The Business of Being Swarovski

Nadja Swarovski has always had crystals on her mind, from sunrise to sunset, and it’s no wonder: The house she grew up in was right next to the company headquarters in the Austrian Tyrol and the view from her bedroom window was a big Swarovski sign. As a kid, she customized her jeans with the homegrown sparklers and made her own necklaces and bracelets from them, too.

“My father was in charge of manufacturing, so his pocket was always full of crystals. He would have meetings with developers, and I’d meet the scientists, the creators and the artists he was working with at the time, so it was always a part of my life,” said Swarovski, one of five family members who run the 3.02 billion euro, $3.42 billion, company, with business divisions that range from designer jewelry and animal figurines to chandeliers, crystal components and reflective road lights.

When Swarovski was growing up in the Seventies and Eighties, the company was best known to the public for its gliding swan logo and its figurines — the first being the rotund bewhiskered mouse known as “Ur-Maus” — and to the industry for its crystal components and chandeliers. Back then, crystals were still referred to as rhinestones, and the jewelry made from them was costume or paste — rather than fashion pieces.

As a young woman, Swarovski always sensed there was something bigger waiting behind the mini hedgehogs and cats, the components and the light fixtures.

“Once I started working in the business, that kind of connection and collaboration didn’t exist anymore. People didn’t know the world of Swarovski I knew, like the crystals that you can apply to leather and soft fabric. People always knew the swan, but they had no idea that we had legs in the fashion industry. They had no idea that Queen Victoria was actually our first customer,” she said.

With help from the late muse and fashion stylist Isabella Blow, who met Swarovski’s father, Helmut, at a dinner party — and practically swooned upon seeing the crystals — she helped to transform the family’s 120-year-old firm into a go-to supplier in fashion and jewelry, architecture and design-led lighting. Nadja helped turn Swarovski into a brand name as well-known and respected as the crystals the Wattens, Austria, firm was supplying.

“There is no one else,” said Stephen Webster, the fine jewelry designer who’s collaborated with Swarovski for years. “No one is doing what they are doing. When I walk into their development studio in London to see what’s new, it’s like viewing the whole precious stone industry in one stop. No one else has put so much into the crystal business.”

Mary Katrantzou, who has printed upon, flocked and rubberized Swarovski crystals in all her years working with the brand, said Swarovski and her team have a way of pushing designers to new limits season after season.

“They are a driving force of ideas, the ones giving you a nudge at the beginning of a season. They force you to be really inventive, to think how the crystals are going to fit into your next collection,” she said.

While Nadja may have helped to retool Swarovski for a new generation of creatives, she is the latest in a line of family innovators. The company was founded on push-the-boundary personalities, starting with her great-great-grandfather Daniel Swarovski, who was born in 1862 and who took the lessons learned from his parents’ crystal-cutting business in Bohemia and — literally — ran with them.

When he was 21, Daniel founded a jewelry company with his future brother-in-law, Franz Weis. A few years later, Swarovski, inspired by the work of inventors Thomas Edison and Werner von Siemens, patented an electric machine that could cut crystal precisely and effectively. In 1895, he packed up his know-how and new machines and moved out of Bohemia to Austria in a bid to distance himself from competitors and imitators.

Together with Weis and a third business partner, he leased a factory in the Tyrolean town of Wattens, near Innsbruck. It was well connected by train to his clients in the couture houses of Paris, and near a river and snowcapped mountains, which he would eventually exploit for hydroelectric power at his factories.

A business was born.

At the time, the company’s products were known as “pierres taillées du Tyrol,” and the brand supplied jewelers and couturiers across Europe and in the U.S. Swarovski’s earliest VIP client was Queen Victoria, who wore crystal-adorned dresses by the Parisian fashion house Worth.

During World War II, when the company was forced to halt production, business in the U.S. boomed, thanks to a robust distribution network — and an enormous amount of stock. Elsa Schiaparelli (who lived in New York during the war) and Hattie Carnegie, as well as costume jeweler Trifari, were all well supplied with sparklers in those darkest of days.

The world of fashion pushed Swarovski to create — and later patent — such products as the crystal-embellished head ribbons and glittering fabric trimmings to accommodate the short hairstyles of the Roaring Twenties, while a shortage of machinery in World War I pressed the company to manufacture its own crystal-grinding tools.Over the years, and in response to market demand, the company built its own premium glassworks and expanded into new types of products. It moved into precision optics, making binoculars and lenses for riflescopes and telescopes. Today, Swarovski Optik remains a market leader in the sector.

