Swarovski, beads, markets, and some checkered history.
(Disclaimer: I don’t have an MBA. I have not researched Swarovski’s finances. This post is just meant to provide general background to beaders who may not know the mechanics of large companies.)
Swarovski is known as a premium purveyor of crystal beads, baubles, and all the rest. The glitter! The color! So beautiful. So lovely.
Background
For at least 20 years — likely longer, please correct me!— Swarovski has created beads and crystal components. They are used everywhere: high-end dresses (especially wedding dresses), designer shoes, designer jewelry, beadwoven jewelry, and even t-shirts and nail designs.
Beadweavers love Swarovski crystals. They are the highest quality available, and their precise cuts make it possible to build elaborate designs. A bead that is slightly too large or too small can ruin a beaded piece. I would not have honed my craft without Swarovski. Full stop.
And here’s the 2020 news…
Swarovski has been losing money over the past 2 years, so the company is faced with some tough decisions. They have to do something, but their executives disagreed on the right outcome.
Ultimately, the Swarovski CEO prevailed and the company is pulling out of its so-called DIY business, and will be cutting 6000 jobs — 20% of their workforce. This decision will be devastating for the beading community. Over time, we will find alternatives for our beloved beads, pearls, and gems, but in the meantime… many books, patterns, and kits need to be reworked. Artists will go out of business — during a pandemic. And sadly, Swarovski does not care.
But… why? 😭
If you don’t have a business background, this decision probably seems strange to you. During a pandemic, isn’t it a good thing to sell products that are shipped off, rather than sold in-store? Doesn’t Swarovski sell kagillion crystal beads every day? They must be making a ton of money, right?
Sadly, that’s not always the case. Swarovski, being such a recognizable luxury name, will probably be better off in the long run if they pull out of lower-end markets. (That said, this is a super shitty thing to do to your customers, regardless of how “low-end” said customers may be. For years, Swarovski cultivated the DIY community, but is now abruptly abandoning it.¹)
Here’s the thing: the so-called DIY-market is a low-margin high-volume business. That means that Swarovski makes a tiny amount of money on each crystal sold, but they sell so many of them that it works out.
But that’s good, right? They sell a lot, don’t they?
Yes and no. Swarovski has been steadily innovating on bead shapes, in an effort to retain the market. For their lower-end items (particularly glue-on crystals and bicones), there are cheaper alternatives. The challenge with new beads (or new colors) is that it’s hard to predict whether the item will succeed or fail. You have to convince a lot of designers — who are all using the beads in different ways — to buy the beads. And not just buy them, buy them at volume. Which means that ultimately, the people buying the finished items have to like them. This is a hard business problem to solve.
It is far, far easier to create a select number of luxury items and draw on Swarovski’s brand recognition, than to try to predict the whims of not just product designers, but end-customers. With luxury items, Swarovski can do a targeted marketing push and create demand. (“OMG! Did you see? Jennifer Lopez was wearing THIS necklace on the red carpet!”) So, instead of admiring her nails, we’re admiring an item with a far heftier price tag.
And Swarovski will know how many items it needs to make. High-end companies deliberately reduce supply in order to make the item an “exclusive.” When there’s only 5 of something, you feel really special when you own one of them.
(I guess. I dunno. There’s only one of my cat in the whole world, but I don’t think everyone’s clamoring to buy her at auction. Artificial scarcity is just weird to me.)
So, that’s why this move might be a solid business decision, as ruthless as it is. But, if you read the section below, you’ll see that this isn’t out of character for the company. (Hint: it involves Austria in the 30s and 40s.)
Now, if I were in charge, I would (at the very least) insist on transparent messaging — and roll the plan out slowly. Note that some members of the Swarovski family and filed lawsuits seeking a less dramatic restructuring (ultimately, they lost).
Aside: Swarovski’s Checkered Past 😬
Although I’ve been using Swarovski crystals in my beadwork for 15 years, it wasn’t until last week that I read the Swarovski Wikipedia page. And I was shocked to discover that early members of the Swarovski family were members of the Nazi party. What bothered me wasn’t just that they were members, but they also directly benefitted from the affiliation. This just gives me an icky feeling.
Alfred Swarovski told the Innsbruck People’s Court after the war: “From my party affiliation, I only took advantage of the fact that it was possible for me as a party member to initiate the negotiations necessary for maintaining the company and to bring it to a successful conclusion with the responsible economic agencies of the Reich.”
Translation: I wanted to sell products to the Nazis, so I joined them. (Ohhh that’s why! You did it for money. That’s ok then. 🤦♀️)
As noted by Wikipedia, “Swarovski Group’s website omits mention of the Nazi period in the ‘Our History’ section, skipping the years between 1931 and 1949 on its timeline.”
So… maybe there’s a karma win here.
How Crystals are like Code 💎💻
(Even if you’re not an engineer, I promise you’ll understand this.)
I’ve built developer software at Microsoft, Google, and elsewhere, and it has striking similarities to Swarovski’s DIY market. I work on products that engineers at other companies use to build apps for end-users. For instance, Snapchat uses Google App Engine to power its backing service. If Snapchat is successful, that makes App Engine successful.² So, App Engine (and products like it), not only have to be sold to companies, but those companies must in turn create successful products. For every one SnapChat, there are a hundred startups that failed.
But, unlike Swarovski and physical products, software doesn’t have inventory. You don’t need to do a fire sale on the beta version that had a great user interface, but was awkward to use. The main loss is engineer time.³
So, Swarovski has a much harder problem to solve. Worse yet, as beadweavers, we’re an even smaller drop in the proverbial bucket (probably the size of a 15/0 Czech charlotte). Beadwoven pieces, being so labor-intensive, are not sold in large quantities. There’s just not enough of us, and we’re not rich enough. This makes me very sad, but so it goes.
¹As I write this, I’m thinking of Silverlight, and how Microsoft did not inform developers that their entire livelihoods would be disrupted. I guess it was safer to say nothing?? 😕
² You’d need a hundred SnapChats for this to actually work out, but you get the idea.
³ Yes, I’m conflating software and services, as this was written for a general audience. For instance, AWS EC2 spot prices demonstrate that AWS does indeed have inventory. (Also, if you’re a beader and you understood this footnote, let’s chat!!! You can DM me on Twitter, same handle.)
