On Holding: The Missing Discount

Every fast-growing footwear brand eventually seems to pay the same bill.

Too much inventory.

Then markdowns.

Then outlets.

Then customers learn to wait.

On Holding has somehow scaled to CHF3 billion of revenue while largely avoiding that cycle.

That may be the most important fact in the story.

The question is whether On built a better machine—or simply grew during the best weather a footwear challenger has ever seen.

2027 should tell us.

My latest piece is about The Missing Discount.

On has avoided footwear’s oldest scaling tax. 2027 will show whether that was design or weather.

The bill from 1972

Phil Knight had a problem that every fast-growing shoe company eventually meets: he was selling shoes faster than he could pay for them. Nike in the early 1970s had to pay its Japanese factories months before American retailers paid Nike, the banks had stopped extending credit, and growth itself was pushing the company toward insolvency. His solution, described in Shoe Dog, was to change who carried the risk:

Why not go to all of our biggest retailers and tell them that if they'd sign ironclad commitments, if they'd give us large and nonrefundable orders, six months in advance, we'd give them hefty discounts, up to 7 percent?

Nike called the program Futures, and it worked so well that it stopped being a program and became the industry. As late as 2015, 87 percent of Nike's wholesale footwear shipments still flowed through Futures orders, four decades after the cash crunch that invented them.

But Futures carried a clause nobody wrote down. When a retailer commits to shoes six months before they arrive, somebody is guessing what people will want to wear half a year in the future, and the guess is always wrong by something. When it is wrong in the expensive direction, the extra pairs do not disappear; they go to the back room, then the sale rack, then the outlet, then the off-price chains. The discount was never really a marketing decision. It is how footwear pays for its forecasting errors, and the bill lands hardest on challengers, who must buy shelf space with volume before they know what sells. That is a large part of why the list of new footwear brands that reached even $4 billion in the last fifty years is so short, and why the ones that did mostly died on the way up. Under Armour got there in 2016, hit a wall in US wholesale, pushed the excess through off-price chains, and taught its customers to wait; a decade later its sales are below where they started. Allbirds, worth $4 billion at its 2021 IPO, marked its inventory down until gross margin fell from 53 to 41 percent, and agreed this March to sell its footwear business for $39 million.

Which is what making the company this article is about so strange. Between 2021 and 2025 a Swiss firm grew from CHF 725 million of revenue to CHF 3.0 billion, roughly 43 percent a year, much of it through the same wholesale doors, under the same advance-order system, against the same incumbents. And the bill never showed up: no sale rack, no off-price channel, a gross margin that rose from 52 to 65 percent while the average shoe climbed from $145 to $170. Either On Holding built a machine the industry has never seen, or it caught the best weather the industry has ever offered. The halved stock price says weather. Working out which it happens to be worth about thirty dollars a share.