By 1950, after years of research and development, Swarovski discovered a way to harness crystals’ reflective properties for road safety, making reflectors that continue to be sold and marketed through the Swareflex brand.

As it worked in the shadows, lighting up dark roads around the world, Swarovski continued to innovate, and to shine in places ranging from the big screen to the couture salon.

A restless inventor, Daniel Swarovski developed the “Aurora Borealis,” effect, a crystal cut to reflect every color of the rainbow, shortly before he died in 1956 at age 93. Christian Dior was among the designers who used it, and other Swarovski crystals.

“I grew up with my grandfather telling me stories about working with Coco Chanel and Christian Dior,” recalled Nadja referring to Manfred Swarovski, who had been helping to manage the company since 1946.

In the Fifties and Sixties, Swarovski became part of the public consciousness — although the public didn’t recognize that fact at the time. Even those who had never heard the family name had watched Marilyn Monroe sing “Happy Birthday, Mr. President” to John F. Kennedy dressed in a flesh-colored Jean Louis dress that was famously iced with 2,500 Swarovski rhinestones.

As children, the same generation had watched Judy Garland’s Dorothy click her magical ruby slippers — made from Swarovski sequins and bugle beads — in “The Wizard of Oz,” they gazed at Monroe’s rocks in “Gentlemen Prefer Blondes,” and at Audrey Hepburn’s discreet baubles in “Sabrina” and jewels in “Breakfast at Tiffany’s.”

And while the Fifties and Sixties may have been go-go years for the company, the Seventies arrived with a jolt and forced the family to think off-piste. The oil crisis, the rise of hippie-chic and bohemian fashion, and a general economic malaise all spelled a decline in sales for the Austrian purveyor of sparkle.

During those years, Swarovski came up with HotFix technology, which allowed crystal elements to be applied directly to fabric without any settings; a way of precision-cutting cubic zirconia to mimic diamonds better; the “Ur-Maus” and a host of other collectible figurines originally made from spare chandelier parts.

Nadja Swarovski said the figurines were born from Manfred’s “doodling” distractedly with bits of chandelier.

“My grandfather sat at his desk, glued components of a chandelier together, and made them look like animal figures. It was the first consumer-facing product, and it was fashionable — and giftware. It evolved into the figurine business, which by the time I graduated from university, became a big part of the overall business,” Swarovski said. In the Eighties, the company would build on that business, launching silver crystal figurines.

The family firm would later push further into interiors, expanding its lighting offer and creating bespoke solutions for architect-driven projects. It launched in-house collections of jewelry — the Nirvana fully faceted cocktail ring remains a brand icon — as well as watches and Christmas ornaments.

Each year, Swarovski creates the crystalline curtain for the Oscars, and regularly collaborates with fashion designers worldwide on ready-to-wear, couture collections and jewelry. It aligns itself with — and supports — young and emerging talent, famously supporting Lee Alexander McQueen at the very start of his career, a relationship that came about thanks to Blow.

“Swarovski has always had the foresight and eye for spotting talent,” said Jonathan Akeroyd, chief executive officer of Alexander McQueen. “They championed Lee at a very exciting time in his career, offering financial support when it was needed most, and this helped the brand at an important time in its development on the international stage.”

The brand continues to supply the sparkles for Hollywood films and now helps to produce those films, as well. Innovation is a constant: Over the years, it created crystal mesh fabric, crystal zippers and eyewear.

One of its next projects is a major repositioning of the collectible miniature items.

“Just like we worked with Alexander McQueen and John Pawson, we want to see who can it be for figurines,” Swarovski said. “Who can reinvent the figurines for us? So we are in negotiations with somebody, and that contract is under way. Repositioning the collectibles is a project for 2016.”

Markus Langes-Swarovski, head of the company’s loose-crystals division and a member of the five-person, family-run executive board, said Swarovski is obliged to innovate as a market leader.

Most recently, the firm developed Xero, a faceted precision crystal with a 0.7-millimeter diameter that can be used to create a micro pavé effect on a variety of products. As of 2012, Swarovski’s entire range has been made from Advanced Crystal, which is lead free.

