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Swarovski: Could Better Packaging Hurt the Brand?

Swarovski has built a global reputation as a luxury crystal jeweler. How can it streamline its supply chain without adding new complications or tarnishing its brand in the process?

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THE CASE

Growth can bring its own complications, as Swarovski Crystal discovered recently. More sales require a better organized supply chain, which can put a strain on existing infrastructure and logistics.

What's more, for a brand that wants to project an image of luxury, switching to more streamlined -- and economical -- packaging might make it hard to preserve its cachet.

These were some of the issues facing the Swarovski Group, a family business based in Austria, which generates billions in sales and employs thousands of people around the world. With business booming and healthy growth projections, Swarovski looked forward to bright times ahead.

But there were problems. The distribution center in Liechtenstein was overextended, and many of the retail stores around the world complained of lack of space. The supply chain needed renovating.

As it stood, the most frequently ordered items were sorted by machine, while others were processed manually, which implied special handling and repackaging. Products were shipped to stores in their final packaging -- the iconic blue gift boxes, which came in more than 100 different sizes. If a shipping case wasn't entirely full, it was filled out with padding. A study of the shipping process revealed that between 5 and 42 percent of the volume in the cases went unused, in part because the packaging options were not modular with one another.

Bagging Instead of Boxing
Several alternatives were discussed to improve this situation. Swarovski ultimately chose to test the idea of using a polybag in a sample of its stores.

The polybag was a plastic envelope that could be used for fashion and jewelry products. The item would be mounted on a display card, put in the bag and vacuum-sealed. The bag would have an easy-tear opening, and be labeled with all the essential information.

Jewelry would be shipped to the shops in the polybag. When customers purchased an item, it would be taken out of the bag and the display card would be placed inside the appropriate gift box. There would be a much smaller range of boxes, along with large and small generic ones to cover low-stock items.

From a logistics point of view, the idea held promise, freeing up space in the distribution center as well as in the shops, reducing transportation costs and improving sustainability. An added bonus of shipping the boxes separately was that, as empty boxes, the 4.5 percent tariff that was levied when shipping products in their packaging would no longer apply.

Two Steps Forward, One Step Back?
Swarovski tested the idea with 281 best-selling products in 21 stores. The results were largely positive, with most agreeing that the jewelry was better protected in the polybag, and much easier to store.

However, two participating stores did not like the new system. One of them insisted on preassembling all the items into their gift boxes when the shipments arrived, to be able to work the same way as before.

Even among the 19 stores that were broadly supportive, they admitted that the system required some adjustments. For one thing, the new method would introduce separate logistics -- one for the products and one for their gift boxes -- adding new steps that could conceivably complicate rather than simplify processes, and add an extra burden on salespeople.

Another issue was that in most stores, the space was such that staff had to open the polybag in front of the customer's eyes, when the idea was that the extra task of mounting the product in its gift box would occur away from the sales area.

A few argued that opening the plastic bag in front of the customer was not necessarily a bad thing; indeed, customers might feel they were getting something clean and new, that nobody had ever touched before.

But this opinion was not widely shared. Most felt the bag looked cheap and that, even if the design of the bag were improved, you couldn't get away from the fact that plastic was still plastic.

To avoid customers seeing the bags, the sales areas of many stores would have to be redesigned to accommodate space for the products, the boxes, the certificates of authenticity and the assembly of all three.

If, on the other hand, Swarovski chose not to redesign the shop layouts, how might the plastic packaging affect Swarovski's luxury reputation?

The company had to do something. But between the dual supply chain, the potential image problem and the possible need for store renovations, was this the right solution for now?