Schindler: Razor-Blade Business Model (Swiss Made)

Jun 27, 2025 7 min read

Thierry

“Life is like an elevator.”

– metaphorical quote about elevators used to describe the ups and downs of life

arvy’s teaser: Schindler sells elevators like razors – cheap upfront, lucrative in service. In a world rising vertically, this Swiss giant builds a recurring revenue empire, floor by floor. Defensive. Digital. And back at all-time highs.

Elevators and escalators.

Your best friends when you’re entering towering buildings or descending deep underground.

We all recognize one or two companies in this space — their logos are hard to miss. Either on the panel inside the elevator or right where you step onto the escalator. But behind those familiar names is a tightly held industry with just four major global players (60% market share), operating in a mature, consolidated, and structurally attractive market.

The biggest? That would be American giant Otis Worldwide. Then there’s KONE from Finland, TK Elevator from Germany (previously part of ThyssenKrupp) — and of course, a Swiss powerhouse with global reach.

Headquartered in Ebikon, just outside Lucerne.

Schindler.

Chart 1: The big 4 Elevator Companies

Source: arvy

Razor Blade Business Model

We’ve talked about it before. With Safran, one of our holdings. Or Accelleron, another Swiss market leader.

The Razor Blade Business Model.

Sell the upfront product — sometimes even at a loss — then rake in the profits through services, maintenance, and spare parts over a long-term contract, often 15+ years. That’s where the magic happens.

Just think of Gillette. The razor itself is cheap. But the blades? That’s where they make their money. You’re locked in.

It’s the same story here.

Like its peers, Schindler makes most of its profit from its services business (chart 2). This part benefits from a massive installed base, brings in recurring, high-margin revenue (think high teens), and provides reliable cash flows.

Here’s the math: Service revenue accounts for ~60% of major OEMs’ (Original Equipment Manufacturer) top line — but nearly 90% of operating profits. These service contracts typically run for 2–4 years, and many come with inflation-linked price adjustments, preserving margins even in rising cost environments.

This also happens to be the industry’s moat. High switching costs in maintenance and modernization. Not to mention regulatory pressure. Once you’re in, you’re not getting out easily.

That makes this market structurally attractive.

And it gets even better. Digitalization is reinforcing the economics.

Predictive maintenance, remote diagnostics, data-driven service models — all of it drives higher efficiency and tighter customer lock-in. On top, rising demand for energy efficiency and systems that deliver up to 70% energy savings is further accelerating the trend.

The result?

A sticky, defensive business model, boosted by structural tailwinds.

But there’s a problem.

Chart 2: Products and services of Schindler

Source: Schindler, Annual Report 2024

China, China, China

It’s not just the luxury giants — LVMH, Hermès, L’Oréal — that count China as a core market.

Elevator companies do, too.

And with good reason.

China accounts for around 60% of global new elevator installations.

Let that sink in.

But here’s the catch: this market is hurting (chart 3). The downturn in China’s new equipment segment has been sharp — and it continues to weigh on global growth.

China is a wildcard.

But there is a small light at the end of the tunnel. A structural upturn is forming, driven by secular tailwinds — the biggest being the need to modernize aging elevator infrastructure. Over 40% of the global installed base is now more than 15 years old.

Let’s do some quick math.

Out of 25 million elevators globally, that’s about 10 million units that need upgrades. That’s a lot of buttons to push.

These modernizations are often tied to new safety regulations, which means mandatory spending — a sweet spot for OEMs. It opens up new revenue streams and the chance to reclaim high-margin service contracts.

Schindler is well-placed to ride this wave.

It has the highest exposure to Europe among global peers — and Europe has the oldest installed base. That’s a strong tailwind. Management is leaning in, scaling up modernization capacity and expanding its service portfolio organically.

So yes — China is weak. That’s not news. But there’s plenty to like in this “Good Story”.

Now, let’s see what Mr. Market is saying.

Time to check the “Good Chart”.

Chart 3: Market outlook 2025, China remains weak

Source: Schindler, Q1 2025 company presentation

All-Time-Highs: A Powerful Chart Criteria

Schindler’s razor-blade business model has long been reflected in one place that matters: a steadily rising stock price.

But even the best charts can take a hit.

In mid-2021, Schindler’s stock dropped – hard. A sharp, sudden 50% drawdown. From a business known for high recurring revenues and long-term service contracts? That raised eyebrows.

Who is to blame for this misfortune?

China. Once again.

As we’ve learned, China makes up roughly 14–17% of Schindler’s total sales. And when China’s real estate sector started unraveling in 2021–2022 — following the liquidity crisis and eventual default of Evergrande, the most indebted property developer in the world — the elevator industry dropped a few floors with it.

But here’s the thing with structurally sound businesses: They bounce back.

And Schindler did exactly that.

Fast forward to today — the stock has recovered all its losses and is once again moving in line with its long-term uptrend.

Even better, it just checked off one of our most powerful “Good Chart” signals.

A new all-time high.

Chart 4: Schindler over the last ten years