So officially, welcome to the On Labs. Please welcome my bodyguard, so nothing can ever happen today, whatever I say. No, but welcome to the first Investor Day here at our home base, and it's very powerful to have actually all you people, you smart people, maybe super smart people. I talked to some of you. It's highly interesting to get all your insights. And it's also the very corner of the world where our dream originally started, here in Zurich, in the mountains with Caspar, David, and then few months, small years later, the two of you would join. And when Caspar and David and myself started this company, this journey, this unbelievable journey, more than a decade ago, we were driven by a shared vision, a strong shared vision we had, but also unwavering belief in the power of movement.
I think it's still the statement you all probably have heard, our mission: Ignite the human spirit through movement. And as an athlete, for me, it was always about performance and innovation, and as a person who loves and respects nature and outdoor, it's also about sustainability at the same time. And I think it's also gonna be increasingly important we care about this factor. Most of us in here have kids. I have three. We have also kids from left to right. Today, seeing our athletes win still gives me goosebumps, and they win, you know, frequently. A year ago, I could have said there was one win, but now there's wins, so I'm super proud. But it's also the daily work with our team, the energy, the level of innovation and the execution I see that gives me goosebumps.
We couldn't be more grateful, more happy, more thankful for the amazing work that this team is doing. This year also marks the 10th anniversary of us five as partners. As I said, Marc and Martin joined somewhat in summer, late summer, twenty-
Spring, only.
Spring. Oh, I see. Yeah, Spring 2013. And working together, and we since then, we work together as creators and business builders. I'm happy to say that our partnership has only grown stronger with the growth of On ever since, and we remain just as energized today as we were a decade ago. So as I said it earlier, there's no one, especially... Hey, I'm talking about me with the gray hair. He has no hair, but Caspar has a beautiful hair. No one us, of us is running off. We love it too much. So, today, our management team represents every region of the world in which we operate, and it's an honor to partner with a team of such great leaders as you are sitting here in the front row. He's already crying, Alex.
As you are as leaders, and we're excited for you to hear from many of them, not all of them, but most of you are being on stage and presenting. Of course, we are also grateful for the critical our investors and partners have played in On's journey until today, and you have seen the On business grow and transform over the past several years, and we want to keep you close to this journey. This was also a special day to invite you here to Zurich, to On, to give you a bit of a glimpse of the inside, who we really are, how different we are, and we want to take you on the next chapter of our growth. We will spend the majority of today sharing insight into our strategy for the next three years lying ahead.
Those aspirations are formed on a strong foundation, and they are driven by growth strategies we introduced at our IPO process. It's Marc and Martin that will start with an overview of our progress since taking us public in 2021, pretty much on the date, in September 2021, and the long-term vision we have set out for our business. Then, our team will walk through the strategic pillars that we set us up to achieve those goals. We'll wrap up with an overview of our financial ambitions to come, and of course, we'll save time for questions, if there are any. Hopefully, this time we have time for questions, not like at the founders talk, we had to wrap up quickly. Now, I think, of course, as with every...
You know, I think you have— Oh, is it already up there? No. The, the disclaimer, please. It's important, we're gonna reveal some information. You have seen stuff. Please follow this rule. Nobody can probably read, it's too small. Do you want to read it out quickly?
No, it's going to take too long.
So, yeah. With that, I think we'll return over—we'll turn it over to Marc and Martin for the show.
Thank you for the introduction.
Yeah, I think we are both much better in talking about goosebumps than about disclaimers. So I also, I also still remember a moment of having goosebumps, which was exactly on September fifteenth, 2021, when we came together as a team on Times Square, but basically all around the world. Remember, this was after a period of a lot of isolation, and during that period, we as a team had to come through so many challenges, and it was so good to see the team coming together physically and really enjoying this moment. But when we were sitting there on Times Square and taking in that energy, it was very clear, hey, we are no longer outsiders. People see the value that we create. They understand we are here for the long term. We have a winning team. We are not going away.
The billboards on Times Square said, "Dream On," and I think nothing else represents our mission as nicely as the slogan. So really, be forward-looking, don't be complacent. There was a lot of hard work going into the IPO, but it also gave us all the motivation that we needed on the days after. It was literally the morning, after maybe getting over some of the drinks, to go head down into building our bigger dream. We went through a similar period this summer with the whole team in building the dream that we are now presenting to you. I'm pretty sure that tomorrow morning, the team goes with the same aspiration into building the next chapter of On. It's really all about that team. It's the passion and the dedication that we are so grateful about.
We also want to express the gratitude to all you here in the room and on the screen for supporting us on that journey. Some of you have been with us since the very beginning. Some of you joined more recently. For us, it's super important today that you actually can finally feel and see the culture and what On is all about here in this building. So what did we do since the IPO? Well, basically, we laid the foundation for a much bigger company in the future. Sometimes if you look back, it feels like you're on top of the mountain, remembering the earliest days. But then you look ahead, and you see all the opportunities that we have, and it feels like, hey, we have just started.
And you know, the good thing is we are here in Switzerland, and we love to climb mountains. So since our IPO in 2021, we actually added CHF 1 billion in net sales. Our CAGR, 65% since then. We actually just had six consecutive record quarters in a row and always exceeding our expectations. And sometimes it's good to look back at the strategies that we set out at the time of the IPO, and I'm sure some of you on the sales side, you still have our deck from the analyst day, as a hard copy on your computer. And in there, we voiced our aspiration to reach CHF 1.76 billion net sales in 2024. So here we are, two years later, very confident to reach our guidance of CHF 1.76 billion this year. We just reiterated that.
That's a year ahead of our original plan. And so today, we want to give you more insights into the next dream. But before we go there, we do want to quickly look back on exactly the strategy that we laid out at the IPO and reflect on that.
I think we actually tried to do this intro without numbers-
That's right.
But you can't resist it, because On is so much more than numbers, right? Numbers is just a financial measurement of the amazing work that the team is doing. And for me, especially, it's been a huge, huge privilege to spend so much time with this amazing team that is sitting in the first row here. But with all the other people at On that are driving us forward, that are learning quickly, that are adapting to new environments, and that are really challenging us and everyone on a daily basis. So what that has led to, and what we always were, is an innovation company at heart. We're not just here to make shoes or apparel. We're pioneering technology and products the world hasn't really seen before. We're creating new sensations and removing barriers. This requires a different way of thinking and operating differently.
You could say we're running a marathon at the pace of a sprint. To push our innovation forward, we collaborate with the best athletes in the world. It's very, very important to us. We develop products together with them. They've become part of who we are, and I think we've become part of who they are. And that has really led to some amazing achievements since the listing back in 2021. So you spoke about the CHF 1 billion we added. I'm going to talk about the French Open victory we added, the Ironman World Championship title we added, and the Boston Marathon win we added. If Hellen, Gustav, and Iga, Ben are winning such amazing titles, that is really a testament to the team, the work the team is doing in here.
It's really nice to see how that comes to life and how our athletes are developing at the same pace as On is. So I would say they wouldn't be part of On if they didn't think we were pretty much dialed in on what we're doing. In 2021, when we IPO'd, we knew we had four key areas that were absolutely critical to durable growth. We had to get them right in order to continue our momentum and tackle challenges of scale and innovation. First was brand awareness. We wanted to grow our brand within the run community and beyond. Second was multi-channel growth. Our ambition was to expand our geographic footprint to reach more people through various channels. The third one was product portfolio. We set out to deepen our range of available products through innovation. Fourth was operational excellence.
We wanted to continue to set up a business the right way, so we could handle higher volumes while realizing opportunities for scale benefits. Ultimately, with the goal to be a more efficient company and a more profitable company in the future. Let's start with the first pillar, which was brand. A very important element in there is brand awareness. Recently, we rolled out a very consistent survey on how we can measure brand awareness globally, and this is also a key element that the team focuses on. What you see on the screen is basically the outcome of our latest brand survey. This shows the percentage of respondents within the countries that you see up here that are aware of the brand On. Now, there's a couple of takeaways from that slide, which we quickly want to share with you.
First, we're very much convinced that the work that we're doing is paying out. On is significantly increasing brand awareness in all markets within the local communities, but also on a larger scale. The second one is countries and cities where we're basically really focusing on, they're achieving over proportional growth. So the U.S. has lifted brand awareness very, very, very, and much, much, much stronger since the IPO than some other markets where we put less focus on. Cities like London have significantly outperformed the U.K. as a market because we focused on London. We opened our Regent Street retail store in London, and we saw a significant uplift in the wholesale channel as well as in the e-com channel. At the same time, the results also show us there's a lot of room to continue to grow.
So Switzerland still has 53% left to 100%, and all the other markets significantly lag behind Switzerland. So we feel there's ample room for growth to continue to scale On as a brand and lift its brand awareness. But it's not just about brand awareness. Most of you know that On is a running brand at heart. We started out as a running brand, and so how are we continuing to be credible within the run community? How do we continue to work with the run community? And we're also counting that. So we have a team, also with an external partner, that counts On's market share on the key running routes around the world. And what you're seeing up here is some examples. So in Miami, On has a 15% market share on the running routes.
