Retail and consumers

Swiss brand On is profitable and growing. It also has a deep wholesale presence.

On has a few things other buzzy brands don’t have: profitability and a stock price that has never fallen below $15. 

As for why On has been able to achieve profitability where others have struggled, co-CEO and CFO Martin Hoffmann has a simple answer.

“We are Swiss,” Hoffmann said in an interview, “and from the very beginning, it was very important for us to build a profitable business. And in the end, aiming for profitability gives you also a clear guideline and rail guards what you do — and that helps a lot in terms of where you allocate resources, how much you grow, where you grow.”

Not only has the company reached profitability (the business has been profitable since 2014), but Hoffmann also stressed that the company has increased its profitability year after year, while still allowing itself to invest in new markets, products and sustainability initiatives. In the brand’s recent third quarter earnings report, net income grew 59% over the previous year.

The company’s financial stability may also be part of why its IPO has not gone quite as disastrously as some others in the market. While the brand’s share price is a good deal lower than when it debuted, the stock has hovered around $15 to $20 since August.

Hoffmann said the company didn’t go public because it was a popular move, but because the business was in a good place. ”We went public in a moment where we had built a company where we knew we had built many drivers for growth that give us a lot of confidence that we will [continue] delivering on what we promise,” Hoffmann said. “We always knew that, in the end, the IPO is just a new starting line and this is how we approached it. And ever since we basically exceeded the expectations that we have set out.”

But there is one other not-so-secret reason for the brand’s success: an early start in wholesale.

The wholesale difference

Unlike many up-and-coming brands, On’s net sales from wholesale are still higher than its net sales from direct-to-consumer channels. Co-CEO Marc Maurer sees wholesale as an important part of the company’s strategy and a reason for its growth.

“Back in 2015, 2016, 2017 — we got so many questions on why we’re doing wholesale,” Maurer said. “We always said, you know, we’re doing wholesale because it allows us to acquire new consumers in a cheaper way and to scale the brand quite efficiently. Because if you’re a pure DTC, you have to create brand awareness.”

It’s much cheaper to have a trusted wholesale partner create that brand awareness for you. For running, which was On’s initial focus, the brand has partners including Fleet Feet and Dick’s Sporting Goods. The emphasis is on finding retailers that effectively reach On’s target audience.

“Then the question is, ‘OK, can the partner bring the brand to life in a good way?’ It has to be premium, it has to be price stable, and we have to be able to execute the brand in a way that feels authentic to us,” Maurer said. Part of the appeal of Dick’s, for example, was that On would have shop-in-shops at the retailer with a brand storytelling element. “We’re not going to go into discounting channels, for example. We’re not going to go into channels where we feel they are not displaying the brand in a premium enough way. But the core is always: Which consumer are we reaching?”

Also important to On are factors like data-sharing availability. 

“We would not work with Dicks if we didn’t know what their inventory position in On is, for example, because then we couldn’t control the number of products in the market,” Maurer said.

The brand is opening more of its own stores as well, but these locations are additive to wholesale and are mostly planned for key cities, according to Hoffmann. Store locations include Tokyo, Zurich, New York and Los Angeles. The brand already has plans to open in Miami and London, as well as to hopefully open in Paris ahead of the Olympics.

China is a different story, since On has a very limited wholesale presence there. That means more stand-alone stores than in other geographies. For the rest of its locations, though, On is focused on using stores to connect with shoppers — through fun runs or other events — and as a way to better showcase its nascent apparel business.


Business Asia
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