In the $174 billion global athletic footwear market, five players dominate trade: Nike, Adidas, Skechers, Puma and New Balance, according to Mordor Intelligence. Underneath, a whole host of smaller brands that are fighting for their sliver of the pie show up on surveys, including Reebok, Champion, Vans, Fila, Asics, Saucony and more.
Missing from Statista’s latest list of the best known sneaker brands is On Running, a disruptive upstart out of Switzerland founded in 2010. But it’s not going to stay missing for long.
Just through May of this year, On’s share of footwear sales at Dick’s Sporting Goods shot to 12% while Nike’s dropped from 39% to 32%, according to YipitData. Sure, it still has a long way to go to reach the leaders’ scale, but Nike and the other market share leaders are feeling On nipping at their heels.
And if On keeps doing what it’s doing, it will be a brand that everybody’s talking about, both consumers and industry insiders. And it is likely to make a come-from-behind case study that academics and business leaders outside the industry can learn from.
It’s secret sauce is leading through innovation with a sustainable edge, building long-term collaborations and powering a team-focused corporate culture that’s playing the long game.
Having flagship stores in the world’s fashion capitals helps, including newly opened multi-level stores in Paris, London and Milan, plus outposts in Hong Kong, New York and Los Angeles, as does having Roger Federer, an elite team of 165+ world-class athletes and coaches as members of the “Oniverse.”
Capping On’s wins this year is a new multi-year partnership with actor Zendaya launched with a dance-inspired video “Dream Together.”
And its ongoing collaboration with LVMH’s Loewe brand helped elevate Loewe to the hottest luxury brand on Lyst’s second quarter 2024 index, kicking aside Mui Mui and Prada from the first quarter. And the On x Loewe Cloudtilt 2.0 collaboration became the quarter’s hottest luxury product. This is On’s fifth release with Loewe.
Managing For The Long Term
Even since On Holding stepped into the public market in September 2021, it’s been a growth dynamo. Out of the blocks, first year revenues advanced nearly 70% in 2022, then powered forward 47% to reach $2.1 billion (CHF 1,782 million) in 2023.
Through the first six-months of 2024, it’s up to $1.3 billion (CHF 1,076 million) with 24% year-over-year growth. Company guidance has it reaching $2.7 billion (CHF 2.26 billion) by year end and to achieve an EBITDA margin between 16% to 16.5%.
“These significant milestones are an outcome of our mantra – ‘Dream On’ – a commitment to pursue the most daring dreams to achieve long-term, innovation-led success,” said co-founder and executive co-chairman David Allemann in a statement.
Updated Strategic Plan
During an investor day presentation last October, the company updated its strategic vision from the company’s original IPO. “The strength of our brand and products, our outstanding team and innovation capabilities, as well as the very large addressable market, give us numerous opportunities to grow,” said co-CEO Marc Maurer at the time.
The revised three-year plan has the company forecasting that by 2026, it will double 2023 net sales to over $4 billion and achieve an 18%+ adjusted EBITDA. Beyond 2026, it foresees growing net sales by 20% to 25% per year and topping 20% EBITDA as a long-term target.
The three-year strategic plan hinges on three pillars:
Elevate Core Competencies
The company will continue to build on its core competencies to grow market share, particularly in the running category. Its chief core competency is innovation with a sustainability edge.
The company was started by three-time World Champion and six-time Ironman Champion Oliver Bernhard who needed a better running shoe. Aided by co-founders Caspar Coppetti and David Allemann, they designed a sneaker foot bed that cushioned the foot’s landing and yielded an explosive take-off – described as “Running on Air”– called CloudTec.
CloudTec immediately caught the attention of the sports industry with an early prototype winning the ISPO trade show’s Brand New Award in 2010. Other design innovations followed, including Helion Superfoam making for an even lighter, more agile and durable shoe.
Now On is taking aim at innovating the shoe’s upper. Observing the company has invested in innovating bottom units and forms, Maurer said the industry has been slow to innovate upper materials, so On is stepping into the breach to revolutionize the upper portions of the shoe.
To produce a shoe with greater sustainability and performance, it is deploying robotic manufacturing technology that reduces the number of pieces in a sneaker upper from around 40 individual pieces to only seven and reducing production time to a mere three-minutes. And it cuts CO2 emissions by up to 75% compared to the company’s other racing shoes.