In a place like New York, it's 7%. Again, I think two messages. Message number one is we're making progress. This was much, much lower at the IPO. Message number two, there's still a lot of room for growth, which is amazing. And then, you know, it's more than just running. So how are we resonating within our core communities that we're tackling beyond running? How are we building cultural relevance? How are we continuing to grow followership on social channels like Instagram and TikTok? Since the IPO, our Instagram, TikTok, and other social channel followers grew by 94%, and the way they're engaging with On is absolutely amazing, and the way they identify with On is, I think, a testament to the work that the team is doing.
So we're growing brand awareness, we're growing running, we're growing, growing with our core communities, which I think tells us that On the brand side, we're doing a pretty good work. So what about the second pillar, Martin?
Yeah. The second pillar was the power of our multi-channel strategy, and we have really seen that coming to life during all the challenging times. It proved to be very resilient, but even more important, it reached millions of new customers in a profitable way. What's super important to understand is that over the last two years, we have significantly extended our capabilities and our reach in all three channels. So from On retail to e-com to wholesale. We are super pleased that our D2C channel has been growing a little bit stronger than our wholesale channel, despite the fact that two years ago, basically, we were in the middle of the pandemic.
For us, it's really about the harmony of the channels, and so it's equally good for us to see that the growth is really driven by both channels at a similar pace. We're not only seeing our channels growing at a similar speed, we're also seeing our markets growing at a similar speed. So from the US to UK, China, Japan, and many other markets, we have seen 70%-100% growth in the last two years. Even markets where we started very early and have already reached a much higher brand awareness, like Germany, we were driving 30% growth. While we elevated our capabilities in the different channels, we have also extended our geographical reach. So we brought on 20 new markets since the IPO, making On more global than ever.
We took five key markets in-house that used to be distributor markets, are now direct markets, enabling us to drive much more sales and profitability from those markets. And what's super important to understand, our e-com channel is more powerful than ever, and Marc has mentioned the brand awareness that is increasing, which is reflected in a high growth of our visitors. Just at the beginning of this year, we launched our new website, which gives us totally new capabilities in showing our products, in actually individualizing the journey on the website. And then the fact, and this is very important, that our number of members has increased by 9x, is a super important base for what we want to do in the future, is really being much more specific and personalized in the journey going forward. What about the other channels?
Which leads us to retail. So, you know, shortly before the IPO, you could experience On at its full kind of depth and breadth, mainly on our e-com site. But at the time of the IPO, we actually had one store outside of China, that was in New York, and we had seven stores within China. By the end of this year, we expect to operate in more than 30 stores in total, 10 stores outside of China and 22 stores within China. Now, since the IPO and, you know, starting to operate kind of a retailer within On, also gave us the opportunity to learn. The first big learning we had is we can actually operate retail, and we can operate it profitably. On as a retail company works. Our retail stores work.
The second thing was, On retail is driving significant brand momentum. In almost all retail locations that we opened so far, new doors have driven a visible uplift in our e-com and wholesale sales. The third one, On is a very important retail channel to drive our future—On retail is a very important channel to drive our future apparel growth. We're clearly able to drive an elevated apparel share within On retail, in some stores exceeding 20%. In a store like Williamsburg, that we just opened in New York, the apparel share is at 16%. All of this gives us a lot of confidence that On retail will play a very, very important role, as part of our channels going forward. We feel very much that over the last two years, we've actually built the foundation for this.
Now, the last of the channels, but it doesn't mean that it is not kind of the least, it's actually a very, very, very important one, is wholesale. So wholesale plays a very, very important part of On, it's an integral role in reaching new consumers, and it's been very, very important to our growth since the IPO. We've expanded our wholesale presence with it, while maintaining very much a premium focus, working with some of the best and largest retailers in the world. Being premium also means being very, very selective with whom we work, and very prescriptive in how we roll out doors and how we bring our assortments and products into the different doors.
As a result, we have been able to reach a wider, more diverse range of run-runners and a younger audience than before, who are very much aligned with the design and function of our products. The exciting part here is that with many of these key accounts, we're still at the very beginning of our journey. We expect to unlock significant growth in the years to come, as we continue to fine-tune and expand our wholesale presence with our most important partners.
Then coming to our third pillar, which is really driving innovation and sustainability in our products. We pushed ourselves since the very beginning to create products in a way like no one else does. For us, performance and sustainability are cohesive design principles. There are no trade-offs. Since the IPO, we launched the Cloudneo, the first fully circular performance running shoe that is only available in our unique Cyclon subscription program. We launched the first shoe that is made out of captured carbon, and we have so many more things in the pipeline that are coming soon. At the same time, it was super important for us to broaden our product assortment and to make it much more performant.
We're super proud where we are today, that we have now seven7 franchises who each contribute more than 5% to our net sales, and we expect more to come. They spread from running, with 3 of them sitting in running, which is extremely important, to all day, to the gym, and then, of course, your favorite tennis sneaker. While we broadened the assortment, we also broadened our price ranges. We extended our price range to the upper-... while we maintained clearly a premium price positioning towards the bottom. Very important, because this is driving profitability, and it's also driving the fuel for future innovation.
Finally, I think we probably have to talk about the biggest challenge that we had over the last two years, mainly because an unbelievably challenging macro environment. I mean, since or since the IPO, as of part of the IPO, it was still COVID, and we went into huge shipping disruptions, and all the capacity came back then. You know, we had huge demand shifts that were way stronger than originally expected and so on. So it has been, I think, for all who've been part of this journey, very interesting two years in operations, and I just want to thank the operations team for the work that they've done since the IPO.
Because, you know, we again couldn't stand here all together if we weren't able to react to some of these challenges in such a, I think, a very effective and quick way. So what we focused on were mainly four different areas. One was happiness delivery, which is our word for customer service. Then technology infrastructure, automation, which goes into all the areas, but here we mainly talk about physical infrastructure, so logistics and sourcing. And all of these topics ultimately impact our bottom line, but more importantly, they have a big impact on the world. Innovating in our operations gives us an opportunity to lead in thought and action. It's very important and a big part of our ESG strategy. So let's start with happiness delivery.
On is a premium company, so we want to be able to deliver a premium service, and if you're growing at more than 60% every year as a premium company, it's very, very challenging to constantly deliver premium service. So the way we think about is, how can we control the key elements that go in there? So how you interact with our consumers, the experience you get, while at the same time automating what we can. So a lot of the interactions you would have with one of our customer service agents is actually not a customer service agent, but it's a machine speaking to you. And if you actually have human interaction, then we've outsourced a lot of that.
What we want to do and what we will continue to do, is make sure that the service level that you get and how you think about it and how we train, whether it's people or machines, that we do that in a very effective and, I think, consumer-oriented way. Then the second topic was technology. We're an innovation company at heart. We already said that. So we can't build the highest performing product without having a high-performing tech infrastructure. Since our IPO, we've implemented a new ERP. We have significantly invested in our digital product creation capabilities. We have upgraded our website, and we have integrated all our key partners into our own digital landscape, be it manufacturing partners or the most important retailers of this world.
So this really allows us to operate way more effectively, to see how much inventory our retailers are carrying, and to be much, much closer on supply and demand planning. The third lever is automation and supply chain. One part of it is freight, which is pretty much about gaining scale and making sure we get the best contracts on the key trade lanes. But the other part is our warehouses that we have across the globe. And what we've done since the IPO, we've invested in semi-automation and automation. So our LAX warehouse is semi-automated right now. It's way more productive than it was before. We're in the process of semi-automating our Luxembourg warehouse, and we will fully automate our Atlanta warehouse, which should go live by the end of 25 or 26.
So which we feel very much, this is a very, very good foundation for future growth. It caters to the profitability that we need, but it also helps us to deal with a constraint in resources that we will continue to see in the long term. We don't believe that we will have unlimited access to human capital to work in the warehouses, so we very much feel we need to get way more efficient, and this is, these investments are absolutely key for the long-term future of On. And then the last pillar is sourcing. So when we talk about our product, we also talk about our footprint, and we think about the customer we serve and how that customer is influenced by the products that we create.
We want to have a very strong sourcing network, and we want to have a sourcing network that is committed to the ESG capabilities that we do have as a brand. For example, we invest significantly, together with our partners, into solar panels, so our capacity on solar panels that we have on the factories will continue to evolve. It's very clear that as part of our science-based targets commitment that we have, that our factory network will be powered by renewable energy in the near future. We've continuously also been investing in getting additional capacity with the factories. We've been investing into having a more diversified sourcing footprint in many more countries, while at the same time upholding our ESG standards.
We're very happy with the partners that we have, and we will continue to work with them, but in many, many different countries and not just one. As we move forward on this path, Martin, we intend to carry on and optimize supply chain resilience, premium quality assurance, streamlined cost efficiency, while at the same time upholding our ESG values and our commitment to our targets.
