On, the performance sportswear company based in Switzerland, which is part-owned by tennis legend Roger Federer, is under the microscope for the wrong reasons.
Reports emanating from Switzerland suggest the company is charging its retail consumers sky-high prices for its running shoes, which is disproportionate to its production costs.
K-Tipp, a Swiss magazine dedicated to imparting information on consumer protection, published eyebrow-raising findings this past week after delving into a confidential customs report that analyzed 30 On products.
It was found that On's "Cloudway" sneakers retailed at a staggering 200 Swiss Francs, which is precisely $230. However, the company incurred just a fraction of the retail cost in production, quoted as 20.73 Francs, which is about $24.
Federer began endorsing the company back in 2019 following the end of his near three-decade association with American footwear giant Nike and even invested an undisclosed sum of money to become a shareholder.
And perhaps the most shocking revelation is that Federer's custom-made design called "The Roger Advantage" sells at 190 Francs ($219) but costs a meager 17.86 Francs ($21) to produce, which is almost ten times lower than the retail cost.
On had a turnover of 1.2 billion Swiss Francs in 2022, selling its most expensive shoe, the "Cloudtilt Loewe," at 445 Francs ($513), yet its production cost is 20.80 Francs ($24).
The same report notes that On's pricing model is not competitive relative to the likes of Adidas and Puma, who add less of a markup price to the factory cost. By contrast, On is geared towards higher profit margins by charging a premium for its sneakers.
Moreover, K-Tipp asserts that the quality of On shoes is not comparable to its prices. Sports doctors and orthopedists have shared concerning claims that the shoe is soft and easily breaks. Consumers have reported cases of tendonitis and frequent material wear.
So far, the company has refrained from revealing statistical data of their accounting records related to production and revenue. However, it rebuffed the report published by K-Tipp in the wake of public outrage in Switzerland.
"We do not disclose or comment on commercially sensitive or confidential information. However, we would like to point out that the figures published in the media last week contained inaccurate information."