In her best-selling new book "The Consumption Choices of the New Elite", Elizabeth Corrid, a well-known American consumer expert, argues that globalization, mass marketing, mass production and brand-name imitations have created the possibility of conspicuous consumption for more people. This proliferation of material goods shows that the obstacles of conspicuous consumption that are integrated into the upper classes have all but been eradicated.
Once "commodity" is associated with a wealthy lifestyle – cars, handbags of all kinds, wardrobes full of clothes, etc., it seems easy to find its way into mainstream society. At first glance, conspicuous consumption has become popularized.
The motivation for conspicuous consumption is to distinguish one's social class from the masses, but as Corid points out, in the era of high material popularity, "luxury" has become more and more popular, and as a luxury brand is consumed by more people, new, higher-end consumer goods that advertise themselves as brands appear every once in a while.
In the field of sports and leisure, Nike and Adidas, which have always been the top brands, seem to have become "mass brands", how to "harvest" those middle-class people who pursue more high-end and more distinctive, new brands have quietly risen in a niche, and such a niche is what both supply and demand sides are happy to see.
1
Running shoes with an average price of 1000
In the Chinese market, 1,000 yuan of On running shoes can only be regarded as entry-level, and more than 2,000 yuan is a mid-to-high-end series. According to media reports, on June 13, On's market value rose to about $14 billion, reaching the 100 billion yuan mark, and its market value has soared 60% year-to-date.
In 2010, ON was born in Switzerland by three founders: triathlon world champion Olivier Bernhard and his friends and runners David Aleman and Kaspar Kopeti.
Since its establishment, ON has achieved a breakthrough in revenue from 0 to $1 billion in just ten years with high pricing, breaking the growth myth created by lululemon, a yoga products brand. Some investors said that it was the same group of people who sold lululemon and bought On, and there was never a shortage of high-end and stories in the field of sports brands, so for investors, liking the new and hating the old is basically commonplace.
The story of On, in addition to the fact that the founder is a former world champion, emphasizes more on the "technological innovation" of its running shoes.
It is said that the founder started by pasting rubber water hoses on the soles of running shoes, and from the very beginning, he clearly defined the core of the research and development of "light touch to the ground and strong rebound", and finally led the team to successfully develop the patented CloudTec® technology. In May 2011, the Swiss Federal Institute of Technology (ETH) released the results of a study that showed that runners wearing On had significantly lower pulse rates and blood lactate levels on the test. In October 2012, On was featured in the Wall Street Journal, and the first Cloudracer was hailed as a "revolutionary running shoe".
After 2013, ON began to combine product innovation with brand genes, and continued to polish product performance with the craftsmanship of a Swiss brand: flexibility, cushioning and speed, extreme scene adaptation, and environmental protection black technology have all become the key points of its research and development.
I have to say that On Ang Run is good at demagoguery. A pair of running shoes can reduce the "pulse rate and blood lactate level" and even become a "revolutionary running shoe", although On was born in Europe, but the use of unaware marketing methods is no less than those "fooling masters" who have appeared in the history of Chinese business.
2
It has been 6 years since entering the Chinese market
In China, many people think that On is low-key, so it was only known in a very limited niche circle at first. And this almost "hungry marketing" model has made On more high-end and unique metaphorical labels.
In 2018, ON officially landed in the Chinese market and set up its headquarters in Shanghai.
On's first step in China was to enter as a dealer agent, which is where On's wit comes in, starting with key opinion figures in the sports field – such as fitness managers or well-known brand organizations – and influencing others through a small group of industry insiders. By the end of 2019, On officially opened its first directly-operated store (Shanghai Pudong Kerry Parkside store).
After entering China, On still uses social marketing. In terms of sales model, a collection of direct sales + dealers has been formed, and the middle-class sports circle that has emerged in high-tier cities has gradually penetrated.
It is said that On Run organizes running activities in urban stores in China and invites KOLs from the running circle to join, and consumers can also sign up to participate through the brand's official experience center mini program. In addition to regular night runs, there are also different activities such as field runs, park runs, cross-store runs in the city and long-distance training, so that consumers can fully experience the running sensation of the brand's various running shoes in different terrains.
Since 2020, On has laid out 22 directly-operated stores in 5 cities, including Beijing (5), Shanghai (9), Guangzhou (1), Shenzhen (4), and Chengdu (3), and opened 28 distribution counters in most of the new first-tier and provincial capital cities across the country.
However, China's middle class did not disappoint On.
From January to March this year, its sales increased by two percent year-on-year, or about 4 billion yuan, hitting a new quarterly high. In the Asia-Pacific market, where China is located, a total of more than 400 million yuan of goods were sold, nearly doubling. In terms of growth rate, the Asia-Pacific region is on the rise, with a growth rate of more than 70% last year, led by the Chinese market.
The company's management is full of confidence, raising the performance target for the full year of 2024 from 2.25 billion Swiss francs to 2.29 billion Swiss francs (about 18.264 billion yuan), and emphasizing that the Chinese market will increase the proportion of sales to 10% in the next three years.
In 2023, On will add a total of 15 new retail stores around the world, including 10 in China. In the fourth quarter of 2023, On opened one store each in Beijing, Chengdu and Guangzhou.
In the past year, On has added an average of one new store per month in China. This is more than ten times more than the opening of the store in the first five years of On's entry into China. Between 2018 and 2022, the brand only opened a total of 12 stores in China.
Founder Martin Hoffmann revealed at the first quarter 2024 conference that it plans to open more than 30 offline self-operated stores in the Chinese market by the end of 2024. In the first quarter of 2024, On also opened its first local store in Hong Kong, China.
3
Can high growth be sustained?
After going public in 2021, On continued to climb at a compound annual growth rate of 78%, and its revenue in 2023 surged by 46.6% to CHF 1.792 billion, approaching US$2 billion, making it the best-performing sports brand. In the first quarter of 2024, On's revenue surged a further 20.9% to CHF 508 million, breaking the 500 million mark for the first time and hitting a record high, with gross profit surging nearly 24% to CHF 303 million and gross margin approaching 60%.
With a gross profit margin of up to 60%, looking at the entire sports brand circle, it is estimated that no brand can reach such a level.
Some people believe that with the rapid growth in a short period of time, On is just an "Internet celebrity brand" so far. The rise of new brands sometimes hits some current consumer trends or consumer psychology. The century-old brand may lack explosiveness, and its R&D, design, and channel operation capabilities have experienced the test of cycles.
For consumers, traditional brands have lost their freshness, while On has brought a new and different atmosphere. However, such freshness cannot be a moat formed by the internal core advantages of its long-term sustainable development - perfect and strong retail channels, continuous product innovation, marketing ability to integrate various resources, etc.
In addition, in some developed regions, Elizabeth Cored believes that a person's "taste" has less to do with what paintings are hung on the wall or what cars are driven, and more to do with the cultural capital accumulated through knowledge, social networks and education. Cultural capital (as opposed to economic capital or money) is a collection of unique aesthetics, skills, and knowledge (often acquired through education and family history).
Social classes are not created through consumption, but through the acceptance of certain values and aesthetics, and the acquisition of the ability to interpret the symbolic meanings implicit in materialism. These values, aesthetics, and tastes form the "habits" of everyday life—the way we see the world and make normative judgments in our unique identity.
Elizabeth Corrid firmly believes that, especially in economically developed regions, in an era of increasingly conspicuous consumption, social status is often determined by what we can't see.
How long can the high-end of On's self-justification last? It remains to be further verified by the market.