Yeah, and adding all those successes in the strategic pillars together has led to very strong top and bottom-line growth. So if you look at the 12 months leading up to our Q2 results and compare this to two years ago, then our sales has grown with 65% CAGR. We added 200 basis points gross profit margin, 130 percentage points, adjusted EBITDA margin. But what's much more important is during that time, we built a foundation for a much bigger company in the future. And those times were tough. There were a lot of hard work in there, and I think what both of us helps, sometimes to go on a run. Because when you go on a run or you move, then all of a sudden you spark new ideas and the tension goes away.
This is the mission of On: igniting the human spirit through movement. Now, if we look ahead, that will stay, that will continue to be our number one guiding principle, both towards our fans and to our culture internally.
Presenting in front of you is almost like going on a run. I'm waiting for the tension to go away, but we're not just there yet.
No, not yet.
So a few more minutes to come with Martin and I. And what we invite you to do now is to visualize 2026 and beyond. Because that's what we did over the last couple of months, and we want to quickly take you on that journey together. So first of all, and one of the big kind of revelations we had throughout the process, and the vision that will guide us going forward, is that On aspires to be the most important premium global sportswear brand, rooted in innovation, design, and sustainability. This will guide us, this will guide our thinking going forward, and it will guide our actions.
On the next chapter of growth, we feel we have eight key pillars that are basically built around three key areas, and we want to quickly take you through some of these building blocks and talk through some of these areas that will shape our future. First one, elevate. We have areas where On is already present. We've already built the foundation in those, but we feel there's way more room to come. There's way more growth that we can have in those. Then we have areas that we can expand, where we've just started, but there's so much more that we can achieve there. We have new areas that we want to establish. Areas like training or areas also like apparel, which very much comes into life in training.
So we will continue to dominate in running, while our entrance in training will significantly increase our addressable market. Building On as a true sportswear brand with an increasing apparel share will be very, very important, and an important growth driver for years to come. The role of own retail as a business will be significantly elevated. Own retail will no longer be just a place for the best physical brand experience in key cities, but it will evolve into a very, very important channel for On overall. We will further elevate our capabilities across all distribution channels and use the combined power of all three channels to continue to reach our consumer and new consumers. We continue to expect strong growth across all regions.
Given our very low market share that we still have in some of the markets, with a very strong brand momentum, we significantly expect to accelerate China as a country. Creating products made for circularity but fully rooted in performance will continue our journey, our sustainability journey. Building a higher brand awareness, together with more focus on our existing customers, will allow us to drive significant growth from new and existing customers.
Yeah, and with this, On will continue to be a growth company as we innovate further. So as we wrap up, maybe please allow me a few more numbers. So first, our premium position, being the most premium brand, together with the expansion on individual sports from running to tennis to training, the expansion from footwear to apparel, has significantly increased our addressable market. At the same time, you have seen this many times in the past, that our products have the power to convert customers that maybe would not identify themselves as premium customers today into our products. So we are constantly tapping into that much bigger market of the general sportswear category. And this gives us a lot of confidence on our financial aspirations.
So based on the guidance for this year of CHF 1.76 billion, our aspiration is to double net sales in the next three years, so that by end of 2026, our aspiration is to reach at least CHF 3.55 billion in Swiss francs. And you know, for us, it was always very important to grow top line and profitability at the same time, and we will continue to do so. Our plan is actually to accelerate and to grow our adjusted EBITDA margin in the next three years faster than in the last two. And our aspiration for the end of 2026 is to be at 18%+ adjusted EBITDA. But everything that you have seen and what Marc quickly introduced, and you will see more about this, has the potential to be much bigger.
But we all want to start with those foundational targets. So how will we get there? We will spend the rest of the presentation with the team to take us through the different building blocks. But for us, it's all about the people and the culture. This will drive the success of that plan. And really, the culture at On is the horizontal thread across all the different building blocks that we have. And so with that, I would love to hand over to Bianca, who is our General Manager for Europe, Middle East, and Africa, and to Noa, our Chief People Officer. Both have been with us since more than six years. Super important on our growth journey so far, and I'm sure you can tell us more stories on what you experienced here. Please come on stage, and while you come, we play a little video.
All these years, we have stayed an innovation company at heart.
Innovation needs to happen everywhere at On. We always endorse new ideas. We try to challenge each other's thinking. We challenge the industry standard.
We wanted to get people moving because we know when we move, we tap into our human spirit, and when we do it together, we can accomplish anything. The way that we work is quite unique. It's less the winning that's motivating, and it's more how we do that. We're creating community, we're creating culture, creating impact with our sustainability efforts. They're all dreaming the same dream.
Is this working? Yes, it is. Thanks a lot, Marc and Martin. I'm really excited to be here to talk to all of you about the culture that makes On unique, and that I think you've also been experiencing the whole day, since you came in here this morning. My journey at On starts about six years ago in Shanghai, when we opened our very first tiny, tiny China office, and we're dreaming about the future of On in China and what it would look like with own retail stores, with a, with an e-com business and the whole multi-channel distribution. And over the last six years, transitioning from-
When they were starting.
Okay. Little movie intermezzo.
We love videos, so. Over the last six years, transitioning from my role leading APAC into the role I now have leading our EMEA markets, I've had the privilege to be in a lot of our hubs and offices and different markets that On has around the world, and building high-performing teams across all of those locations, building and continuing to develop the culture that we have at On. And so this is the reason that I'm at On, and also why I'm really excited to be here with Noa, our Chief People Officer. Noa, your story at On is somewhat similar and also connects very much to culture, so tell us a little bit about it.
Yeah. So thanks, Bianca. So I also joined On around six years ago, and when I joined On, we were around 100 people globally. Today, we're 2,000. And I remember coming to the office and feeling that something is different, talking to people, going on a run, and just feeling that this team is something different. And what I know, and probably you know as well, that when companies grow, culture changes. It shifts, it adapts, sometimes it, it's, it's just not the same anymore, right? And every time I had the opportunity to stand in front of the full organization, to travel to different offices, I told myself: It is just not going to be the same anymore. Now, it's not 100 people, it's 200 people, it's 500 people, it's 1,000 people. And I was wrong.
Every time I thought, "Hey, it's just not going to feel the same," it was still very much the culture that binds us together. And we hear that also from our top leaders. So as an example, last week, we were in the mountains with our 50 top leaders, and we talked a lot with the leaders about why they're here, what motivates them, and it was just so inspiring to hear from so many people there who recently just joined, that it just feels different. The culture is just something that is... That, that, it's hard to explain in words, but, but people feel it. And I spoke to some of you just before this presentation, and you also shared that it just feels different.
We hear it from our team, we hear it also from candidates, and we actually also hear it from some of the partners that we're working with, and they are interacting with our team on a daily basis. As I said, most importantly, we hear it from our own team. One of the biggest proof points for us that the culture actually works is our annual engagement survey, and we do that once a year, and we basically wanna know how the team feels. Here again, we always expect the results to change, right? We, if you think about it, doubled our team since the IPO. Some of you have met us in the IPO. We doubled our team since then.
So we feel things will change, but what is extremely encouraging to see in these results, and these are the five top scores of our recent engagement survey in 2023, is that the things that are so important for us in the culture are still very much the strongest in how people feel. So two questions here are about innovation. People still feel that they can innovate. People still feel they can challenge the status quo, and this is very important for us... people still feel a very strong sense of belonging as being one team. And I traveled to China recently. It was my first time in China, and, you know, China is very different to Europe, and I was exposed to so many new things: the new food, the new people. And then I entered the On office, and it feels the same.
I was like, "Am I in Switzerland?" Because people really feel that sense of belonging as being one team. People are very passionate about what they do, and also it's extremely encouraged to see that people feel On is in a position to succeed over the years to come.
So what is different and what is unique about On's culture? Our culture is best described by the five spirits that all go back to the human spirit, which is our mission. And, you know, when, when talking with Noa about, about what makes the culture special, we suddenly were saying: Hey, every brand has values. Every brand has a form of spirits. But what makes culture and those spirits unique at On is that everything we do, from how we design product, to how we design customer experiences in our stores, to how we do learning and development, everything starts with those spirits. They are the starting point of, of everything we do. And I just wanna give you a couple of examples on a few of the spirits, so you, so you see some of the, the stories, and you get behind the scenes.
I think, you know, walking in here this morning, you already, you felt that probably this is a slightly different company. You didn't get kind of a badge somewhere at a reception, and were, were guided to your meeting room. You saw that we have a bar and a barista. That basically is where people enter our home. That's where the conversations happen. They happen at the bar. They happen over lunch. They happen all around On Labs, and not just in Zurich, but across all of our, across all of our offices. And so the explorer spirit is the one spirit that goes back to, you know, all the way when we started, and it's really about this disruptive nature that makes On, On, right? So when we designed the very first On product, this was reimagining what a running shoe could look like.
We bring this way of thinking, this reimagining, really to everything that we do at On. On the team spirit, I think you feel a lot of that also hearing from different members of our team over the course of today. The way we think about the team spirit is really that On is not a family; On is a sports team. We support each other, and we care for each other, but we also challenge each other. We give each other a lot of candid feedback. So if I think about yesterday afternoon, for instance, we had a workshop with one of our most important strategic partners that came in. The moment they left, we kind of got together with the team, and we gave each other feedback on how that went.
