The Fastest Growing Sports Brand in the World. How On Running Soars to the Cloud.
Once just a necessity to protect your feet, shoes have evolved into a fashion statement and status symbol. Driven by global demand for stylish and functional sneakers, it’s no surprise that the sneaker industry is booming.
Recently, On Running, a Swiss brand known for its innovative designs, has experienced explosive growth, with revenue approaching $2 billion two years after its IPO.
Specifically, On Running IPOed in 2021, 11 years after its founding, and has maintained a healthy stock price and profitability, which is increasingly rare among consumer brand IPOs. The Zurich-based company said net sales rose 46.5% to 480.5 million Swiss francs in the third quarter of 2023. In turn, it raised its 2023 sales target to CHF 1.79 billion.
These refreshingly positive results highlight the fact that the company has a clear vision and product strategy. Below we highlight On Running’s efforts to stand out in the market.
Toward the end of his career as an athlete, former Swiss professional triathlete (and On Running co-founder) Oliver Bernhard realized he had to produce a running shoe, one that offered a different kind of running Running shoes for experience and feel. He cut garden hose into small pieces and attached them to the soles of traditional running shoes to achieve a softer landing and spring-like response. This pair of shoes that gave people a unique experience was sought after and well-advised by his two good friends.
So, in 2010, the three friends founded a company in Zurich, Switzerland, and the shoes they produced quickly gained a cult following among local runners. Just one month after the company was founded, the early On Running prototype won the ISPO Brand New Award, one of the most important awards in sports innovation.
Thus began our journey from a quirky running shoe made from a garden hose, to the creation of revolutionary cushioning technology CloudTec, to On Running, the fastest growing running shoe brand in the world.
High-end positioning
Another competitive differentiation point of On Running is its clothing variety, which has also maintained high pricing. This is an area of increasing focus for the company, particularly within their own DTC channels, including online and self-operated stores. It currently ranks higher than Hoka (20%) but lower than Nike (76%) in terms of apparel category share.
At the heart of all these strategies is a relentless focus on profitability. As Chief Financial Officer and Co-CEO Martin Hoffman said in an interview: “We are Swiss, and from the beginning it was very important to us to build a profitable business. Ultimately, profitability is the Goals also give you clear guidelines and oversight of what you’re doing – which helps a lot with where you allocate resources, how much you’re growing, and where you’re growing.”
Innovation is the core
In the highly competitive world of athletic footwear, the only way to stay ahead of the competition is to innovate. The company has been pursuing this goal through various research and development activities, including the aforementioned growing clothing line. Let’s discuss some of the top innovations that have emerged from On Running’s product line and marketing machine.
In 2010, the company began bringing its innovative patented technology, CloudTec, to the world. Since then, they have continued to innovate, creating a range of award-winning products and proprietary technologies. On Running pioneered the use of flexible panels in all of their shoes back in 2010. In 2013, they introduced the first injection-molded, purpose-built Speedboard that transforms impact into explosive thrust. They then launched the Cloud model in 2014 with a zero-gravity outsole for an ultra-light offering. In 2016, they developed Missiongrip, a shoe for running and walking on trails and outdoors.
At the same time, they have also expanded their product range to include a range of activewear, such as ultra-lightweight running apparel such as hybrid shorts and lightweight jackets using advanced fabrics. In 2019, On Running introduced Helion Super Foam, Cloudstratus shoes and patented sequential CloudTec solutions to give runners more support and more cushioning.
The 2019 “The Roger” collection was developed with legendary tennis star Roger Federer after he joined On Running as an active co-entrepreneur and investor. While working with Roger to develop competition tennis shoes, he suggested extending On Running’s patented technology to a line of tennis sneakers to reinvent the age-old way of making tennis sneakers. The partnership further strengthens On Running’s high-performance product offering and reputation. Roger’s perspective and insights as a professional athlete are expected to help improve their product development, marketing and user experience while increasing consumer perceptions of the company’s reputation.
Brand collaborations are a common way for brands to reach new audiences. One of On Running’s most recent partnerships is with LVMH-owned luxury brand Loewe. The collaboration features a line of colorful sneakers in Loewe’s signature hues, priced at $450 a pair — more than the average price at On Running, but less than the average price for a pair of Loewe sneakers.
Another major avenue the brand invests in is recycling. The founders have long wanted to do something about the ongoing use and disposal cycle of running shoes. To that end, they launched a Cyclon subscription service that allows shoppers to send back their used Cloudneo shoes and exchange them for a new pair. Since the Cloudneo shoes are made from castor beans, old shoes can be shredded and recycled into a new pair.
Do DTC brands also wholesale?
While other brands have moved away from wholesale in recent years, On Running is firmly committed to working with wholesale. In fact, the company generates more revenue from wholesale than its own DTC channel. So what does this look like?
Secondly, we see not only more and more products in wholesale channels, but also the types of wholesalers that purchase brands are becoming more and more diverse. While traditional athletic retailers like Dick’s and Foot Locker aren’t surprising, Net-a-Porter and SSense might not be the most obvious partners for sneaker brands. In fact, we’ve seen performance footwear brands like On Running, Hoka and Salomon gain traction with the fashion crowd in recent months and years, and when we combine this trend with On Running’s premium positioning, these wholesale Channels start making a lot of money in practical terms.
Unlike many emerging brands, On Running’s wholesale net sales are still higher than those in the DTC channel. Co-CEO Marc Maurer believes wholesale is an important part of the company’s strategy and the reason for its growth.
“Back in 2015, 2016, 2017, we had a lot of questions about why we were doing wholesale,” Maurer said. “We do wholesale because it allows us to acquire new consumers more cheaply and scale the brand very effectively. Because if you’re a pure DTC, you have to create brand awareness.”
“If you look at those pure-play DTC brands, at some point they need to spend a lot of money to grow beyond a certain scale. Customer acquisition costs become extremely expensive, which makes it very, very unprofitable,” Maurer said. “That’s exactly why we said, ‘Hey, we’re not just a wholesale brand, we’re not just a DTC brand, we’re both.'” That’s allowed us to get to the scale we have today…with some pure Compared with other DTC players, our funds are very limited, but our profitability is higher.
Soar to the cloud
On Running is based in Switzerland, one of the smallest countries in the world. With few residents, high mountains, and long winters, there aren’t enough runners there to support running brands. So, from day one, On Running aspired to be a global company. Over the past decade, On Running has built strong connections with consumers in markets including the United States, Brazil, Australia, Germany and China. Today, On Running operates in more than 60 countries and has wholly owned subsidiaries in key markets, all of which are growing rapidly. On Running products are worn, recommended, tested and loved by an active community across continents and cultures.
On Running’s success as a global running brand can be attributed to a combination of factors, including innovation, design, sustainability, community and brand. By focusing on creating products that improve athletes’ running experience, On Running has developed a loyal following among runners and recreational athletes. The company’s commitment to sustainability and social responsibility also sets it apart from other brands in the industry. As On Running continues to expand and grow, we’re excited to see what new innovations and collaborations the company will launch in the future.
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