Summary
Highlights
On, a Swiss sneaker company, is rapidly gaining ground on established competitors like Nike and Adidas. Since going public in 2021, On's net sales have consistently grown, and its stock price has soared. Meanwhile, Nike has faced stalling growth and Adidas has had its own challenges. However, On is also under pressure from potential tariffs on products manufactured in Vietnam, which accounts for a significant portion of its revenue.
CNBC visited On's headquarters to witness their innovative spray-on technology, which can produce a sneaker upper in minutes, drastically reducing manufacturing time compared to traditional methods. While still in early stages for mass production, this technology highlights their emphasis on innovation. Analysts attribute much of On's success to the unique design of its running shoes, featuring hollow pads in the sole for cushioning, which helps them stand out in the market.
Initially, On's shoes were perceived more as lifestyle footwear rather than high-performance gear. To overcome this, On focused on performance and opened company-owned stores. This strategy, combined with successes like Olympic medalist Hellen Obiri winning the Boston Marathon in On shoes, elevated its brand image. On targets wealthy shoppers with premium-priced products, typically selling for $150 or more, and partners with athletes like Roger Federer and luxury brands.
On's rapid rise was also aided by opportune timing. During COVID-19 lockdowns, recreational running and athleisure boomed, leading to increased demand for athletic shoes. Concurrently, Nike scaled back its retail partnerships, which analysts believe was an over-rotation towards direct-to-consumer sales. This created a void on retail shelves that On was able to fill, gaining prime retail space that Nike had vacated.
On plans to expand its apparel line, aiming to increase its current 4% contribution to revenue, and double its store count from 53 to 100. However, potential tariffs proposed by the U.S. on goods from Vietnam and Indonesia could significantly impact the company, as most of its products are manufactured there. While tariffs have been suspended, if reinstated, the increased costs are likely to be passed on to consumers. Analysts suggest On's premium positioning may help it withstand these impacts.