This is not, you know, me giving the team feedback and saying: Hey, you know, we could have, like, guided them a bit more in this direction and done a bit more of that. But actually, they're challenging me and saying: "Hey, Bianca, you know, you need, you need to actually understand this about that account, and for the next time, let's do this a bit differently." This is something that I love about how we work together as a team. Lastly, the positive spirit, it's all about delivering the wow. I think it's important to understand that this is not just something that we do internally, but also with our partners, with athletes.
So when we have athletes, you know, you heard from Gustav earlier, coming to On Labs, then they're not just up on stage talking to the team, from a stage somewhere, but they're actually part of the work that we do, right? They're becoming part of the On team. And so when Roger was here a couple of weeks ago, he wasn't just talking with Oli on stage about their athlete trajectories and how they now feel, but he was in some of our meetings talking about forecast quantities for 2024. He brought a birthday cake to somebody on our operations team. Pretty sure that made her birthday, like, a multitude more exciting, but this is how we deliver the wow. Roger delivers the wow.
All of us, we, we live by this positive spirit, in everything we do. And being from Switzerland as a small home market, which is something that you've heard us say many times, we expanded outside of our home at a very early stage for the brand. And so today, as you know, we have a global footprint with hubs across all continents, from Portland to New York to São Paulo, to our three office hubs in Europe, with Zurich, Berlin and London, to our hubs in Vietnam, where our sourcing team is based, to Shanghai, Yokohama and Melbourne. And what has been important, and, as we've expanded outside of Switzerland early, is that we always brought what is truly distinct to On culture everywhere we went.
But as Noa has mentioned, in her experience in the Shanghai office, there's this thing that is truly On. At the same time, we've always been very local to the locations that we've expanded into, taking local culture, local nuance, language into account. And so maybe the workout or the morning run that you experienced this morning in Zurich felt a bit different than what that would have been like in our Shanghai or in our Yokohama office.
Sorry. So Bianca mentioned that we're a global team, and in that expansion, we are also very intentional about how we expand our team. And we know that for us to truly be an innovation company and to truly drive the best product, we need to invest a lot in these teams. And you see that we have more than 200 people that are working every day on product and innovation. You also see that this team has a lot of people sitting in the global marketing team, and this is this team has creatives, has, has marketeers, and it is actually the largest creative agency in Switzerland as part of our team. And we're also very, very intentional about how we build our teams for the future. So if we know that e-com is a huge driver for us and also retail over the next few years.
We will invest a lot in these teams, not only in the number of people that we hire, but also very much in the culture that we wanna bring. So as an example, if you think about retail, most of our team members in two or three years will be in the retail stores. They will not be in an office environment. So how do we bring that culture that is so important for us and that binds us together into a new environment like retail? So these are things that we're very focused on and also very, very intentional on how we do that. And we can really do that because of how strong we are from an employer branding perspective.
What you see here is that we've won a number of publications on how On being an innovative brand and being the best place to work for innovators. That allows us to tap into talent from different industries and to really bring the best talent here to Switzerland or to other locations. We've hired more than 500 people this year, and we receive just a bit less than 90,000 applications. That means that we're very selective on who we bring to the teams, and I spoke to one of you about our recruiting process earlier. Our recruiting process can be longer, right? Sometimes people ask us, "Oh, I'm meeting the CEO, or I'm meeting the GM.
This is something that is new to me." We do that because we believe that this is the only way we can build high-performing teams and also protect our culture. So this is something that we're also investing a lot in.
On the topic of high-performing teams, you know, you saw on the, on the spirits, the inclusive nature of On. This is something that is second nature to us, so diversity and inclusion is something that's really within our habits. We have a lot of nationalities at On. In Zurich alone, I think there are more than 80 nationalities here. So if you walk through the office, you hear a lot of, a lot of different languages, and we continue to invest in the diversity of our teams. So three pillars that are important to highlight here: We build more and more diversity. Also, as we serve more diverse communities around the world as consumers, we want to invest more in the diversity of our teams.
We've committed to 50% of all candidates that we bring into the hiring process this year being from underrepresented groups. That's true at an aggregate level, but also something that we apply on a team basis. For some teams, that might be BIPOC background, for some teams that might be gender, for some teams that might be the professional background and experience that people bring. At the same time, we've learned that as we make our teams more diverse, we need to make sure that our inclusive culture continues to develop and that we double down on that, on that inclusive nature that is truly On. If you look at our engagement survey, the team feels like they can be their authentic self at On.
But this is not something that we take for granted, and that as we bring more communities to On, we also need to continue to work on. Probably the most important thing on here is social impact. So how do we scale this inclusion that we live with our teams, to the communities that we operate in and, and that we're surrounded by? This is where we brought to life Right to Run. Right to Run is our social impact program. You know, if we think about how we came in this morning, and we all put on our running shoes and our gear, and we went out for a run, or we did yoga and meditation, this is something that we take for granted.
But actually, there are lots of people out there for whom this is not natural because based on disability, based on access, based on inclusion and where they live, actually, they don't have this freedom to move. And so Right to Run works to break down those barriers. We work with more than 20 partners around the world that, you know, do everything from organizing races, supporting those groups on safety, but also lobbying governments. And I just wanna give you two examples on here. So you have Zach Friedley here, who is an adaptive athlete, and he started Born to Adapt. It's a trail race that allows kids, youth, adults with a disability to actually run trails, to dream of one day going to UTMB and racing UTMB.
Just the vision, the excitement that puts in those kids' and people's eyes, I think to me, this is something that is truly inspiring, and that goes back really to the mission of On and of who we are. The other example is Free to Run. So there are a lot of conflict zones, like Afghanistan, like Iraq, where women and also other adults don't have access to movement and running. So Stephanie Case, she's a human rights lawyer, and she started Free to Run in Afghanistan in 2014. We've been working with them.
She's supporting women and girls to basically dream of, yeah, one day running a marathon, being able to run in a safe environment, and just watching what they've done and how we've been able to support with Free to Run on that mission is truly inspiring. I think that takes us back to where we started and the mission of On, the connection between movement and the human spirit, and that's a perfect lead over to the brand part of the presentation. I will now hand over to Alex, who's our brand mastermind and Chief Marketing Officer. As I do that, you'll see a trailer of arguably one of the most inspiring athlete stories. So here's Right to Race and Dominic Lobalu.
...When the war start, we lost everything. We lost a parent, so we start to escape. We met exactly three years ago, and I exactly remember the call: "There's a guy that wants to run." Took me like 100 meters. I said, "Wow, this guy has something special.
Oh, my word! He staggers towards the line. Out of nowhere, a superstar.
It's like in a film. Diamond League is like Champions League in soccer.
It's the fastest time in the world this year.
Hey, hey, hey, hey, hey, great, Dominic!
To get the Swiss citizenship is very difficult. There are many obstacles.
What do we have to do that he gets the chance to run? You cannot hide him.
A great story. So for any of you that wanna check that out, it's about a 30-minute documentary. Very, very much encourage you to go and watch that. Thanks, Bianca, for the intro. I need you to come to some meetings next week to give me that kind of setup for the meeting. So I'm here to talk to you about the brand. We've heard about the health of our growth, we've heard about the health of our team and our culture, and also, very important, is the health of our brand. You would imagine I'd have a strong interest in that, a vested interest. Equally, when I cast my mind back to probably the end of 2016, I was actually working for an agency. On was a client back then.
Slightly different budgets back then, but that's, that's a different story I can go into later. I spoke to David, one of the founders. He said to me, "Hey, you could come over and head up, the global marketing team in Zurich." I had to go and tell some friends and family, some colleagues, you know, some clients that I was gonna move to Switzerland to work for this brand called On. Which, you know, we were niche back then, let's just say. There were some skeptics in the room, probably a few more skeptics, you know, still in the room today. That's okay. We like to convince people here at On. But now, if I look, if I chart that trajectory from 2016 to where we are now, we're an even healthier brand than we were today.
And also gives me that, that, effort to go back to those people when they actually apply for jobs, when they come to On, and I can, sometimes push them back and say, "No," and remind them of their skepticism back in the day. So let's talk about something we hold very true to our hearts and to, our minds. The brand is something we have cultivated, throughout the years. It's something we've got a, a very strong, handle on. If I was to ask you to think about the very best brands on the planet, I'm sure many of you have a few that, that come to mind, probably some of the very similar ones. Maybe some of the competitors of On would, would come into the mind as well.
If you think about what those brands have done exceptionally well, they've managed to create amazing product. They've had scale. They all equally have an amazing impact. But it's this cultural relevancy that Marc mentioned earlier, that we feel is such an amazing opportunity for us to cultivate, for us to grow awareness, to grow out, and to find new fans. So what do we need to do? We need to do three fundamental shifts, and to do that, we need to supercharge our brand awareness and at the same time, increase the efficiency of our spend. So we see three major shifts on that journey. The first is about these new audiences. So via cultural impact, how are we gonna go out and find these new audiences? This is actually a playbook that we've already developed and deployed to date.