It has also developed the Transfers Unlimited technology, which allows designers to create a single crystal motif from different sizes, shapes and colors of crystals.

“If we stop innovating, [the company] would become, within a very short time frame, just a commodity business,” Langes-Swarovski said.

Today the crystal business — including the figurines, jewelry, accessories, lighting, loose crystal components and genuine, colored gemstones — accounts for the lion’s share of overall revenue with 2.33 billion euros, or $2.61 billion, in sales. Jewelry, in turn, makes up around 75 percent ($1.95 billion) of the crystal business. The company has 30,000 employees and about 2,480 stores worldwide.

The company remains family run, with no chief executive and five cousins, all direct descendants of founder Daniel Swarovski, running it as executive board members. Nadja is head of corporate communications and design services; Robert Buchbauer serves as chairman and head of the consumer goods business. The U.S.-based Daniel J. Cohen is head of gemstone, lighting and road reflector activity, while Langes-Swarovski heads the loose crystals division. Mathias Margreiter heads up finance and administration.

Nadja, who joined the board in 2011, admits the unconventional setup is a challenge, as no one has the final say.

“We all love each other, but we have to make sure that when we go ahead with a project, it has everyone’s support. We have to make sure we convince each other. The development would be much faster if there were a ceo, but then the question is who is it going to be? Would it be a person with more shares or more experience or more success?

“We all have a different sense of entitlement, but the most important thing is that we care for the business and appreciate the business. We have a passion and vision of how it can develop,” she added.

The firm’s growth is self-financed.

“A key part of the family’s philosophy is to really make sure that we’re able to finance the growth ourselves — it determines the speed of growth in that sense,” said Langes-Swarovski, who joined the executive board in 2002. “There might one day be opportunities where we also look for other forms of financing, but we feel what, at least, we are trying to achieve for now can be done with financial autonomy.”

He argued that while a family-run business has its own “different dynamics,” the advantage is that it creates a more long-term view. “Of course…we need to look at our quarterly results, but not in the same manner as publicly traded companies. Therefore, we can engage in sustainable development,” he pointed out.

Langes-Swarovski added that each generation has aimed to “add another angle, another aspect,” to the business, while building upon its existing expertise. “Each generation keeps that fire burning,” he said during an interview in his glass-walled, light-filled office at the Wattens headquarters.

In the current year, he expects the innovations to drive between 5 percent and 6 percent growth for the business, helped by the positive impact of a weaker euro.

In addition to repositioning the figurines, the cousins are also working to build upon the company’s branded retail network, which launched in the late Nineties. Swarovski stores carry jewelry, accessories and homewares, while a sister retail chain called Cadenzza, which launched in 2013, is set for further expansion.

Cadenzza stores carry Swarovski-branded jewelry, an in-house line called Lola & Grace and designs from other brands as well, such as Versace, Oscar de la Renta, Roberto Cavalli and Giles & Brother.

“We’re trying to build Cadenzza and Lola & Grace slowly and soundly,” said Langes-Swarovski, adding there is much potential for expansion with those brands. He said that in 10 years’ time, the Cadenzza concept will be able to play “a strategic role,” in the fashion jewelry business.

The firm has also amped up the branding for its crystals in other designers’ creations, with the launch of a new quality seal in late 2014 that bears the words “Crystals From Swarovski,” that allows customers to check the crystals’ authenticity online. “It has all these security features because in some cases people claim it’s a Swarovski crystal when it’s not,” he said.

Branding Swarovski products is also important, he said, because of the premium the crystals command.

“In many instances, a Swarovski crystal has a price premium up to 3,000 percent compared to a commodity, low-end product, so I think the customer deserves that assurance,” said Langes-Swarovski.

He also has his sights on building Swarovski’s brand outside the jewelry and fashion arena, expanding its reach into real estate. Partnering with Dubai-based Tebyan, the firm has created Sparkle Towers, an apartment building at the Dubai Marina, which is set to be completed in December 2016. The company is also looking at projects in India and Miami.

There are also plans to go into the events sphere, “helping people to create a sparkling wedding,” he said. “I believe events overall, where crystal can add this particular glamour, is an area of opportunity for us,” he said. “These kind of things are more unconventional and therefore more interesting, I think.”

Company founder Daniel would no doubt have said the same.

Sign up for WWD news straight to your inbox every day