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Why On Running Could Be Worth $6 Billion

With its upcoming IPO, the Roger Federer-backed Swiss sneaker upstart expects to raise as much as $622 million at a valuation above $6 billion on the back of its rapid growth and plans to push further into the lucrative lifestyle market.
A woman wears red and white On trainers running along a concrete road.
The company returned to profit last year after making a loss in 2022 and 2021. (On )

To become the global sneaker brand it is today, On Running had to overcome some challenges after launching in 2010. For one, it needed to attract shoppers well beyond its home base of Zurich, a small city not exactly known as a sneaker hotbed. It also needed to convince customers to choose its somewhat odd-looking footwear, with its midsole of segmented tubes, over products from established running brands like Brooks and Asics, not to mention giants such as Nike and Adidas.

It’s done both. Today, On boasts fans in more than 60 countries and sells in more than 8,100 stores worldwide. The next step in its expansion is an impending IPO on the New York Stock Exchange, which it expects will raise as much as $622 million and value it at more than $6 billion, the company revealed in a regulatory filing this week. To put that figure in perspective, Adidas just sold Reebok — a faded but still widely recognised and valuable name — for $2.5 billion.

On is a fast-growing upstart in the sneaker business and among those supercharged by a pandemic boom in running. In 2020, its global sales were 425.3 million Swiss Francs (about $464 million), rising 59 percent from the previous year. In the first six months of 2021, sales already reached 315.5 million Swiss Francs. It also brought in a net income of 3.8 million Swiss Francs during the period, after a loss of 27.5 million Swiss Francs for the full year in 2020. By comparison, Allbirds, the other big sneaker company gearing up for an IPO soon, reported a loss of $21.1 million in the first half of this year.

The key to On’s success, it says, is the unique feel of its sole. “It’s all based on one radical idea,” the company notes on its website and stated in its filing. “Soft landings followed by explosive take-offs. Or, as we call it, running on clouds.”

It started out trying to build a better shoe for runners, but its trajectory shows it growing beyond that market into a bigger lifestyle brand. It’s a lucrative path, if On can get it right. Nike and Adidas, for example, got their starts focusing on athletes. On now advertises shoes for all-day wear and has a line of tennis shoes with Swiss star Roger Federer, who invested in the company in 2019 and serves as a prominent face for the brand. If On successfully makes the transition, it could eventually surpass its competitors in the running market.

“On makes a great product that runners really like,” says Matt Powell, the sports industry analyst at research firm NPD Group. But they aren’t the only ones buying its shoes these days, he notes. The distinctive design is helping them catch on as casual footwear, a market that’s much larger than performance sneakers, Powell says.

These shoppers are key to On’s growth plans. “We started with the run specialty channel and then selectively expanded to additional premium retail partners to reach a broader audience,” On said in its filing. The company already sells at a number of upscale retailers, including Ssense, Dover Street Market, and MatchesFashion, and means to keep adding more partners on the premium end as well as branching out to new customers.

It’s also growing in other ways, beefing up its direct-to-consumer channels, for instance, which currently make up about 37 percent of On’s sales. It’s further developing its e-commerce operations, as well as opening physical stores. At the end of last year, it opened its first brick-and-mortar location in New York.

North America, in fact, has become On’s largest market since it entered the US in 2013. It’s another strength for the company. The US is the world’s largest market for sports footwear, including performance, outdoor, and “sports-inspired” shoes, projected to reach $36 billion according to Euromonitor. Just over half On’s global sales came from North America in the six months through June 30.

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On’s signature cushioning was the work of co-founder Olivier Bernhard, a former duathlon and Ironman champion. He wanted padding in the centre of the foot for landings but a firm feel at the front of the shoe for pushing off into the next stride. He experimented by cutting a garden hose into pieces and securing them to the bottom of an existing shoe. Bernhard and two friends — David Allemann and Caspar Coppetti, On’s other co-founders — took the idea to an engineer and refined it into what On calls CloudTec. It’s the basis for On’s Cloud sneaker, a popular model that runs about $130.

Innovation has remained central to On’s brand since, helping it gain trust among its core audience of runners and athletes. To develop new products, it has sought partners such as the Swiss Federal Institute of Technology. It has introduced items designed for speed, trail running, and added cushioning. It also makes clothing, though it’s the original running platform that remains the core of the company.

There are challenges ahead. All the footwear On produced so far this year came from 13 sites run by 10 suppliers in Vietnam, a country whose factories are currently being hobbled by Covid outbreaks and where local freight operations have ground to a halt. It’s unclear when these disruptions will ease. On expects them to affect its operations for the rest of 2021 and into 2022, though to date it has only experienced temporary disruptions due to Covid.

Still, to mitigate future risks, the company will start producing shoes, clothes, and accessories at eight new suppliers in Vietnam, Lithuania, and Turkey. It needs that capacity for another reason too: to supply enough sneakers to the rising number of shoppers who want to get their hands on a pair.



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Eugénie Trochu, Vogue Paris' new head of editorial content (left). Adeline Mai. Francesca Ragazzi, Vogue Italia head of editorial content (right). Courtesy.

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Compiled by Joan Kennedy.

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