Why On Running Could Be Worth $6 Billion | This Week in Fashion, BoF Professional

On Running, a global sneaker brand, had to overcome many obstacles after it launched in 2010. It had to attract customers beyond its hometown of Zurich. This small city is not known for being a sneaker capital. It also had to convince customers that its strange-looking footwear, featuring a midsole of segmented tube tubes, was better than products from established running brands such as Brooks and Asics, and giants like Nike and Adidas.

It’s done both. Today, On has more than 60 million fans and sells in more that 8100 stores around the globe. In a regulatory filing, On revealed that it is planning to launch an IPO on New York Stock Exchange. It expects to raise $622 million and valued it at more $6 billion. To put that figure in perspective, Adidas just sold Reebok — a faded but still widely recognised and valuable name — for $2.5 billion.

On is a growing upstart in the sneaker market and one of those who are being fueled by a pandemic surge in running. Its global sales in 2020 were 425.3 million Swiss Francs (about $464 millions), an increase of 59 percent over the previous year. Already 315.5 million Swiss Francs were sold in the first six months of 2021. It also made a net profit of 3.8 millions Swiss Francs, after a loss in total sales of 27.5 million Swissfrancs for 2020. Comparatively, Allbirds, another big sneaker company, reported a loss in the first half this year of $21.1 million.

The key to On’s success, it says, is the unique feel of its sole. “It’s all based on one radical idea,”The company has posted the information on its website and in its filing. “Soft landings followed by explosive take-offs. Or, as we call it, running on clouds.”

It started as a shoe for runners. However, its trajectory has shown it expanding beyond that market to become a larger lifestyle brand. It’s a lucrative path, if On can get it right. Nike and Adidas, for instance, started by focusing on athletes. On is now a brand that sells shoes for everyday wear. It also has a line for tennis shoes featuring Roger Federer, a Swiss tennis star who invested in the company in 2019. Federer is a prominent face for the brand. On may eventually surpass its running competitors if it can successfully transition.

“On makes a great product that runners really like,”Matt Powell, an analyst in the sports industry at NPD Group, says so. But they aren’t the only ones buying its shoes these days, he notes. The distinctive design is helping them catch on as casual footwear, a market that’s much larger than performance sneakers, Powell says.

These shoppers are key to On’s growth plans. “We started with the run specialty channel and then selectively expanded to additional premium retail partners to reach a broader audience,”According to the filing. The company is already selling at a number upscale retailers like Ssense, Dover Street Market and MatchesFashion and intends to continue adding more partners on both the premium and general end of the market as well as reaching out to new customers.

It’s also growing in other ways, beefing up its direct-to-consumer channels, for instance, which currently make up about 37 percent of On’s sales. It’s further developing its e-commerce operations, as well as opening physical stores. It opened its first brick and mortar location in New York at the end of last fiscal year.

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North America, in fact, has become On’s largest market since it entered the US in 2013. It’s another strength for the company. The US is the world’s largest market for sports footwear, including performance, outdoor, and “sports-inspired”Euromonitor projects that shoes will reach $36 billion. Just over half On’s global sales came from North America in the six months through June 30.

On’s signature cushioning was the work of co-founder Olivier Bernhard, a former duathlon and Ironman champion. He wanted cushioning in the heel for landings and a firm feel at its front for pushing off into the next stride. He tried cutting up a garden hose and attaching it to the bottom of an already existing shoe. Bernhard and two friends — David Allemann and Caspar Coppetti, On’s other co-founders — took the idea to an engineer and refined it into what On calls CloudTec. It’s the basis for On’s Cloud sneaker, a popular model that runs about $130.

Innovation has remained central to On’s brand since, helping it gain trust among its core audience of runners and athletes. It has sought out partners such as the Swiss Federal Institute of Technology in order to develop new products. It has introduced products for speed and trail running, as well as cushioning. It also makes clothing, though it’s the original running platform that remains the core of the company.