So picture on the right-hand side there, you can see Ben Shelton at our THNKS tennis event in Williamsburg, just this year, where we took him, Iga, brought the local community together. They had an amazing experience. For those of you that tuned into the U.S. Open, maybe you saw some of the moments of Ben. He popped up on a few people's feed. He had a very iconic put-the-phone-down moment, which managed to become a bit of a TikTok meme. And these are the moments which truly amplify the brand. So this is even more important, given the potential of how things are gonna change in the future.
So we see the impact that ChatGPT now brings into the media landscape, how the big search engines are going to adapt, how they function, how we spend our dollars as a marketing team. Rising media costs overall make the competition very fierce for us. So we have an option. We can either do what all the other brands do, we can toe the line and follow them, or we can do as we do in the lab, we innovate, and we do something different. So on to the second major shift. Authenticity. You hear this word a lot at On, and it's something, again, we hold very true to the brand.
And it's been so important for us throughout the years, going back to the very first specialty run dealers who are still big fans of the brand, a few more that we've managed to convert over the years. These dedicated runners that have been at the very core of the brand. Now we need to expand this out. So when we look at event formats like On Track Nights, again, on a picture on the right-hand side, this was an event format that we rolled out this year to 5 different cities, 5 key cities, where we bring the fury, the energy, the power of Run right to the consumers, so people can line up around the track and really feel the energy that, in the past, they only had when they were on the sidelines. So event formats like this become more of a copy-paste approach.
We don't have to reinvent the wheel every time. As we go to new cities, as we expand into different geographies, we can take these event formats out. At the same time, the key accounts, as mentioned earlier, will untapped new audiences, but through amplification with their marketing dollars combined with ours, making sure our, our brands align, and we tell the right stories, these are new amplifiers for the brand. And with an increased focus in these new communities, you've heard about them, training, tennis, wider into movement, lifestyle, this is gonna give us access to even more fans. So for marketers to talk about purchasing, how do we drive purchase at scale? This is all about creating this new playbook to increase efficiency. Third fundamental shift. So we believe that through conversion is how we're gonna drive efficiency.
So if we look at the appeal of some of the best-known faces, a Ben, an Iga, Hellen Obiri, and maybe some other people that we can add to the mix. Doesn't always have to be athletes. There's some very famous musicians, there's some very famous actors, actresses out there that we can tap into. So how do we take ourselves into a wider audience using those people and those places, those moments, to amplify our brand into those new geographies? D2C, as you see on the picture again, on the right-hand side, is a key opportunity for us. We know when we open a store, the uplift, the halo effect that happens to the overall effect of the brand. And these experiences with the communities, these are additional amplifiers. And how do we see that actually put into effect?
So back to the Ben, the famous Ben Shelton moment. We call it the Ben effect. He'd probably call it a trick shot. But we see that just through the moment of those two weeks at the U.S. Open , +1,000% tennis apparel searches on our .com, +100% On .com conversions. Just to frame that, that's within the in the specific area of the tennis vertical, which represents, if you think of the Roger franchise, around 5% of our business. So as we expand these verticals and expand this new reach into communities, we have an amazing opportunity. Almost 400% revenue increase just within those two weeks. So before I hand over to some very intelligent product team, who I know product is the key moment.
I heard earlier from the sessions that everyone was extremely excited. I wanted to give you a brief look of what's gonna come next year. We're extremely excited. It's an Olympic year. This is a big moment for a performance brand. We have an amazing stories to tell, new audiences to tap into, totally new innovations. If any of you did the tour and saw some of the orange glass, if you managed to peek a little bit behind there, you might have seen some of the new innovations, which are truly amazing. This will couple with athlete stories like you just heard from Dominic, and these full-bodied looks to cover a new range of sports. So before I hand over, a marketer likes to show movies, so one last movie before we go on to the next.
Running has become a big part of me caring for myself. Running, you really become one with the city. That's what keeps me coming back.
Play to break a sweat or for glory or just good times.
So thank you very much, Alex. I still remember when you packed your car and arrived here from London down in Zurich, so that has been amazing. You heard it from many people today, you know, On is an innovation company at heart, so let's talk about innovation and product. I'm very happy that we're working here on product innovation next horizons, and we do that in a body that we call the product board, that is led actually by the On founders. We work together with creative scientists, developers, athletes, and we spend a significant part of our year in the lab as founders as well. So of our lives, actually, and sometimes it happens that Roger sneaks in, and then we work together with Roger on exciting products.
If I look out here through the orange glass, you mentioned the inner lab. So I see around 200 people sitting here, and it's amazing how this innovation engine works. So, you know, Caspar and myself, who are working in that product engine together with Olivier, but I also wanted to introduce Michael Gerald, our Head of Product, who works together with the team, and then, of course, also Thilo, who's our Chief Design Officer. And actually, Thilo has been here at On from literally day one. So internally, he's often referred to as the secret fourth founder at On. And so, Thilo, please tell us at On, what's the disruptive force of design that builds On and probably consumer brands in general?
Thank you, David, and I happily do so. So design as a disruptive force and design, what does even design mean? This is a question to the audience and as well for the people on the screen. What is design for you? I think very often it gets referred to as looks, perhaps sometimes even decoration. But I have to say welcome to Switzerland and welcome to On's design team. I think design is not decoration, and the looks is just a part of the outcome of what is a very complex design process. So I'd rather think of design as a very powerful tool. I think that's the best definition, and then we think of what this tool can do. I think in the big picture, it can do two different things.
First of all, it enables you to build castles in the sky because it offers tools to, you know, fire up the fantasy. Then it lets you as well build the same castle on the ground because you need to make all those dreams reality then at some point.
More specifically, you know, what design can do is it can identify the essence of a product idea, or, for example, it can serve as a catalyst when an idea comes up. It can be both a mirror, but it can be as well a projector of ideas. It can inspire better processes. Yes, design can save money, or it can drive sustainability. And with all these keywords, you can tell that for me personally and for the On design team, it's as far away as from decorating things as you could imagine. So to be able to run, I think, a design team successfully in this complex age and time, you cannot have a design team that is monocultural. You need from design researchers, to 2D designers, to 3D designers, to 3D specialists that look into AI, to people who only do colors.
You need to have designers that are straightforward, that really manage to, you know, land a thing, but then you need as well sketchers and stylists and creative dreamers, and this diversity is absolutely needed to make one whole product range. And what's very important as well, we do have a lot of people with a footwear, accessories, apparel background, but we very consciously as well make sure that there are enough people in the team who have other backgrounds, because not knowing about footwear or apparel can sometimes be as well an advantage. So the design team consists now of all these leaders, and they make something which is holding up as well high the flag of Swiss design.
I happen to be one of the very few Swiss, actually, in the design team, and the reason why I believe it makes sense to continue actually a great tradition is that Swiss design has been known for being quite rational, boiling down things to the very essence, and to be quite minimal, yet playful in a functional sense. And this always has been the case, whether it's been with product design, typography, architecture, and it happens very consciously, and we take this very seriously at On to continue this, tradition and as well to keep it up in the future, and as well to be here for the design place, Switzerland, working internationally, but out of Switzerland. That's a really big ask to ourselves. This goes with an anecdote.
So visual technology or visualized technology, that's a promise that we have at On when we create products. And similarly to Alex, I remember this moment where somebody who I knew a little bit called me and invited me to a footwear design competition, and I thought a little bit, "Yeah, footwear, why not? I love shoes, and I love sports," and I was into designing outdoor and sports stuff already back then. And I had to switch my brains on a little bit and ask myself, "Good, that's a new technology, and what do I want to offer?" And I think the logic behind visualizing technologies is pretty simple. By visualizing the function of a product, you make a promise, A, that's the rational side. But I think a task of design is to make people curious as well about something.
If people get curious, they want to try it, and we knew back then that if people try it, there is this conversion moment that makes a product very interesting, and in a commercial sense, then at some times, they would probably as well buy it. So this visual tech, this Viztech , as we call it, it's still here. It happens on all the products that we make, and from a part of a design idea, I think it really became a signature design trademark and as well, a mindset in how we work. With this goes what I call the product integrity. That's a bit the very simplified North Star of what we do in the design team. Functionality and performance is always at the base of what we do. Now, the Swiss thing is that the word functionality, it begins with fun.
So it's not, you know, like a boring part that we have to get over with, but the functionality and the performance, of course, is a lot of research and is very broad of what we look into before we check the materials, which is the sustainability layer. We find it's an absolute responsibility of the design team to drive that factor, and only functionality, materials, everything has been checked. There is the part of styling, which I think is the last, you know, 20%-30% of the work happening in a design team, giving all the results that we've been finding throughout the research and conception phase, then a product face. From this triangle, you can imagine there are three steady pipelines that inspire us when it comes to the aesthetics of things.
