On Holding AG (ONON)

On Holding AG is an athletic company focused on running shoes and apparel. It was founded in 2010 in Switzerland — making it young compared to established players like Nike and Adidas — and has built a following among serious runners by emphasizing innovation in shoe design and selling primarily through its own channels rather than through wholesale retail.

A startup in a mature industry

Running footwear is a mature global industry dominated by a handful of multinational giants — Nike, Adidas, Brooks, Asics, Saucony — each with decades of heritage, massive retail networks, and hundreds of millions of dollars in marketing budgets. Into this crowded landscape, On entered in 2010 with a simple premise: that the running-shoe market had room for a brand built on distinctive innovation rather than historical reputation or mass-market scale. The three Swiss co-founders, each with experience in engineering or business, believed they could design a shoe with a unique cushioning technology that felt different underfoot and appeal to serious runners willing to pay premium prices for performance.

The company started by selling almost exclusively online and through its own retail stores, avoiding the wholesale retail network that was the traditional path to scale in athletic footwear. That choice — which would have been risky for a company in 1990, when internet retail was unproven — proved farsighted by the 2010s as e-commerce matured and direct-to-consumer sales became viable even for capital-intensive consumer goods. By selling directly, On could control the customer experience, gather data on what customers wanted, and keep a higher percentage of the selling price than wholesale deals would allow.

The centerpiece of the product strategy was CloudTec, a cushioning technology based on cloud-like columns of foam arranged in specific patterns on the shoe’s sole. The patent-protected design created a distinctive feel underfoot and became the visual signature of every On shoe. Early runners who bought On shoes reported that the bounce and response felt markedly different from established brands, and that differentiation, amplified through running communities and online reviews, built a passionate core following.

Scaling the model

For much of its first decade, On remained a niche brand — well-regarded among serious runners but unknown to the mainstream. Growth was steady but not explosive. The company expanded geographically, opening stores in Europe and eventually the United States, and it added running apparel (tights, shorts, jackets) to complement the core shoe business. The direct-to-consumer model proved disciplined; the company grew without diluting the brand or becoming dependent on wholesale partners who might demand discounts.

A significant milestone came with the addition of selective wholesale partnerships. While direct channels remained the priority, On began selling through premium athletic retailers like Fleet Feet and specialty running shops, and eventually through larger sporting-goods retailers. Wholesale typically offered lower margins and less direct customer contact than direct sales, but it extended reach to customers who preferred to try shoes in stores or who simply did not know about On through online channels.

The company’s valuation and profile shifted sharply after a strategic investment from a sports-celebrity venture group and subsequent growth acceleration in the late 2010s. By 2021, when On went public in a mergers-and-acquisitions deal with a blank-check company (a SPAC), the brand had become recognizable among runners in developed markets, and the company had proven it could grow revenue and manage the capital and inventory demands of scaling a consumer brand.

The economics of selling shoes

On’s business model centers on direct-to-consumer sales, where the company owns the relationship with the customer, controls pricing, and captures the full wholesale margin plus the traditional retail margin. A pair of On running shoes typically retails for $120 to $200 depending on the model. The cost of goods sold — materials, manufacturing, logistics — is roughly 40 to 50 percent of retail price, leaving gross profit of 50 to 60 percent on direct sales. After operating expenses (salaries, stores, marketing, customer service), the company typically operates at modest profitability or a loss if it is in growth mode.

Wholesale sales are lower-margin. When On sells to a retailer, it typically earns 40 to 50 percent of the final retail price. The retailer then marks it up and sells to the customer. This is profitable but less rewarding than direct sales, which is why On has resisted becoming too dependent on wholesale despite its growth potential. The company also sells apparel and accessories, which expand the average customer purchase but typically at lower margins than premium shoes.

Growth in e-commerce revenue has been a strategic priority. Online sales have minimal physical-store overhead and can reach customers anywhere, but they require investments in web infrastructure, paid digital marketing, and logistics. International expansion — particularly in Europe and Asia — represents significant opportunity but also requires local marketing and customer acquisition.

Competing in a branded market

Running shoes are a branded-product category. Customers develop loyalty to brands based on fit, performance, and identity. Switching brands is possible but requires a customer to give up accumulated knowledge — they know their size in Nike or Adidas and have to relearn it in On. That creates stickiness and justifies premium pricing for brands that have earned customer confidence.

On’s challenge is that it entered a market where Nike and Adidas already have enormous advantages: heritage, global distribution, multiple shoe lines across every performance niche, and marketing budgets that dwarf On’s. On’s counter-strategy is to remain focused on serious runners, differentiate the shoe through distinctive design and innovation, and maintain the brand’s positioning as modern and premium rather than try to compete on volume or legacy. The strategic partnership with athletic celebrities and sponsorships of professional athletes amplified the brand story without the mass-market advertising spend that the incumbents rely on.

The company has also begun exploring adjacent categories. Hiking shoes, lifestyle sneakers, and sports watches represent expansion opportunities but carry the risk of diluting the focused performance-running identity that built the brand.

Pressures and the road ahead

On faces structural headwinds common to athletic-footwear brands. Raw material costs — rubber, foam, textiles — are volatile and driven by global commodity prices. Supply-chain disruptions can delay product launches. Wholesale partners (retail stores) have their own margin pressures and sometimes delisted slower-selling brands.

The larger question for On is whether a company with Swiss-based costs and direct-to-consumer positioning can compete globally with Nike, which manufactures at scale in lower-cost countries and has a wholesale network that reaches every corner of the world. On’s answer has been to own the premium end of the running market and accept lower volume, but that market is inherently smaller than the mainstream.

For research, students of On should read the 10-K (SEC CIK 0001858985) to understand the split between direct and wholesale revenue, geographic breakdowns, and profitability trends. Quarterly calls highlight customer acquisition costs, average order value, repeat-purchase rates, and new product traction. Watch gross margin — it signals pricing power and manufacturing-cost pressures. And follow the brand’s perception in the running community, which remains the core market and the source of word-of-mouth growth.