‘The sponsorship model is broken’: On co-founder Caspar Coppetti on building a premium athletic brand that rivals the giants

According to co-founder Caspar Coppetti, the concept when it first launched in 2010 was “we want to be the most expensive product on the market.” On’s shoes retail for between $130 and $200 a pair. It took a few years, but the strategy worked out. In its most recent earnings report, On’s quarterly revenue hit around $307 million and direct-to-consumer sales represented 38% of its business.

Coppetti joined the Modern Retail Podcast this week and spoke about how the brand, best known for its running shoes, has tried to focus on growth while maintaining its brand integrity.

“When you have a strategy, and it’s a premium strategy — it’s a very simple strategy,” said Coppetti. “You have to always keep supply below demand. Nothing builds desirability, like scarcity, right? And you have to be 100% buttoned up and prepared to walk away from things that could be good for business in the short-term but would hurt the brand long-term.”

For the first few years, this made things difficult. On walked away from some retail partnerships that likely would have jumpstarted business. But now, Coppetti said he’s happy the company was so selective because it cemented On’s name as a premium product.

That helped make it a brand that athletes sought out. Tennis star Roger Federer, for example, is not only a spokesperson for the brand but an investor. And even beyond Federer, On is trying to take its athletic partnerships even further by offering new types of sponsorships and contracts. “The sponsorship model is broken,” he said. “It’s basically a duopoly, where two large brands control the market and they play very ugly games at the cost of the athletes.”

Despite the brand’s early focus on exclusivity, Coppetti also spoke about the need to leverage key wholesale partners. The company is sold in thousands of individual running boutiques, as well as larger retailers like REI and Foot Locker. “We felt we needed the validation, not just [from] the best runners but also of the specialty shops,” he said. Even with DTC representing over one-third of On’s business, the company still focuses on growing retailer partnerships. What’s more, Coppetti said that the two businesses aren’t antagonistic; “they are very complementary and additive to each other,” he said. “When we start working with a retailer, our online sales will go up in that area.”

Now, On is on an upward trajectory and expanding into new products and regions. According to Coppetti, this success was thanks to the company holding true to its values and keeping the big picture in mind. “It took a lot of discipline. But, you know, we’re Swiss — we’re known for discipline,” he said.

Here are a few highlights from the conversation, which have been lightly edited for clarity.

Why On focuses on a premium marketing strategy
“If you’re based in Switzerland and you have a patented technology, the only strategy that’s available to you is really a premium strategy. You’d be very unwise not to do that. So we said, hey, we looked at brands like ASICs at the time. And they were the market leader; they were selling $180 running shoes, but they’re also selling $40 shoes… And so they were diluting their own premium brand image. And we felt [that] there must be quite a number of runners out there that really care about what they run in, and why not just go exclusively after them? And so we basically said, ‘Look, we want to be the most expensive product on the market.’ So that was one move, and it turned out to be a good move. And the other one was that we had a choice of going DTC only — that was the time a lot of DTC brands started. But we felt we needed the validation, not just [from] the best runners but also of the specialty shops. That’s where brands are made; that’s where the community lives. A lot of these store owners — they are former professional runners, college runners. And they really organize running and running events in their community. And it’s a great bunch. And we wanted to connect with them. Similar to what you would in skateboarding, you would you work with a local skate shop.”

Saying no more often than yes
“We say no nine out of 10 times. And, we were also saying no at the time [when we first launched], and we didn’t necessarily have all the good retailers that we wanted. When you have a strategy, and it’s a premium strategy — it’s a very simple strategy. You have to always keep supply below demand. Nothing builds desirability, like scarcity, right? And you have to be 100% buttoned up and prepared to walk away from things that could be good for business in the short-term but would hurt the brand long-term. And to do that as you’re starting up, and your costs exceed your revenues — and maybe you’re even chasing investment — it took a lot of discipline. But, you know, we’re Swiss — we’re known for discipline. And I guess there were probably times early on when we felt we were doing the right thing… For example, there was a period when a very well-known specialty group in the U.K. called The Sweatshop (they invented the London Marathon)… we had worked so hard to get in there. And just after we launched with them, they got taken over by a large retail group that heavily discounts. And we were like we don’t want to have anything to do with them. And we pulled all our inventory from that store. And we thought all the other brands will do the same, but none of them did.”

‘Two large brands control the [sponsorship] market’
“The sponsorship model is broken. It’s basically a duopoly, where two large brands control the market and they play very ugly games at the cost of the athletes. And we’re trying to change that. And one of the things that we do is we offer them contracts that are structured in a different way. For example, we have several female athletes — one of them is Nicola Spirig, Olympic gold and silver medalist in triathlon. She’s had three babies since she’s worked with On, and she’s always gotten her full salary. We would never deduct an athlete when they’re injured or pregnant or mentally in a bad place. So we don’t do the ‘Hey, you have to compete that many times.’ We also feel that to really have a long-term career, you need to have some financial stability. So we’re currently looking into doing 401ks for our athletes, where that is possible.”