125 Years Of Family Business Seeking Listing? Changes In Swarovski

In western Austria, located in the foothills of the Alps, there is a remote town called Wattens, which is also the headquarters of the world famous crystal manufacturer Swarovski.

For more than a century, Swarovski company has passed down the crystal making process as a trade secret from generation to generation, maintaining the family business mode, and so far has won a number of patents related to crystal cutting. Affected by the epidemic, Swarovski's 125 year old brand is expected to suffer heavy losses this year, down 30% to about 2 billion euros (about $2.4 billion). Before the outbreak, Swarovski had expected sales of its core crystal business to grow by 4% - 5% in 2020. Even local residents of the headquarters of vatens are increasingly worried about the economic downturn, as they have long relied on Swarovski's tourism dividend to provide highly paid jobs for skilled workers. Thomas oberbeirsteiner, the mayor of vatens, said he had to rethink his investment in public facilities after the town lost 2 million euros in revenue this year due to declining earnings from Swarovski.

On August 21, Swarovski's official said that it would not rule out the family behind him to give up part of its equity and seek capital injection and rescue by listing on the stock exchange or seeking strategic partners.

Swarovski faces drastic reform. Picture vision China

Twice recombination under epidemic situation

At present, schlosski is one of the world's leading manufacturers of crystal (swarski) and Swarovski (swarovi), which is one of the leading manufacturers of crystal instruments in the world. In 2019, the annual sales volume of Swarovski group is 3.5 billion euro, of which the annual sales of crystal business is 2.7 billion euro.

In the first quarter of this year, however, the sales of luxury goods in the United States and Schwarzschild suffered a heavy decline due to the outbreak of the Asian market. As a result, the company has to lay off staff worldwide and plan to "rationalize" its sales and marketing activities. In June this year, the company's first layoff involved 600 job changes, and many departments and management of Swarovski were also affected. "This change is essential to ensure our long-term development." Robert buchbauer, the group's chief executive and chairman of the board, said the company hopes to "reposition itself more effectively" and fundamentally change its original organizational structure and business model.

Robert buchbauer responded: "painful but inevitable, part of the company's restructuring plan." Under the restructuring plan, Swarovski also plans to combine jewelry, home accessories and Swarovski crystal world, a scenic spot in its headquarters.

Affected by globalization

Why does a family business with hundreds of years of history fall into such a situation now? In addition to the rapid expansion of the "black swan" business in the past few years, the rapid growth of its business caused by the "global" epidemic.

For a long time, Swarovski has highly efficient brand communication effect relying on the way of star bringing goods, keen sense of trend, fast speed of updating and brush presence in high-end large-scale event scenes. Whether it's eyeglass frames, lamp holders, figurines or manicure elements, these glittering pieces that appear in high profile clothing and celebrities can be obtained for less than 100 euros. With weak profit margin and short-term consumer loyalty, Swarovski is active in the low-end market of mass luxury goods. In order to match the speed of brand communication, Swarovski has set up a very large network of boutiques to expand its business at a high speed for higher profits.

In recent years, with the market demand gradually turning to high-end jewelry, the sales of Swarovski, which is famous for its artificial crystal, tends to be sluggish. In addition, there are many competitors on the market. More and more fashion accessories brands of the same type choose to enter the imitation crystal luxury jewelry market. For example, pandora pandora, which has become popular in the Chinese market in recent two or three years, aims to become Zara in jewelry industry, which further reduces Swarovski's market share. In addition, the outbreak of the epidemic, empty shopping malls and stores suddenly from the "golden pig" into a huge operating cost, the operating pressure is great.

Seeking change leads to disputes among family members

All this has forced Robert buchbauer, now chief executive, to rethink his previously overconfident expectations and make a difficult decision to send a signal to the huge family that needs to be changed: reform, or Swarovski will be knocked out of the stage by market forces that he has selectively ignored for a long time.

Robert buchbauer believes that at present, the company needs to readjust its business focus and take the initiative to withdraw from the low profit wholesale business. In the future, Swarovski should focus more on designing more unique and high-quality products, and take the high-quality route rather than the mass line. "Sewing Swarovski crystals on a 10 euro T-shirt will not increase our profitability in the least, or even damage our brand image," he said It plans to streamline its physical store network with more than 3000 outlets worldwide. Robert buchbauer expects these changes to be implemented in the next two to three years. "It's a very painful decision for everyone, but we have to make up for what we should have done a few years ago," he told Bloomberg

The future Swarovski crystal will pay more attention to the fine line. Picture vision China

In addition, most enterprises of the same size as Swarovski have been listed. For example, Bulgari, a jewelry company, will seek the protection of large multinational groups such as LVMH, while others, such as high-end down jacket enterprises such as molecule spa or Canada goose, will choose to obtain financing by selling shares. The Swarovski family has been trying to maintain its independence in the way of private enterprise and family ownership. In 2014, Robert, then CEO of Swarovski Crystal boutique department, responded in an interview: "because we are not listed, we can't use capital market funds, and we can't go to the stock market for financing, so we can only be more professional, pursue perfection and high efficiency - this is the only way for us to survive, and we need to reserve funds for the future growth of the enterprise." But when the whole crystal empire is now flashing a red light under the impact of the "black swan" incident, Robert's ideas will inevitably waver.

Not surprisingly, however, Robert buchbauer's reform plan met with strong opposition from the rest of the family. On the other hand, it is easy to face the advantages and disadvantages of the traditional business model, but it is easy to face the new business direction and innovation. Although opponents also acknowledge that the company needs radical reform, they believe that the existing change plan will cause irreversible damage to the town and the company's parts sales business, and the scale of business reduction is too large. "There are still a lot of opportunities to sell high-quality crystal parts around the world, and Robert buchbauer needs to think about how to win these customers, rather than shut down and fire employees," family member Paul Swarovski told the company

Will the reform measures formulated by Robert buchbauer finally come true? His critics say it still needs to be approved by the shareholders' meeting, but it may be difficult to achieve given the current split in the family. But Robert claims he has the support of key shareholders. If Swarovski wants to have a future and continue to maintain its global reputation, he said, drastic reforms are needed immediately, even though it could trigger a dispute across the Alps. "Bad news always makes people's emotions fluctuate and collide violently." "But it's about the ultimate long-term survival of our business," he said