Called LightSpray, the first commercial launch of the new design is pending, but it was just tested at the Paris Olympics by marathon runner Hellen Orbiri and Ironman Kristian Blummenfelt. While Blummenfelt didn’t win a medal at the Olympics, he took first place just two weeks after at the European Ironman Championships.
With LightSpray’s performance proven, Maurer explains the next hurdle is for consumers to accept what he describes as a completely new design language.
“When marathon runner Hellen Obiri saw it for the first time, she was fairly skeptical. It truly doesn’t look like any performance running shoe you’ve even seen before, but after putting them to the test in her training session, she decided they were too good to leave behind for competition.” She went on the win the Boston Marathon in a pair.
Maurer acknowledges the company takes its cues from Apple to become the ‘Apple’ of innovation in the sports world.
Expand Global Reach
Being a native Swiss company with a relatively small home market, On has always aimed at the global market. It currently distributes in over 60 countries, operates a vibrant e-commerce business, 37 and counting company stores, including 25 in China and distributes through 10,000+ independent retailers.
Britt Olsen, On’s global chief commercial officer, described its wholesale partners as “authenticators” of the brand and a complimentary way to reach new customers that it may not have reached yet through its direct-to-consumer (DTC) channels.
DTC sales grew 33% in the first six months and nearly 20% in wholesale channels. The Americas are its largest market, accounting for 65% of revenues, but Asia-Pacific is coming on strong, up 71% in the first six months to $113 million (CHF 112 million).
Establish Credibility In Adjacent Categories
Exploring adjacencies in other categories is a priority. It looks to build deeper connections with the training community, extend its reach into tennis and offer head-to-toe looks.
Shoes continue to garner the lion’s share of company sales, but apparel and accessories grew 36% to $58 million (CHF 49 million) to date this year and are critical to success of its own retail stores, which have evolved from a modest 3,000 to 5,000 square feet to multi-story flagships in London, Paris and Milan.
“Our larger stores are working very, very well and they have an outsized impact on apparel,” Maurer shared with me, noting that apparel could well grow from its current 5% share in store to 25% or more.
The company’s many collaborations help in its adjacency moves, like its exploration of luxury through the Loewe collaboration and with South Korean brand Post-Archive Faction.
Working with Roger Federer since 2019 helped put On on the tennis court. And in the creative arts, it maintains a partnership with singer, songwriter and dancer FKA Twigs for a new training collaboration, plus this year it brought on Zendaya for a head-to-toe creative fashion and performance exploration. Beams, WalkGoodLa and Free People Movement are also brand partners.
Building A Team To Win
“Since the beginning, our company’s goal has aways been built around movement – ‘To ignite the human spirit through movement.’ It can be individual performance but moving together is a bit more fun,” Maurer shared. “We’re building a team that will lead to extraordinary achievement, breakthrough innovations and ultimately durable growth.”
Commercial officer Olsen added, “We’re asked repeatedly ‘What’s your magic sauce?’ and we talk about all these things, but our ultimate source of success is a reflection of the people and the focus we have on leadership and our company culture.”
That’s evident in the shared leadership responsibilities. Co-founders Allemann and Coppetti share executive co-chairman roles and co-founder Bernhard acts as executive director. Maurer along with CFO Martin Hoffmann jointly hold the chief executive officer role. Such shared responsibilities don’t work for many companies, but they do for On.
The spirit of On teamwork is made crystal clear in the Zendaya “Dream Together” video, backed by a team of dancers moving gracefully together. Zendaya’s voice over celebrates team spirit – “Together. Learn. Dream together. Win, Lose, Fail, Try again. Get back up. Grow together. Move, whether we’re athletes or not.”
On’s together message stands in sharp contrast to Nike’s latest ad, “Winning Isn’t For Everyone.” Drum managing director Fernando Desouches described it as antithetical to team spirit: “Rather than celebrating the values of the Olympics; excellence, respect and friendship, it flies in the face of them – mocking them, if anything.”
Olsen, who is based in Portland, Nike’s home turf, adds, “As an American, having worked for a lot of American companies and VC-backed companies here, it was really a breath of fresh air when I came to On in 2014. We work more in partnership, that’s the Swiss way of doing things.”
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