Premium Brands Have Hidden Complexity

Today, I’m digging into On Holding (ONON).

On Holding builds premium performance footwear and apparel, best known for shoes with distinctive hollow, cloud-like soles.

When I first looked at their financials and saw their 60% plus gross margins, I thought this is a clear example of a company that benefits from the power of a brand. While that is true, a little more digging showed me that having a premium brand like this comes with a bit more complexity than I thought.

Some examples of that:

• Brand-led demand is volatile by default. When customers buy because they want your product, not because they need it, it can easily lead to forecasting errors. Stockouts hurt customer trust while overproduction can tank margins (via markdowns and write-offs).

• Premium brands can’t discount their way out of mistakes. Once you claim “premium,” promotions become a last resort, not an available lever. That means you have to invest in and become excellent at forecasting, inventory visibility, and supplier coordination.

• DTC is a needed enabler. On uses DTC as a source of valuable data. It allows them to more easily see what customers buy, return, complain about, and reorder. That feedback loop is what makes better forecasting possible.

• Wholesale = scale, DTC = intelligence. One of the main reasons why this company has built a $15 billion enterprise value business is because they've seen sales growth and margin expansion by weaving DTC and wholesale together.

Once again, I have always had a naive assumption that brand leads to higher margins in companies like this. I have given very little thought to the complexity that comes with being a premium brand. That made this an especially fun report that I'm going to bookmark.

With that, I'll see you tomorrow.

Nick

TL;DR

• On Holding is a premium global sportswear company best known for high-performance running shoes, with a fast-growing apparel business layered on top.

• The company operates a dual-channel model, wholesale for scale and DTC for margin, data, and brand control.

• Gross margins have expanded above 60% as DTC mix rises and freight and sourcing normalize.

• The core lesson for entrepreneurs is that premium pricing only works when product innovation, brand discipline, and operations stay tightly aligned.

• The main risk is execution complexity, inventory mistakes, FX volatility, and reliance on cultural and athlete partnerships that are not fully controllable.

The 30,000-Foot View

On Holding designs, markets, and sells premium performance sportswear, primarily footwear, supported by a smaller but rapidly growing apparel and accessories segment. The company positions itself as a technology-forward brand rooted in performance, design, and Swiss engineering credibility.

The business model is straightforward but hard to execute well. On invests heavily in product innovation and brand storytelling, then distributes globally through a balanced mix of wholesale partners and direct-to-consumer channels. Wholesale provides reach and volume, while DTC delivers higher gross margins, customer data, and tighter brand control.

Revenue mix highlights:

• Wholesale accounts for ~59% of sales.

• DTC contributes ~41% of sales and continues to grow faster than wholesale.

• Footwear represents ~95% of revenue, with apparel and accessories still early but strategically important.

• The Americas are the largest geography at ~64% of sales, followed by EMEA and APAC.

Key stats:

• Market cap: $15.2B

• TTM revenue: ~$3.17B (USD, converted at ~1.10 USD/CHF)

• TTM gross margin: ~62%

• TTM operating margin: ~12%

• Employees: ~3,250

• Industry: Athletic footwear and apparel

Company History

• 2010: Founded in Switzerland with a focus on performance innovation and distinctive cushioning technology.

• 2012–2013: Early investment in DTC, launching e-commerce in Europe and the U.S.

• Mid-2010s: Expansion beyond niche running communities into broader performance footwear awareness.

• Public listing: IPO on the NYSE under ticker ONON, providing capital for global expansion.

• 2023: Investor Day formalizes ambition to be the most premium global sportswear brand.

• 2024: DTC mix climbs above 40%, and gross margins exceed 60%.

• 2025: Record quarterly revenue, expansion of premium brand hubs in global cities, and increased use of cultural collaborations to broaden brand reach.

Show Me the Money

Standout financial features:

• DTC expansion is the primary gross-margin driver.

• Gross margins have steadily expanded above 60%.

• CapEx remains modest relative to revenue, reflecting a brand-led model.

• The balance sheet remains net-cash positive.

Financial Data

The N.O.O.B. Nine — Competitive Powers

The Nerd Out on Business Nine is made up of Hamliton Helmer's famous "7 Powers" of competitive advantage (Scale Economies, Network Economies, Counter-Positioning, Switching Costs, Branding, Cornered Resource, and Process Power) combined with two of my own (Data Flywheel and Distribution Advantage).

Average Score: 3.1/5 - A real but fragile moat, powered primarily by brand, process, and channel discipline rather than structural lock-in.

Memorable Marketing

On’s marketing strategy blends performance credibility with cultural relevance. Rather than mass discount-driven advertising, the company relies on athlete partnerships, grassroots community engagement, and selective high-profile collaborations to reinforce premium positioning.

Key campaigns and tactics:

• Grassroots ambassador model

  • Built trust inside running and fitness communities.

  • Reinforced authenticity and word-of-mouth growth.

• Cultural collaborations (2024–2025)

  • Partnerships with high-visibility cultural figures expanded awareness beyond core runners.

  • Positioned the brand at the intersection of sport, fashion, and design.

• Premium brand hubs

  • Flagship retail locations act as experiential marketing, not just sales points.

  • Strengthen brand storytelling and local community engagement.

• No-Black-Friday pricing discipline

  • Reinforces premium brand signal.

  • Avoids training customers to wait for discounts.

Tactical takeaways:

1. Protect pricing discipline if you claim to be premium.

2. Use community credibility before scaling paid reach.

3. Treat physical experiences as marketing assets.

4. Keep collaborations selective and brand-consistent.

5. Build legal and reputational safeguards around partners.

AI Uses & Opportunities

Current uses:

• AI-assisted demand planning and operational tools.

• Early adoption of generative AI with explicit risk management around IP and regulation.

Future opportunities:

• SKU-level demand forecasting to reduce inventory risk.

• Fit and sizing AI to lower return rates.

• DTC personalization engines tied to climate, activity, and purchase history.

• AI-assisted creative testing with human brand oversight.

• Product-feedback analysis from athletes and customers to speed iteration.

Bumps in the Road

• Inventory forecasting errors can quickly erode margins.

• FX swings materially affect reported profitability.

• Heavy reliance on athlete and cultural partners introduces reputational risk.

• Supply-chain disruptions and trade-policy changes remain ongoing threats.

• Scaling innovation like LightSpray introduces execution risk.

Your Swipe File

• Premium pricing requires a combination of operational excellence and branding. Historically, I've given more weight to branding, but operations is just as important.

• DTC unlocks a valuable data loop.

• Brand-led businesses must over-invest in forecasting and supply-chain discipline.