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Putting the sparkle back into Swarovski’s growth story

CEO Circle

Putting the sparkle back into Swarovski’s growth story

Published 21 February 2023 in CEO Circle • 6 min read

Stéphane JG Girod and Niccolò Pisani, both Professors of Strategy at IMD, consider the reasons behind a fall in profits at Swarovski post-COVID and the steps being taken to pull the iconic company back onto a profitable growth trajectory

Established in 1895, Swarovski has over the years built a global reputation for its iconic crystals, seen everywhere from the star on the Rockefeller Center Christmas tree to adorning movie and pop legends including Audrey Hepburn, Jennifer Lopez, and recently Harry Styles. Yet a combination of new competitors to the market, changing consumer trends, and, of course, the pandemic saw a dramatic fall in profits and left Alexis Nasard, the company’s new CEO, with some serious strategic decisions to make.

With a family history in crystal craftsmanship, founder Daniel Swarovski’s vision for the company was to “create a diamond for everyone”. Based in Watterns, Austria, Swarovski built strategic access to Paris, where crystal jewelry was in high demand. It opened its first boutique store in the 1980s, and the crystal business boomed. In 2019, the company ranked fourth in the world in luxury jewelry, but it was its cheaper costume jewelry that was driving company revenue – particularly in China, which accounted for 25% of total costume jewelry sales. By 2020, the company had built a massive global presence with nearly 3,000 physical and 34 online stores in 170 countries.  

Trouble ahead

Swarovski uniquely positioned itself as a diversified player, competing with both luxury giants such as Richemont and LMVH as well as low- to mid-range entrants like H&M. However, consolidation among some of the bigger players in the luxury market – LMVH’s acquisition of Tiffany & Co for example – posed a threat to Swarovski’s position at one end, while rampant digitization trends started weakening the company’s stronghold on mid-range luxury jewelry and grand physical stores. Through their growing online sales, H&M and other new competitors were gaining traction in the market, with online sales of fine jewelry also expected to significantly increase. While most sales would still be made in store, it would be crucial for retailers to blend online and offline offerings to meet customer expectations and retain brand loyalty.

The biggest problem would prove to be the effect of the COVID-19 pandemic. In 2020, the company reported double-digit growth declines as the combination of physical store closures, falling demand for discretionary items, and travel restrictions took their toll. Newly appointed CEO Robert Buchbauer (the great-great grandson of the founder Daniel Swarovski) announced the need to “reimagine and rescale our entire Swarovski business”. He devised a restructuring plan that would shift Swarovski away from a mass market luxury company to one focused on the high end.

Buchbauer’s view was that “Swarovski crystals on a 10-euro T-shirt don’t add to our profitability and hurt our brand image.” The change would mean 6,000 redundancies and 750 store closures, a move that was strongly opposed by other family board members. They saw it as a shift from the company’s founding vision and were sensitive to the impact it would have in Watterns, where 45% of residents’ jobs would be on the line. The differing views led to a damaging and high-profile rift, leading to Buchbauer’s resignation just 18 months after taking up the post and Nasard’s subsequent appointment.

Luisa Delgado, chair of the board, stated that: “With the appointment of Swarovski’s first external CEO, we are taking an important further step in establishing a sustainable governance model.” Chief among Nasard’s priorities would be to learn lessons from the difficulties the company had recently faced and return Swarovski to its former glory.

Swarovski unveils new store concept at Times Square Hong Kong
In 2022, Swarovski unveiled a new store concept at Times Square Hong Kong.

The digital response

The pandemic significantly advanced the shift towards social media advertising and the digitization of retail. In acknowledgment of this inexorable trend, Swarovski introduced its #SparkDelight campaign. It also created “wonderlab” to bring its physical retail experience into a more digital age. The new store concept, described as a “sensorial retail space”, included digital window screens and touchpoints throughout the store designed to help with purchases and immerse customers in the brand. The first concept store opened in Milan in 2021, with plans for 27 more. Alongside the physical launch, the stores were promoted digitally with virtual tours, sneak previews of upcoming collection pieces, and lifestyle content.

Closure of some physical stores post-pandemic was inevitable. However, Swarovski sought to make a virtue out of necessity by analyzing data derived from geographic information systems (GIS). The company was aware that a consumer who spent $100 instore would on average spend $163 online in the following 30 days. Using GIS to track digital sales, Swarovski was able to make informed decisions as to the optimum sites for physical stores.

Armed with data on sales per square foot, footfall trends, digital traffic, and customer retention, it was able to renegotiate several existing store leases. Data and location analysis also helped with more targeted marketing to specific consumers and identification of stores in different industries with a similar customer base. Swarovski had discovered a halo effect: that its physical proximity to other brands significantly influenced customer perceptions of its own brand.

The pandemic fundamentally changed the luxury goods retail landscape. For Swarovski, it highlighted existing issues within the business, not least an over-reliance on physical retail at the expense of digital offerings, enabling the brand to adapt and succeed.

Key takeaways

1. Constantly adapt

Even iconic brands need to reinvent themselves, but this is only possible if the board and management teams can be dynamic in their questioning of assumptions that guide decisions. Senior leaders need to be hyperaware of external signals, and connected to shifts in macro, political, ecological, and social environments to start change when it is timely to do so. With Swarovski, the status quo was not questioned sufficiently early, which became an even greater problem once the pandemic hit.

2. Strategic decisions cannot be made in a financial silo

Buchbauer’s customer segmentation decision, to focus on the high-end market with the resultant cut in staff numbers, was based on traditional financial and growth criteria. However other non-financial factors came into play – sensitivity over mass redundancies that would affect communities and unease at disregard for the company’s original purpose – that could not be ignored. Crucially, the company’s original purpose turned out to be a valuable inclusive purpose in the age of sustainability.                       

3. Businesses need to cultivate a safe space that allows diversity of thought

Appointing Nasard was vitally important in bringing an external perspective to strategic discussions. Whether a family or non-family business, it is important that there are processes and a safe environment that allow for quality dialogue and the questioning of assumptions without the feeling that egos and professional expertise are being attacked. Emotional bonds in a family business can make this harder, but all the more important.             

4. Digital is key, regardless of physical presence

Swarovski had a large physical retail portfolio and anticipated that 80% of fine jewelry purchases would be made in store. Yet, through use of digital touchpoints at various points of the customer journey the company saw (albeit belatedly) that constant connection could drive customer relevance, personalization, and higher degrees of emotion, boosting brand loyalty in both mass market and high-end segments.


Stéphane J.G Girod

Stéphane J. G. Girod

Professor of Strategy and Organizational Innovation

Stéphane J.G. Girod is Professor of Strategy and Organizational Innovation at IMD. His research, teaching and consulting interests center around agility at the strategy, organizational and leadership levels in response to disruption. At IMD, he is also Program Director of Reinventing Luxury Lab and Program Co-Director of Digital Execution. 

Niccolo Pisani - IMD Professor

Niccolò Pisani

IMD Professor of Strategy and International Business

Niccolò Pisani is Professor of Strategy and International Business at IMD Business School in Lausanne, Switzerland. His award-winning research has appeared in the world’s leading academic journals and extensively covered in the media. His work has been featured in both Harvard Business Review and MIT Sloan Management Review. He has also written several popular case studies that are distributed on a global scale. At IMD, he is involved in a variety of degree, open, and custom programs. He also co-directs the International Growth Strategies program.


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