Those three pipelines, they are the aesthetics of sustainability, the aesthetics of innovation, and the aesthetics of performance. This is all pretty rational because we can go after a new set of materials. We look into how we can dye or not dye products, how we make processes more environmentally friendly, and then how does this reflect in the looks? The aesthetics of performance, this comes through the relentless collaboration with our athletes, where we ask them not only what they have in mind, but of course, we ask them as well to validate the products. This happens subjectively with the athletes, but then we counter-check as well with our sports science team if scientifically our products really work. So this means a whole product language or a whole product family can be born from a process which is very tech-led and which is very scientifically led....
So here we have these two. And last but not least, we have the innovation part, where it's the same game, where, for example, with the Cloudsurfer, the beginning was a computer model in which we tried to calculate the ride that we want to give our footwear. So this was the clear goal from the beginning because we wanted to define whether we can steer this ride, depending on weight, depending on tempo, depending on distance. And actually, all this research led to a shape that ended up in a whole product range that we now call one of our staples and as well want to grow. There is one more pillar or overarching layer, which we call Sui Generis, which for us means from scratch.
Because behind all the rationales that we, that we see in the three other pillars, there is as well one which is really hard to rationalize, which is probably a bit like the magic design layer, for many people, that tries to regroup all of this and to create silhouettes that just have not been around. So with the silhouettes, I mean shapes of footwear, shapes of apparel that are entirely new to the market. And the reason why I believe this is so important is that technology gets protected to patents, which is a process, and then you have like a somewhat technocratic results, which gives you legal protection, but eventually, people will try to copy you.
What happens if you can establish a design that nobody has ever done before in the market by claiming the design space and by just being out there with it over time, this is then very hard to take away again. Quickly to illustrate, thanks a lot, we brought these three shoes, which look very, very different. I take this one as an example. This is the Cloudnova, which dates back a few years now. When we first developed and drew this, we really were not sure if this shoe has a niche in the market. We didn't know really how to call it. It was a running sneaker, but for what audience? Like, let's be honest, it was a bit unsafe, and now over time it grew into a really nice staple of ours.
The great thing is, it's definitely a silhouette that wasn't there, on which we build now a franchise, and I feel this is one—like, typically one of those which will be forever ours. So besides all these, you know, rational pipelines that we have through athletes and functionality, this culture of trying to create designs out of nothing, so to say, is a super important validating pillar that cross-pollinates with the others, and which hopefully leads to what you experience today a bit as a overall and general design language of On. So to conclude, besides the daily, which honestly never feels like a daily, it feels daily new. That's the, that's the only part. We're looking into the future with the design team. As you can imagine, right now, AI, a big topic.
How does that support and extend the abilities of our design team? A great journey that we're on. Very important, I would like to recap again quickly now. So yes, we believe that design is a very powerful and disruptive force. We do believe as well that it's no coincidence that some companies that have been very successful in the last few decades use design as a pillar. We will continue to make technology visible, and we will be at the forefront about everything which is aesthetics of sustainability, but as well with innovation and performance.
Thank you very much, Thilo, for sharing some of the secrets of design at On. So running is at our very core, and On has been born from running, and I think it's probably not just us, right? So ask yourself, when did I first start to run? And if you think about that, you're probably thinking, "Oh, must be somewhere two years old." Probably even started to run before you actually started to walk, because it was a little bit easier. And so I feel it-- it's what makes running so versatile and so universal. It really is a foundational sport. So as we grow up, we demand a lot more, as we do, from not just running, but from running gear as well. Performance, lightness, flexibility, comfort, right? Moisture control, protection against the elements.
This is what continues to make running so versatile. A few months back, we actually decided to have an Apple Computers to Apple moment, and we dropped the running from our URL and made our URL much more versatile as well. It's on.com. Now, it's on.com, and our ambition extends far beyond running. On's running core allows us to organically grow to adjacent verticals, from the running route to the outdoors, to the trail, and On is born in the Swiss Alps after all. But then also to training. We see a lot of athletes, sports omnivores that take their running gear from the street to the gym and to their training routines.
Tennis and court, so stop and go, stop and go, something that's actually inherently also in CloudTec, that is a lot about cushioned landings, but then explosive takeoffs again, and ultimately to all day, because sport. The sport silhouette today is the new uniform. So we approach these verticals as a premium brand, and, you heard Martin saying it, we see the addressable market for these verticals north of CHF 70 billion. So that means that we're just scratching the surface, and I would love to ask Caspar and Gerald to take us on a journey how we're building these sports verticals. Caspar?
Thank you, David. It feels like yesterday that we started this brand with a view of putting the fun into the run and keeping you away from injuries. Today, On is in the major markets, in the main markets. We're in the top three as a running brand. We are by far the one with the biggest momentum, as measured by revenue growth. And as it was mentioned before, we go out on the running rounds and we're counting, and our clear mission is to be the number one on runners' bodies. And today I feel more than ever, we have a shot at reaching that. Let me walk you through the strategies that we're deploying to actually get to that goal. I'm not saying we're gonna reach it within the three years, but we're not gonna stop until we're there.
So our teams have a very powerful metaphor when it comes to how we talk about strategy, about how we're gonna win in running, and it's basically built on the image of the cloud, and clouds can produce both lightning and rain. And lightning stands for the brand energy that comes out of winning races, the inspiration it gives both to consumers and our own organization. And rain stands for, well, make it rain. We also like that here at On. So starting with lightning, there's been a lot of talk about that. I'm not gonna go through all the details, but you see three very gifted athletes here. You've seen Hellen Obiri take out the Boston Marathon in probably the strongest women's field in a long time. We've seen Gustav Iden literally shredding the run record in Kona by three minutes.
Very recently, two weeks ago in Eugene, Yared Nuguse ran the fourth fastest mile ever, breaking the North American, the US record, and coming within 0.8 of a second to the world record on the mile. That's been standing for 25 years, and let's just say the late 1990s weren't necessarily the fairest time in sports. So now, with these new technologies, people are actually going a lot faster. And so there's this arms race going on within the top running brands of who makes the fastest shoes, and we have put together a team, the Lightning Group here, of over 20 engineers, sports scientists, material scientists, and we have leapfrogged our peers to be in the front pack of that race.
Now, without revealing too much, I can only say as much in 2024, in August next year, our athletes will toe the line in yet again, two groundbreaking new speed-enhancing technologies that we're not gonna reveal today, for obvious reasons. Now, let's turn our attention to how we're gonna make it rain with consumers. Now, as you're following this space very closely, over the last 18 months, we have significantly and successfully reshaped On's product portfolio to reach even more consumers with even more relevant styles. These products that we've launched in that timeframe of only 18 months, include the Cloudrunner, the Cloudmonster, and the Cloudsurfer, which are roughly half of On's sales today. Cloudsurfer, of course, being the first one to feature CloudTec Phase.
Now, building on these successes, we will now start to consolidate our technologies, all our products in running, into very clear product franchise brands, with a view of getting brand name recognition for these brands and enabling our fans to self-select the right products for them. We're gonna make it a lot easier for consumers to find the right product. And they can say, "Well, I'm a Cloudsurfer-- I'm in the Cloudsurfer. I'm gonna get Cloudsurfer Little, Cloudsurfer Big, Cloudsurfer Max." You know, to make it very simple. Additionally, we're asking ourselves: We have all these athletes winning races, going a lot faster. That's great for them. What about me? How can we bring these performance-enhancing technologies to the everyday runner? How can we upgrade your running experience, not for a sub-2 marathon, but for a sub-5 marathon? How can we create the e-bike of running shoes?
So more and more, we're gonna—you're gonna see these technologies come into these product brand franchises that we're creating in running, and you can upgrade for $40, $50 bucks more into one of these super shoes. We call them the super shoes for mere humans, and the first product to drop will be the Cloudmonster Hyper as of February next year. Overall, these initiatives will also help us to further increase our average price points. That's a very clear goal. Martin mentioned it. On's price will only go up, and will—it will allow us to become more profitable, and it will further fuel the aspirational quality of being the most premium sports brand out there. To wrap the running section off, you know, we love product. Just a couple highlights. You've seen this morning some of the innovations on the apparel front.
For example, the Ultra Jacket. There's already a new version of that coming. It's getting even lighter. If we continue at that rate, it will go into zero to negative weight. Let's see how we get there. We have Cyclon now coming to apparel. We have CleanCloud, so captured carbon, coming to apparel as well. And then, on November 2nd, the next product based on CloudTec Phase, the Cloud Eclipse, so a max cushioning product from On, will hit the shelves. Very good pre-orders on that. And CleanCloud, the captured carbon EVA, will roll out to millions of pairs actually, starting in 2025 already. So about two or three years ahead of our initial timeline for that. So that was running. You can feel the focus on running.
We're not just gonna double down on running, we're gonna triple down on running, and we will work towards that goal of ours to be the number one on runners' bodies. Now, a new baby, training. We're very, very excited. Today marks the official start for the training category, performance training. Now, you may have seen on your recent visit to a studio or gym near your house, that there's already quite a few members there wearing On products. This has happened completely organically. But now we want to start to design to these communities with intent. Starting now in 2024, we will double down on training and build products for and market to these communities, whether it's for high-intensity workouts, it's treadmill work, it could be lifting weights or lower intensity workouts like yoga or Pilates.
