On Holding: Why Selling Less Can Protect a Premium Running Brand

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background] Before 2020: Become a Running Shoe Before Becoming a Fashion Symbol

On did not begin as a fashion brand.

The company was founded in Switzerland by former professional athlete Olivier Bernhard together with David Allemann and Caspar Coppetti.

Bernhard, who competed extensively in duathlon and triathlon, had been searching for a different running sensation from that offered by conventional running shoes.

That experimentation eventually led to the technology that became On's most recognizable product feature: CloudTec.

The hollow structures beneath the shoe compress during landing and recover as the runner moves forward.

From the beginning, this sole construction served two purposes.

It was a functional product technology.

It was also a visual brand identifier.

Many athletic shoes become difficult to recognize once their logos are removed. On's distinctive midsole construction gave consumers another way to identify the product from a distance.

That became an important brand asset because the functional design itself also worked as visual branding.

On's earliest customers were serious runners rather than fashion influencers.

The company first developed credibility through specialist running stores, performance positioning, athlete use, runner recommendations, and product trials before expanding into broader sporting-goods and wholesale distribution.

That sequence mattered later.

A brand that initially acquires customers primarily through low prices and promotions can find it extremely difficult to demand premium prices later.

On started from the opposite position.

Before 2020, it had already established three important foundations.

First, recognizable product technology.

Second, credibility developed through specialist running channels.

Third, pricing positioned above much of the mass athletic-footwear market.

Therefore, when On eventually expanded into lifestyle use, it did not need to manufacture a fashion story first and search for a product justification later.

The performance product came first.

Broader cultural and everyday-wear appeal followed.

This history also helps explain why On later had the ability to resist excessive promotional distribution.

If customers purchase a brand primarily because it is cheap, management has little power to restrict discount-driven channels.

If customers first value performance, design, and brand identity, management has a stronger foundation for sacrificing some short-term volume to protect long-term pricing.

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timeline] 2020-2026: From Rapid Expansion to Deliberately Managing Growth Quality

After 2020, consumer interest in running, outdoor activity, health, and comfortable footwear increased significantly.

On benefited from those industry tailwinds, but it did not reposition itself as a casual comfort brand.

The company continued to build its identity around running, athletic performance, and technical product innovation.

In September 2021, On Holding AG listed on the New York Stock Exchange under the ticker ONON.

The IPO provided capital, but its strategic importance went beyond fundraising.

It gave On additional resources to invest in inventory, international markets, product development, marketing, company-operated stores, and its DTC infrastructure.

By the time it became public, On had already demonstrated that it could operate through two major distribution systems.

The first was Wholesale.

This included specialist running stores, selected larger retailers, and distributors in certain markets.

The second was Direct-to-Consumer, or DTC.

This included On's own website and company-operated stores.

Each channel offered different advantages and risks.

Wholesale could expand geographic reach quickly without requiring On to fund and operate every physical store itself.

However, the brand had less direct control over inventory, merchandising, promotions, and the final consumer experience.

DTC required greater investment.

But it gave On more control over consumer data, product presentation, brand experience, and final selling price.

The critical element of On's later strategy was not the elimination of wholesale.

It was the gradual rebalancing of control between the two channels.

During 2022 and 2023, On entered a period of significant scale expansion.

Net sales reached CHF 1.7921 billion in 2023.

The Americas had become the company's largest region, while footwear continued to account for the overwhelming majority of sales.

Rapid growth created a classic consumer-brand risk:

Overdistribution.

When a shoe becomes popular, wholesale retailers naturally want more inventory.

For a public company, those orders can be particularly tempting.

The reason is straightforward.

Once products are sold into wholesale, revenue can appear in the company's financial statements before the final consumer has purchased the product.

But selling inventory to a retailer is not the same as the final consumer buying it.

This is the difference between sell-in and sell-through.

Sell-in is the brand selling products into the channel.

Sell-through is the retailer actually selling those products to final consumers.

If sell-in consistently runs ahead of genuine sell-through, inventory eventually accumulates in the channel.

Retailers then need to release cash and shelf space.

Discounting becomes the easiest solution.

Once consumers learn that they can wait for markdowns, restoring the original full-price structure can become extremely difficult.

On's net sales increased to CHF 2.3183 billion in 2024, representing growth of 29.4%.

In 2025, net sales increased again to CHF 3.0140 billion, approximately 30% higher than the previous year.

From 2023 to 2025, On therefore increased net sales by approximately 68% in only two years.

Importantly, this expansion was not driven entirely by wholesale.

DTC net sales were CHF 671.8 million in 2023.

They increased to CHF 942.8 million in 2024.

In 2025, DTC net sales reached CHF 1.2605 billion.

Wholesale remained highly important, generating CHF 1.7534 billion of net sales in 2025.

On therefore did not abandon retail partners.

Its model increasingly looked like this:

Wholesale provided scale and market reach.

DTC provided a growing degree of consumer access, brand control, and participation in retail economics.

In 2026, this model encountered a more serious test.

Promotional intensity increased in parts of the retail environment during the second quarter.

On management did not respond by maximizing wholesale sell-in simply to maintain a more attractive reported growth rate.

Instead, management emphasized deliberate control of wholesale shipments and the protection of full-price integrity.

The financial results showed a revealing divergence.

Second-quarter 2026 net sales were CHF 850.3 million, up 13.5% on a reported basis.

Looking only at that figure could make growth appear to have slowed dramatically.

At constant exchange rates, however, growth remained 21.6%.

During the same quarter, DTC net sales reached CHF 388.4 million.

Reported DTC growth was 26.0%, while constant-currency growth reached 34.3%.

DTC represented 45.7% of total quarterly net sales.

Wholesale net sales were CHF 461.9 million, representing reported growth of only 4.8%.

That divergence reflected the strategic choice management was making.

The issue was not simply whether wholesale customers were willing to take more inventory.

The company was unwilling to maximize shipments into channels where promotional conditions could weaken full-price selling.

At the same time, second-quarter gross profit margin reached 65.4%, compared with 61.5% in the prior-year period.

Management subsequently raised its full-year 2026 gross profit margin expectation to at least 65% and continued to expect constant-currency net sales growth in the low-20% range.

That made 2026 an important year in the On story.

The previous years demonstrated that On could grow rapidly.

The new question was whether management could apply the brakes when additional short-term volume threatened the quality of that growth.

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problem_opportunity] Problem and Opportunity: The Faster a Premium Brand Grows, the Easier It Becomes to Damage Its Own Pricing

On's central problem was not that consumers had suddenly stopped wanting running shoes.

Nor was it that the brand had lost relevance.

The problem came from success itself.

When a premium shoe becomes popular, wholesale partners naturally request more inventory.

For a public company, accepting those orders can be particularly tempting.

Products shipped into wholesale can support current-period revenue.

In the short term, the financial statements may look stronger.

But inventory purchased by a retailer has not necessarily been purchased by the final consumer.

If retail inventory exceeds what consumers can absorb at full price, the problem has merely been postponed.

Eventually, excess inventory can move into markdowns and promotional channels.

For a premium consumer brand, one of the most dangerous developments is teaching customers that there is no reason to pay full price.

Imagine a shoe with an official price of $180.

If consumers repeatedly discover that they can purchase it for $120 or $130 by waiting, the economically meaningful price begins shifting away from $180.

The official MSRP may remain unchanged.

The price anchor in the consumer's mind has not.

That is one of the least visible risks facing a premium brand.

The price tag remains the same.

Pricing power becomes weaker.

This creates the strategic distinction at the center of the On case.

One growth model is to maximize distribution, place inventory in more stores, and address discounting and excess inventory later.