There are many challenges ahead. All footwear On this year was produced by 13 suppliers in Vietnam. Vietnam’s factories are currently being affected by Covid epidemics and local freight operations have halted. It’s unclear when these disruptions will ease. On expects them will affect its operations for the remainder of 2021 and into 2020, although it has experienced only temporary disruptions as a result of Covid.

To mitigate future risks, the company will still start manufacturing shoes, clothes and accessories at eight new suppliers in Vietnam and Lithuania. It also needs this capacity to provide enough sneakers for the increasing number of customers who are looking to purchase them.

THE NEWS IN BRIEF

FASHION BUSINESS AND THE ECONOMY

In the first half of 2021, revenue jumped 64 percent year-on-year, to €574 million ($679 million). Valentino.

Valentino announces couture ambitions, recovery after coronavirus slump. Jacopo Venturini, chief executive, stated that sales rose almost to 2019 levels due to a new merchandising strategy. In the first half of 2021, revenue jumped 64 percent year-on-year, to €574 million ($679 million), after being hit hard by lengthy pandemic shutdowns in Italy.

Retail sales at Ferragamo were close to pre-Covid levels in August and July. The Italian luxury label said on Tuesday it returned to operating profit of €66 million ($78 million) in the first half of 2021 from a loss of €72 million in the year-ago period.

Tod’s posts strong sales growth but still lags behind 2019 levels. The Italian shoemaker, which also owns Roger Vivier, Hogan and Fay, announced on Wednesday its sales in the first half of 2021 increased 55 percent compared to the same period last year, totalling €398 million ($470.6 million), but is still down 11 percent relative to pre-pandemic times.

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Bureau Betak is acquired by The Independents at a valuation of over $70 million. The events production company is known for staging some of the most memorable events in the world. fashion’s most impactful shows, generated more than $100 million in 2019. This deal is a wager on big physical returns. fashionEvents, with a digital dimension.

Lululemon raises full year forecast betting on strong athleisure market. According to IBES data from Refinitiv, the sportswear manufacturer saw net revenue rise by $1.45 billion in its second quarter, surpassing estimates of $1.34 trillion.

Dior signs a two-year partnership agreement with Paris Saint-Germain (PSG) Dior artistic director Kim Jones has designed the team’s official wardrobe for the next two seasons, marking the luxury brand’s first tie-up with a sports club. Hugo Boss was previously the PSG’s partner.

Hong Kong is moving to reopen China’s border, which will boost retail stocks. Visitors from China will be allowed to skip the strict quarantine process required for most arrivals, a key first step toward reopening the border with the mainland and reviving a flow of visitors that’s long been crucial to the local economy.

China accuses Canada Goose ‘misleading’Advertisements for consumers China fined the high-end parka manufacturer because it claimed to use “the warmest material from Hutterite,”Even though its products are mostly made from other material, Chinese state media criticised the ads as evidence Canada Goose hasn’t “carefully studied China’s law and ignores changes in the Chinese market.”

Everlane leaves China market. The US retailer will follow in Urban Outfitters’ footsteps and close its Tmall Global store on Sept. 12, citing the Covid-19 pandemic and an adjustment in global strategy as contributing factors.

THE BUSINESS OF BEAUTY

Mexico is the first country in North America to ban animal testing for cosmetics. Shutterstock.

Mexico is the first country to ban animal testing in cosmetics. Shutterstock.

Mexico bans animal testing in cosmetics. The new law also prohibits the import, marketing and manufacture of cosmetics that were tested on animals in Mexico.

Indian superstar Deepika Padukone launches beauty and lifestyle brand. The Indian actress Deepika Padukone, who has more than 100 million followers on social media, will launch a lifestyle brand with its first categories being beauty and skin care in 2022.

PEOPLE

Nensi Dojaka (right) at the LVMH Prize event alongside a model sporting her Autumn/Winter 2021 collection. LVMH.