In training, On will lead with apparel, and that's very, very important. For every footwear piece sold in training, there is about 10 apparel pieces and, and so some of you may have seen some of the pieces this morning. We will focus on the most premium materials, as well as the Swiss engineered details and clever features that already set us apart. We will cater to new aspirational consumers and adding to the growing Oniverse of communities that we serve. As always, On's pieces are versatile and transition seamlessly from studio to street, so expect to see them, encounter them outside the gym as well. We've of course also built purposely made footwear for training. The first one will actually launch very soon in spring. This is the Cloudpulse.
It's designed for explosive workouts with intervals of cardio, such as running, perfect for your favorite high-intensity interval training class or boot camp. We already have very strong interest in the training category from some of our strongest wholesale partners, such as DSG in the US or the premium Intersport stores here in Europe. With this, I will hand over to Gerald, our Chief Product Officer, to talk to us about tennis.
Thank you. Thank you very much, Caspar. And I mean, everyone talked about their amazing entrances into this company. I actually joined in, in 2019. I spent 10 years in big tech, and I got a little bit unlucky because the day I started, actually, that guy started. So here comes a guy, 20 major wins, comes in, into the office, day one, sits at the table and is like, "Yeah, what about this? What about that?" Like, he knows stuff. He knows how to do product. He's been there, and he wants to take us on a journey to bring court lifestyle to the next level.
I'm there, I'm like: "Yeah, doesn't sound familiar at all, but let's go." I think if you heard about the explorer spirit, if you heard about the eight building blocks, the strategic building blocks that Martin mentioned, tennis is very much at the core of that. Together with Roger, we sat down, and we actually haven't stopped since then. Every couple of weeks, he comes in, and these guys walk around with him very casually. There's still a lot of people, selfie here, selfie there, and it works really well. Roger's just, not just great at that, but he really has helped us to build a very exciting range of products. Starting with the Roger Pro, that you've seen him playing on his very last few matches. No comebacks, right? No.
All the way down to the lifestyle silhouettes or what Thilo here brought to the table, we're now building an extremely compelling range of court products for all different usages. Roger now comes with a team. You heard about the Ben effect, so I'm not gonna speak about that again. But then there's also Iga, and Iga's been here as well, and Iga knows tennis. Very different style. These young players, they go completely different on the court, so we had to rethink and restart from scratch. But we have a great team of designers, developers, engineers. We redid a completely new tennis shoe. Now on Iga's feet, probably on your feet, if you like to play tennis or padel or any of that, pretty soon in 2024. And then there's that look... Pink, Iga? No, should be Ben, right?
So we really mixed it up when it came to the U.S. Open. We're super excited about that team being here with us in the product team. Every other week, yes, they have a lot of opinion, but it helps us a lot to really bring that next level gear out for everyone who's extremely excited about being on the court. But on the court is just part of the game. We're also very much looking at how these athletes help us approve technology to bring it off court. So I saw throughout the day a couple of people wearing these court lifestyle silhouettes, all called the Roger. You wear them, they have CloudTec, they're super light, they're non-leather, AKA vegan, and they really bring that next level of comfort to your court lifestyle all-day wear.
Together with the team, we really wanna double down on that, and then, as you probably have seen with some other brands, it's also all about bringing that lifestyle over to your head to toe. I'm wearing it in black, but it's also available in white. So it will be really all about how we bring that tennis excitement from Roger to Iga and Ben over to the broad range of consumers, who now look to us not just for running, but also for tennis. And then we've had some things going on as well with some partners. So, we've worked with Kith in New York in the past. We're gonna work with a partner called Beams in Japan, with our friend Woody White over in L.A., who runs Oyster Tennis Club, also giving access to courts for underprivileged communities.
We really look at how we can build that community on and off the court for our brand, and how they will then help us really to embrace a great tech that starts here all across the world, which I think we already did at the U.S. Open. Alex, it's your video, but I'm gonna show it. Is that okay? Okay. Yeah. So if by any chance you're in New York around August next year, hit us up. We might find a little spot for you on the court to go playing with these guys. And then we wanna round up the five verticals with what we call Performance All Day. It's our vertical where we play, but we keep the performance in there. So why do we call it Performance All Day? It is our approach to translate great performance product into all-day comfort.
We have a dedicated team of engineers who very much focus on that. So when you think Cloudsurfer, think what can come next if you translate that for an everyday use, for a consumer that might be a little bit slower than just running and still maintaining that next level of comfort. One example is also the Cloudnova that Thilo, for example, showed. When we originally started the Nova, we sent it to our testing team on that—until then, only tested running shoes. They were like: "Isn't that a lifestyle product?" We're like: "No, no, just test it." And they came back, and they were like, "Hey, you can actually run in that shoe. Maybe not the marathon, but at least a 5K." So I think that's the approach that we really wanna take also when it comes to Performance All Day. These products, they have to work.
Maybe for Caspar, not exactly good enough for a long run, but at least for me, it still works. So always rooted in performance is our promise. We never compromise on performance. No matter if it's our Cloud waterproof shoes that you're gonna wear on a rainy day in New York, our new Challenger jacket that just launched, extremely breathable. Noa is sporting the vest version of that, and it's super lightweight. Or my personal favorite, the On cap, everything's rooted in performance. And then there is Run Culture. So Run Culture is something that we very much care about in this company. It is something that all of us are extremely, extremely keen about, and when you go out for a run, it's just better if you do it as a team.
So like this morning, when you broke a sweat together and you came back, it's that different kind of feeling. We share the same passion for stylish gear, a good look, but it's also really about how it performs and how running can become a team sport. If you go out with a crew, it's very addictive. That Run Culture thing has somehow also translated to something called fashion that you probably heard before, and that intersection of performance and design for us really has become relevant as we've been designing product together with a fashion brand that is called Loewe. So on October 12, we're actually gonna launch our first Cloudtilt silhouette, which is an adoption of what you see on the Cloudsurfer, together with them.
And then this is really how we tweak comfort, design, and everything into fashion relevance.... And as we look towards the future, Jonathan Anderson and team at Loewe, Thilo and team at On, I think there's some exciting products ahead. David, over to you.
Yes. Thanks a lot, Gerald. So we feel it, and the product pipeline for On is incredibly strong. I can tell you, sometimes we're getting a little bit itchy because we're working on these products that are still way out, and we're itchy to reveal them. But it's an incredible lineup. We're building winning products in the performance core, so very much from running, but then also from trail and then from pro tennis. At the same time, we extend the performance core, as you have heard, to an authentic, active lifestyle. Running as the most universal, versatile sport extends into training, of course, and then trail running and hiking extends into an outdoor lifestyle. When you travel, when you want to be protected from the elements, very versatile as well. Tennis extends into a court lifestyle.
Of course, tennis over a hundred years has been influencing fashion lifestyle as well, so it just naturally extends over. A blend of these lifestyle silhouettes is the new uniform of an active lifestyle in Performance All Day . So you might ask, does On already resonate with the community in these lifestyle corners? We can tell you absolutely, because over the last years, On has built blockbuster shoe franchises in lifestyle. So these are independent silhouettes from performance footwear, and they are each hitting beyond 1 million pairs. So take, for example, the Cloud X in training, in training lifestyle; the Cloud and the Cloudnova in Performance All Day ; the Roger in court lifestyle. We're very much looking forward then also to the launch of the Cloudtilt that we have shown, which will also drop in Performance All Day .
Then also the Cloudhorizon, who brings CloudTec Phase, our new technology platform, to the outdoors and also crosses over to the outdoor lifestyle. So at the same time, as On continues to pivot from a footwear to a sportswear brand, it's exciting to see how we are creating full looks and bring the On brand to the full body. So you see how we transition seamlessly from the street, then also to the gym, and how we're also have collaboration partners like, for example, Loewe, who build on our very premium apparel collection and integrate some of the premium pieces of On even into their collection. So we continue to work on our performance promise, feel nothing, to feel everything.
Beyond looks, apparel will deliver on our performance core. Our vision is to be the most premium global sportswear brand, and this all means that we are working towards our vision. With that, we are giving you a bit of space to breathe, to stretch, and to hydrate, and we do a break of a few minutes, actually 25 minutes to be precise, right? Before we come back to then talk with the markets, how we scale these sports in the markets. Thank you very much.
... Hello? Test, test. Hello! I know the break is super fun, but this is more fun. Welcome. Cool. How's the presentation going for everyone so far? Interesting? Yeah. Okay, good. Good. Well, now it gets really fun because you have all the women on stage that actually make all this happen, and bring it to market. Also take all the creative innovations, and brand stories, and impact initiatives that you just saw in the first part of this presentation. The three of us are gonna walk you through how we actually meet consumers, where we meet consumers, and how we expect this to evolve. So I'll do a quick introduction. My name is Britt Olsen. I am the GM for Americas and our head of Global Commercial Strategy. I have been at On for almost nine years now.
