On Running's Premium Pricing Strategy in a Discount-Driven Market

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The athletic footwear industry in 2025 is navigating a complex landscape of macroeconomic headwinds, shifting consumer preferences, and intensifying competition. While sector-wide trends reveal a tug-of-war between rising average selling prices and declining unit sales, one company-On Running-has emerged as a rare beacon of growth and margin resilience. By steadfastly adhering to a premium pricing strategy, eschewing discount-driven tactics, and leveraging innovation, On has not only outperformed expectations but also redefined what it means to compete in a market increasingly defined by markdowns and price sensitivity.

Industry Context: A Sector at a Crossroads

The athletic footwear industry in Q3 2025 exhibited mixed signals. U.S. dollar sales rose by 3 percent, driven by a 4 percent increase in average selling prices (ASPs), as data shows, consumers gravitated toward higher-priced brands and styles. However, unit sales declined by 1 percent, underscoring a shift in consumer behavior toward value-conscious purchasing. Sport lifestyle (athleisure) sneakers, particularly running-inspired designs, saw robust dollar sales growth of 5 percent, buoyed by the back-to-school season and the enduring popularity of cross-training footwear. Yet, this growth is tempered by challenges: rising tariffs, inflationary pressures, and the proliferation of AI-driven pricing tools aimed at optimizing markdowns.

On's Strategic Differentiation: Premium Pricing and Full-Price Discipline

On Running's Q3 2025 performance exemplifies the power of strategic brand differentiation. According to earnings reports, the company reported revenue of 794 million Swiss francs, surpassing the 763 million francs forecasted by analysts. Adjusted earnings per share hit 43 cents, well above the 25 cents expected. Central to this success is On's unwavering commitment to full-price sales. Unlike competitors such as Nike and Adidas, which have launched early Black Friday promotions according to industry reports, On chose to forgo discounts entirely, reinforcing its premium brand identity. This decision aligns with CEO Martin Hoffmann's emphasis on "the intersection of performance and design," a positioning that resonates with consumers willing to pay a premium for innovation.

To mitigate the impact of tariffs, On implemented preemptive price increases in the U.S. market, a move that contributed to margin expansion in Q3. This proactive approach contrasts sharply with the discount-driven strategies of rivals, which often erode profitability. By maintaining ASPs significantly higher than industry peers-On's average selling price of $180 outpaces Hoka's $160- the company has created a pricing buffer that insulates it from sector-wide markdown pressures.

Margin Expansion and Tariff Resilience

On's Q3 results highlight its exceptional margin resilience. Adjusted EBITDA margins reached 22.6 percent, while gross margins expanded to 65.7 percent-well above the industry average of 45-50 percent. This performance is underpinned by operational leverage and a focus on premium product innovation. For instance, the launch of the Cloudboom Strike, a technologically advanced running shoe, has driven demand and justified higher pricing.

In contrast, competitors like Nike and Deckers are grappling with the economic fallout of rising tariffs and shifting consumer behavior. Nike, for example, has adjusted its outlook amid soft demand, while Deckers faces similar challenges in maintaining profitability according to market analysis. On's ability to navigate these headwinds without compromising margins underscores its strategic agility.

Innovation and R&D: Fueling Long-Term Growth

On's commitment to innovation is another pillar of its success. The company invests 4-5 percent of its revenue in R&D, a figure that dwards Nike's 2-3 percent allocation. This investment has yielded products that blend cutting-edge technology with aesthetic appeal, such as the Cloudboom Strike, which has become a flagship offering. Additionally, strategic partnerships-such as Zendaya's endorsement-have amplified brand visibility and reinforced On's premium positioning according to industry reports.

Conclusion: A Model for Sustainable Growth

In a sector increasingly defined by discounting and margin compression, On Running's premium pricing strategy offers a compelling alternative. By prioritizing full-price sales, leveraging innovation, and proactively addressing tariff pressures, the company has not only outperformed competitors but also demonstrated the viability of a value-driven approach in a discount-driven market. As the global athletic footwear industry is projected to grow at a 5.0 percent CAGR through 2030, On's disciplined strategy positions it to capture a disproportionate share of this expansion. For investors, the message is clear: in an era of sector-wide headwinds, strategic differentiation and margin resilience are the keys to unlocking long-term value.