Nensi (right) and a model wearing her Fall/Winter 2021 collection at the LVMH Prize event. LVMH.

Nensi Dojaka wins LVMH prize. The prestigious prize was won by Nensi Dojaka, a London-based womenswear designer. She beat nine finalists, including Christopher John Rodgers and Bianca Saunders. fashionPrize.

Etro names Dolce & Gabbana executive Fabrizio Cardinali CEO. Cardinali joins the company later this year from Dolce & Gabbana, where he most recently served as chief operating officer and a member of the company’s board. He previously held the chief executive positions at Richemont-owned brands like Lancel and Dunhill.

Veronica Wu resigns as a member of the VF Corp. board. The Silicon Valley-based venture capitalist’s departure comes after a leaked email published by Axios showed her downplaying racism in the US and calling Black Lives Matter “the true racists.”In a statement, Wu, the owner of brands such as Supreme, The North Face and Vans stated that he had decided to resign from the board immediately. “was not the result of any disagreement with VF on any matter relating to VF’s operations, policies or practices.”

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Ex-models go public with allegations of assault by former elite model boss Gérald Marie. French investigators have collected testimonies from several women who claim they were raped, or sexually abused, by Marie. More than five others are scheduled to be interviewed in the next week, Agence France-Presse reports. Ebba Karlsson, a Swedish model and Lisa Brinkworth (ex-BBC journalist) are two of the victims.

MEDIA AND TECHNOLOGY

Eugénie Trochu, Vogue Paris' new head of editorial content (left). Adeline Mai. Francesca Ragazzi, Vogue Italia head of editorial content (right). Courtesy.

Eugénie Trochu, Vogue Paris’ new head of editorial content (left). Adeline Mai. Francesca Ragazzi (right), head of editorial content at Vogue Italia. Courtesy.

Vogue names new editorial content heads for French and Italian Editions. Eugenie Trochu, former editor of Vogue.fr, will helm Vogue Paris, while Francesca Ragazzi will take the lead at Vogue Italia, after having served as the magazine’s fashion market director. The appointments follow a series of high-profile departures as Condé Nast streamlined its flagship publication. Both editors will work under Vogue’s European editorial director (and British Vogue editor-in-chief) Edward Enninful.

Marie Claire US will cease printing publication. The American fashionAccording to the New York Post magazine, which was partly owned by Hearst from May until now, will be a digital only publication. The paper said subscribers would be offered print editions of Hearst’s Harper’s Bazaar instead.

Facebook and Ray-Ban announce smart glasses The company’s new product, Ray-Ban Stories, was unveiled on Thursday. The product is available at both Ray-Ban retail stores and on its website for $299. It is available in the USA, Canada, Australia, Canada and Ireland.

JD.com launches a new resale platform. On the new platform, titled Jing Zhi, sellers can host second hand products and pay a 6 percent commission or sell goods directly to JD.com’s AiHuiShou second hand division.

Alibaba’s logistics arm invests in European last mile. Cainiao, Alibaba’s logistics business, announced Friday the launch of its locker network in Spain and France in the Chinese retail giant’s bid to ramp up efficiency. While Cainiao’s network currently spans 170 lockers in Madrid, Barcelona and Paris, the firm plans on expanding the programme to 2,000 lockers across the two countries by March 2022.

PayPal to buy Japan’s Paidy in a $2.7 billion deal. The largely cash deal will expand PayPal’s capabilities in Japan (the world’s third-largest e-commerce market), another step for the brand toward claiming the top spot in the buy-now, pay-later industry, which is experiencing a pandemic-led boom.

Shopee owner looks to raise $6.3 billion in Southeast Asia’s biggest fundraising. The funding round marks Southeast Asia’s largest ever capital raising, and is the second major funding round in less than a year for the $185 billion e-commerce and gaming company.

Joan Kennedy compiles this list.

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