tea-light holders, stone-studded sunglasses and crystal-encrusted frames to glam up your Apple Watch.
In the 60s and 70s, Hollywood celebrities from Marilyn Monroe to Audrey Hepburn donned Swarovski-encrusted gowns and jewelery. Big-name designers and artists, from Karl Lagerfeld to Salvador Dali to avantgarde architect Daniel Libeskind have collaborated with the Austrians. At this year’s Super Bowl concert, Jennifer Lopez paraded a Swarovski crystal manicure during her halftime performance.
But despite its affiliation with the glittering world of high fashion and celebrities, the majority of products costs less than 100 euros. That places Swarovski into the cut-throat segment of mass-market luxury, with its thin margins and fleeting consumer loyalty.
After years of exuberant expansion, Buchbauer says Swarovski needs to refocus and learn that less is more. That means exiting the low-margin wholesale business where cheaper competition from Egypt or China has dented profit. If Swarovski wants to survive, it needs to offer fewer but more exclusive items under its own brand, and cut back its network of 3,000 boutiques, the CEO says. Buchbauer’s vision for the new Swarovski is to sell more carefully curated products tailor-made to match consumer tastes, a turnaround he predicts will take 2-3 years to execute.
Family-owned luxury companies have struggled to remain independent, with the likes of jewelry house Bulgari or cashmere specialist Loro Piana seeking shelter in a multi-national conglomerate like LVMH. Others, like high-end winter outfitters Moncler SpA or Canada Goose Holdings Inc. and Italian silk-and-leather label Salvatore Ferragamo SpA, have sold shares to the public, easing their access to capital.