Switzerland has a massive obsession with a running shoe. Walk through the clean streets of Zurich or ride a train to Geneva and you will spot them everywhere. They have distinct, hollow rubber loops on the sole. They look like little clouds. This brand is On.
For years, On Running stood as the ultimate symbol of modern Swiss corporate pride. It was sleek, innovative, and globally successful. Then a consumer magazine leaked the production costs. Now the entire country is questioning what it actually means to be a Swiss brand. Recently making news in related news: Why Kevin Warsh Will Keep Wall Street Guessing On Interest Rates.
The backlash started when K-Tipp, a fiercely independent Swiss consumer watchdog publication, obtained customs data. They looked at the manufacturing costs of various On shoe models imported from Vietnam. The numbers shocked the public.
Take the Cloudtilt model, a shoe co-designed with the luxury fashion house Loewe. K-Tipp revealed that On pays manufacturers in Vietnam roughly 20.80 Swiss francs, which is about 24 US dollars, for a pair. That exact shoe retails on Swiss shelves for 445 francs. Additional information on this are detailed by Bloomberg.
The standard Cloudflyer 4 costs about 24.50 francs to produce. It sells for 250 francs. This means the markup is over ten times the factory cost.
The Myth of the Swiss Premium
Swiss consumers are completely fine with paying high prices. They expect it. They live in one of the most expensive countries on earth. But that willingness to pay relies on an unwritten social contract. The high price tag is supposed to guarantee high wages, local craftsmanship, or unmatched technical quality.
When people realized they were paying a 1,000 percent markup for shoes made in the same Southeast Asian factories as cheaper brands, the illusion shattered. The scandal hit a nerve because it exposed a structural truth about modern consumer goods. You are not buying engineering. You are buying a marketing budget.
On fiercely defended its pricing structure. The company pointed out that the factory gate cost does not include international shipping, distribution, customs duties, retail staff wages, or the heavy investments needed for research and design. Retailers themselves take a massive cut, often around 50 percent of the final price.
That defense makes perfect sense to anyone who understand global retail logistics. It fell completely flat with the Swiss public. To many locals, the business model felt distinctly un-Swiss. It looked like aggressive Anglo-American financial capitalism hidden behind a clean alpine facade.
From Zurich Startup to Wall Street Darling
To understand why this hurt so much, you have to look at how On built its empire. The company started in 2010. Three friends, Olivier Bernhard, David Allemann, and Caspar Coppetti, wanted to create a better running experience. Bernhard was a former Ironman champion. He taped pieces of a garden hose to the bottom of his running shoes to create a cushioned landing and a firm liftoff.
That prototype became CloudTec. The tech actually worked. Runners loved the feeling.
The brand grew fast. It did not just appeal to elite athletes. It captured the wealthy suburban demographic. Tech workers, doctors, architects, and designers adopted On as their daily uniform. The shoes became the ultimate signifier of casual, high-income comfort.
Then came the ultimate endorsement. In 2019, Swiss tennis legend Roger Federer joined the company as an investor and active partner. Federer is not just an athlete in Switzerland. He is a national monument. He represents class, humility, precision, and sustained excellence. His involvement gave On an bulletproof stamp of authenticity.
When On went public on the New York Stock Exchange in 2021, its valuation soared past 10 billion dollars. The founders became incredibly wealthy. Federer looked like a financial genius. The country cheered.
The Problem With Outsourcing Authenticity
The Swiss have strict legal standards for labeling products as Swiss Made. For industrial goods, 60 percent of the manufacturing costs must happen within Switzerland. Watchmakers like Rolex and Patek Philippe guard this fiercely.
On avoids this legal trap by never actually printing Swiss Made on its products. Instead, the shoes bear the phrase Engineered in Switzerland. It is a clever legal distinction. The design, marketing, and corporate strategy happen in a beautiful, minimalist headquarters in Zurich. The actual physical labor happens in Vietnam.
This setup creates a strange paradox. The company uses Swiss imagery, Swiss flags, and Swiss landscapes in its global marketing. It sells the idea of clean alpine air and precise European engineering. Yet the physical product is completely decoupled from the Swiss economy.
When K-Tipp published its findings, it forced a national conversation about corporate ethics. If a brand extracts all its cultural value from Switzerland but does all its physical manufacturing in low-wage countries, is it really Swiss?
Critics argue that On is squeezing its suppliers while overcharging its domestic fanbase. The data showed that On pays its Vietnamese manufacturers less per shoe than some traditional German sportswear giants pay for theirs, despite On charging significantly higher retail prices.
The Realities of Premium DTC Brands
The fury over On highlights a massive misunderstanding of how direct-to-consumer and premium sportswear brands operate today. On is no longer just a running company. It is a high-margin premium lifestyle brand.
In this world, the physical product is often the cheapest part of the equation. The real costs live elsewhere.
- Global Marketing Campaigns: Securing athletes like Federer or Zendaya costs millions.
- Retail Real Estate: Opening flagship stores in London, New York, and Tokyo requires massive upfront capital.
- Wholesale Margins: Third-party retailers demand huge discounts to carry the product on their shelves.
If On cut its retail prices to match its production costs, the brand would lose its premium allure. High prices create exclusivity. People want the shoe partly because it costs 250 francs. It signals status.
This creates a delicate balancing act. When the curtain gets pulled back too far, consumers feel like suckers. Nobody wants to realize they paid hundreds of francs for twenty francs worth of material and labor, regardless of how comfortable the shoe feels.
How to Protect Your Brand From the Outsourcing Backlash
If you are running a premium brand or building a product company, the On controversy offers critical lessons. You cannot simply coast on a premium regional identity while maximizing margins in low-wage countries without facing scrutiny.
Be entirely transparent about where your products are made and why. Do not try to hide factory origins behind phrases like "engineered in" or "designed in" if you are not ready to defend the wage gaps and production conditions.
Invest heavily in visible local infrastructure. On is trying to do this now. They are building massive innovation labs in Zurich. They are experimenting with fully recyclable shoes made from bio-based materials through subscription models. They need to show that the high margins are funding true innovation, not just corporate wealth.
Pay attention to your margins relative to your suppliers. If your public data shows that your profits are skyrocketing while the factory workers creating your core product are earning baseline wages, investigative journalists will notice. The reputational damage will far outweigh the short-term profit bump.
Keep your core community happy. On grew because local Swiss runners recommended them to friends. By charging its home market some of the highest retail prices in the world, the company alienated its most valuable advocates. Treat your home market with respect, or they will turn on you first when things go wrong.
