The Swiss sporting goods provider On Holding AG has set itself ambitious growth targets for the next few years. In order to achieve this, expansion in markets such as China and the USA should also be promoted.
Marc Maurer reveals exactly what the sports goods retailer’s current expansion plans look like and which trading partners it relies on in its wholesale strategy. On’s co-CEO also explains what efforts the company is making in the area of circular economy and in collaboration with para-athletes so that they can achieve their best performance.
What is your current wholesale strategy?
It is important for us that we can reach our groups of customers with the right products: We are present with innovations in running shoes, clothing and accessories for high-performance sports, outdoor, exercise and tennis. Clothing plays a very important role for us. We try to work with the appropriate channels that make it possible to reach our customers.
There are the running sports specialists, the outdoor retailers but also general sporting goods such as SportScheck and department stores such as Breuninger in Germany. We try to work with premium partners who fit our brand strategy. In addition, of course, there is our own distribution – our e-commerce and our own flagship stores – which is growing faster than wholesale. Together, this allows us to address our customers through the right channels.
Where do you want to reach your customers with your own physical store in the future?
We now have the first successful ‘test cases’ with our own flagships in New York, London and Zurich, which we will continue to expand. On the one hand in China, which is a market that relies heavily on its own stores, but then also in western markets in Europe and the USA.
Are there any current opening plans?
For example, in November we will open another flagship store in London-Spitalfields. In the new year we will expand with additional on flagship stores, especially because it allows us to better present our premium clothing to our customers and make it more tangible.
Why is it so important for clothing to be presented in the store?
A good three-dimensional presence is extremely important, especially for clothing. Footwear is easier because shoes can be easily presented on a wall and many partners have the expertise to bring them to customers. When it comes to clothing, it is essential to work with good shop-in-shops in order to convey the added value of the products to customers.
This works very well with partners where we can build an installation directly in the shop. SportScheck is a good example where we own a lot of our own space. This is all the easier in our own stores, where we have a clothing share of up to 20 percent. This is more than twice as high as in traditional wholesale.
In which markets would you like to grow even more?
We are currently growing very strongly in markets like the USA and England, but there is still a lot of potential because the markets are very large. In markets such as France, Italy, Scandinavia, Spain, Eastern Europe and China, we are still very small compared to the market potential. It’s about how we can build the brand through distribution expansion and brand awareness. This includes increased collaboration with our athletes and brand campaigns.
We are currently active in more than 50 countries and, apart from Switzerland and Austria, we have no country where we even come close to achieving maximum market penetration or saturation.
So the potential has been exhausted in Austria and Switzerland?
We started in Germany, Austria and Switzerland and have been present since 2010. We have a relatively high market penetration here and are analyzing how we can grow even further in new segments.
You work with various athletes and individual associations. What role does sponsorship play in addition to form as an outfitter for On?
We always come from the sport and how we interpret it. Tennis, for example, is a huge market that has seen very little innovation – both footwear and clothing – but has huge potential to influence the lifestyle space in the coming months and years. It is also a market that allows us to work with athletes who strongly identify with On and share our brand values. We are incredibly lucky to have Ben Shelton and Iga Świątek [Anm.d.Red.: Tennis-Profis] can work.
How do you want to combine sport with lifestyle?
We try to create events where we can connect with the community. This is particularly important in a spectator sport like tennis, where there is little exchange between the community and players. We have now implemented this in New York, where we rented tennis courts in Brooklyn for a whole day and brought the athletes together with the local community to play tennis.
In running, we have, among other things, the On-Track Nights, an athletics event with a festival feel where we can bring the athletes and the fans together. This way we can have much more cultural influence and connect a wide variety of people. If we sponsor existing events, we have a lot less of that.
Para-athletes are also part of the On team. How does On address the individual needs of athletes with a handicap?
A good example is Zachary Friedley, who ran the Ultra-Trail du Mont-Blanc [Anm.d.Red.: Ultramarathon,Trail-Running um die Berggruppe Mont Blanc] walked with a flexible leg prosthesis. For his trail marathon he needed a special outsole with grip. During the tests, the sole quickly broke because he has a completely different running style than ‘classic runners’. That’s why we work very closely with the athletes and try to find individual solutions to support them in the respective sport.
We also have the ‘Right to Run’ project, a social program that currently supports 19 organizations worldwide that protect their communities’ fundamental right to run and exercise and make it easier for people to access exercise.
Speaking of product development: What innovations and technologies await us?
There is a lot to expect, especially with regard to the Olympics. We are currently testing new spikes with our athletes again. There are also a lot of clothing products coming onto the market in which we work with many sustainable materials.
In addition to Cloudneo, a completely circular running shoe, which is part of the first subscription system for performance running shoes and clothing called “Cyclon”, we are working on another project: CleanCloud. Here, carbon emissions are used as the primary raw material for shoe soles. We want to show the sports industry and consumers that performance and sustainable materials go hand in hand.
How has the Cyclon subscription program been received so far?
Cyclon was our test of scaling sustainable products. We found that three groups of consumers are interested in the product – the early adopters (from a sustainability perspective), the runners, and the on fans who want to show their loyalty with the subscription system.
It is a long-term project in which we also need the support of consumers in order to change consumer behavior and increase willingness for circular economy. With higher demand, we can reduce prices and ensure circularity of products. But consumers must also become more willing to pay a little more for a more sustainable product.
Isn’t returning products after they’ve worn out to get a new one an obstacle for customers?
We see in our data that a lot of Cloudneo shoes are coming back. It also works in the timeline we have set out – the shoes come back after around nine months if the customers go running around twice a week. There are many Cyclon customers who are willing to support the circular economy and send back their expired shoes. We have a good renewal rate. But there are also some who try it once and then do something else again. For this reason we would like to offer a larger selection of products and systems. Just one product will not work in the long term.
So the range of the program is being expanded?
There will be more products coming that will also introduce more variability. The current Cloudneo running shoe is very light and not very cushioned. The Cloud Monster offers more cushioning. We are a sportswear brand and offer clothing from head to toe, which is why we are trying to offer other products in the Cyclon range in addition to the Cloudneo and Cyclon-T.
Additionally, we are looking for further opportunities for a circular economy outside of a subscription system. With PET bottles, there is no need for a subscription model for the bottles to be returned because there is an established network of collection points. The sports industry must also develop in this way so that it becomes normal for clothing and shoes to be returned after they are worn out. We have the technical capabilities and infrastructure to recycle these products. At this point we are currently working more closely with our partners.
Finally: What expectations do you have for the rest of the current financial year?
The third quarter is going very well, we are looking very positively at the fourth quarter, even in a relatively difficult environment. If you look at retail and consumer demand, the market has probably seen better days, but fortunately we feel this relatively little. This makes us very positive for next year.