I was the third person in our Portland office, so have been incredibly grateful to see the growth and scale of the business. I also have David to thank. I think you should be head of recruiting now, maybe, after bringing so many of us to the organization and stalking us for months on LinkedIn. But it was a great choice to join in the end. Cool. I'm gonna hand it over to Rebecca and Amanda, and let you two introduce yourselves before we move into our channel mix.
Awesome. This working? Perfect. Hi, everyone. I'm Rebecca Cai. I'm the General Manager of Asia Pacific. I've been with On since 2020, first starting in our Zurich office, and then early last year, got the opportunity and call to move over to Shanghai, where I'm now based, and very excited to be talking a little bit more about our market approach, and then specifically diving into China, which I know has been an interesting topic of conversation for a lot of us so far.
Hi, everyone. My name's Amanda. So I've been with On. Or I lead the digital team within On, and I've been here a bit over six years. So when I joined, we were a whopping 8 people on the e-commerce team, selling a few pairs of shoes on a really old, rickety website. And so today it's just really exciting and humbling to be able to just take a moment and share just how far we've come and give just a little bit of a glimpse into what we're dreaming up next. So really looking forward.
You might have noticed we're the three Americans on the management team, but I think I'm the only one that still lives there. So, and I'm not used to having so many of you in Zurich with me, so thank you for, for traveling all the way here. Cool. We're gonna dive into channels. So I think what's something really important for everybody here to know is that since the very earliest days in the beginning, we really always built a mindset internally where channels should be complementary and not competition, and this is very much how we've set up our team, and this is how we lead our team to rally around that vision. So we know we have a lot more power in building the brand and closing this awareness gap when all three can play together.
But we also respect that each of them have something very uniquely different to bring to On and our consumers. So you'll hear a lot from Amanda today around e-com, but this is where we can really bring the most expressive and digitally scalable version of ourselves to the world. In this environment, we actually often choose brand as a lever over conversion lever, just to make our relationship feel a bit more sticky and less transactional, and this keeps our customers coming back for more. Amanda will talk about that later. In retail... Everyone's excited about retail, right?
Okay, I hope so, 'cause you need to remember retail and On. This is a place where we really have the opportunity to build our most intimate touch point, so we can be super human. We can convey our design DNA, our innovation DNA. We want On customers to feel when they come into our stores, hopefully the same way that we've made all of you feel today. So you might have known something about On before, you probably interacted with us somewhere, but today you leave with a feeling and a connection to who we are and what we're trying to build. And last but not least, wholesale remains a super important channel for On.
So not only is it a place where we can validate and authenticate new product, it's also a place with some of the most important and biggest partners in the world, where we can scale and amplify what we're trying to achieve. I'm also the clicker. Okay, great. So, hey, a founder favorite story, you, you may have heard it if you've been in the Oniverse for a little while, is that the realization that if you start a brand in Switzerland, you actually have to leave pretty quickly, if you want to have scale and impact. So we have had a bit of the forced luxury of being a global brand for over a decade, which I think has given us a really big competitive advantage.
Today, On is fortunate enough to operate in 60 countries with over 9,800 partners and distributors over the world.
... Great. So we have this diverse portfolio of channels. We have different markets. You talked, Gerald talked to you a lot about verticals. Within each of our five verticals, we've identified twelve communities that we consider to be communities and personas and fans that On has a close or deep connection with, or we want to have a close and deep connection with. And what that means is that within these channels, we know that we need to tier product, and we need to segment product so that regardless or depending on the channel that you go into, you're having a very different personalized experience based on what you want from On. Now, the fun part is making sure that this segmentation strategy and tiering of product, head to toe, plays across all three channels. Good.
Outside of channels, we also wanna talk to you a little bit about how our markets play across the world and where they're at in their growth phases. You have the mic.
Perfect. So we have a very diverse portfolio of markets, from entry stage to established stage to even more mature markets. And, you know, someone who's now lived in the U.S., China, and Switzerland, I've had the opportunity to kind of live in each of those different buckets, and that's really apparent when you talk to consumers. So when I moved over to Switzerland, everyone I told that I worked at On knew who I-- knew what company I was talking about. In China, I do a lot of introduction: "Hey, this is a running Swiss brand that sells global sportswear product." I point at the shoe. I do a lot of introduction, and that really shows the momentum of the brand that we have and the opportunity that we have in some of these earlier markets.
So like I said, in markets like Japan, in markets like China, in markets like Latin America, we are really just getting started. And here, we can not only see a large addressable market size, but we also see the strong growth of consumers in those markets getting more and more excited about sports. We feel this is a huge opportunity for us as a brand to invite new fans into our product and into our customer experience. Looking at a market like Europe, where we have a more established business in Central Europe, you can also see that there are a lot of majority of markets like France, Italy, Spain, where our market share is around the 5% mark.
We're super excited about the momentum of these markets as well, and how we're tapping into a diverse community of, of individuals, as well as the young community that we're already reaching in those markets. As Martin mentioned earlier today, we've also introduced training, or a lot of you mentioned training, as a new category, which further increases our total addressable market as a brand. As we grow in a lot of these diverse markets, we feel it's super important to tailor our distribution strategy and expansion strategy, depending on the consumer landscape and the preferences for-- that those consumers have when they shop. So in markets like the U.S., Germany, and Switzerland, where there's a large network of premium wholesale partners, some of them, which we mentioned today, they really enable us to amplify our brand story, to connect with consumers, and complement some of our direct channels.
In other markets, let's take France as an example, we see a limited amount of premium channels as well as specialty partners. So to move beyond the position that we've already created, we feel it's important to now build meaningful physical store presence to really invest in our own retail network. Our first chapter store is Paris, is opening it up in the next few weeks. We're super excited and invite you all to come join us for that opening. In a market like China, which you see all the way on the opposite side of Switzerland, we have to fully adapt our multi-channel approach, given there are very limited wholesale partners that are in that region, and the way that customers shop is very different to the way they shop in other markets.
So what we do in a market like that is we work with franchise partners who help to build that multi-channel distribution with us and grow that in conjunction with our direct channels, like retail and digital. No matter where we are in the world, e-com is a key channel that we feel really connects across everywhere and an opportunity where we can build close customer engagement. To speak more about how we bring this to life, Amanda is gonna share more details.
Thank you. So as Britt and Rebecca touched on, each of our channels plays a very specific role in how we reach our customers and essentially grow our fan base. Our approach to e-com is extremely complementary to our multi-channel approach because it's much more than just a transactional engine. But we really view e-com as a core brand-building engine alongside. And this is really our strength and one of our core differentiators in terms of how we position e-commerce compared to a lot of very transactional, heavy, heavy websites. So there's a few things that e-com uniquely brings to the table. For one, it's the only destination where you can really feel the entire brand pulse of the organization.
So whether it's learning about Right to Run or signing up for a community event, it all has a home within our digital flagship. It's also where you can have really the most intimate and personalized experience with, with the brand. And it's also the only destination where you can see all of the products that On has to offer. Now, as a result of our commitment to really focusing on this differentiated experience, our e-com channel does and continues to outgrow our wholesale business. Since 2019, we've tripled the number of visitors on, on the website and have managed to over-proportionately grow net sales alongside.... We also continue to see really strong momentum on the acquisition front. So actually, over 51% of our transactions are still coming from new customers to, to the brand.
Now, once customers are really immersed into our E-com environment, they've shown to be extremely captive and loyal. So over the past few years, we've managed to steadily increase the basket values, as well have been able to drive really strong both cross-category as well as cross-vertical shopping behavior. Actually, when we look into our repeat buyers, what we see is that over 40% of them shop for more than one category. We're extremely excited and, and really just energized by just how loyal the On fan is. Essentially, once you're in, you're in, and this stickiness really just grows with each order that our customers make. Now, we've come a really long way from the rickety old website that we had back when I first joined.
We've really invested a lot and have built a really strong and premium brand home on.com. We've significantly invested into both our tech as well as our organizational capabilities to really elevate the customer experience across a lot of dimensions, and this comes to life in multiple ways. For one, it comes to life in our ability to truly personalize the experience based on deep consumer insights. It also comes to life in our ability to provide truly cross-channel brand campaigns, and it comes to life in our ability to provide a really premium and seamless shopping experience to our consumer. We will continue to over-invest in these capabilities.
But now, in addition, we will also now expand across even more interfaces, and this will give, give us even more—this will give our fans even more entry points and touch points into the brand and to experience On. So as part of this expansion, we will launch an On app, and this will be a new and very intimate home for our loyalists and members. We will also further lean into social commerce. Now, this is an area that we're already seeing really strong traction in, in China, and now we have the opportunity to further expand in these platforms in, in other markets.
And now, for markets where we might be limited in our ability to reach new consumers through our own e-com alone, we will expand our brand presence through premium marketplaces, as well as enable some of our distributor partners to operate e-com in additional markets where we're not yet serving. Now, the digital space moves extremely fast, and just as the shopping destinations and, and channels will evolve, so will how consumers actually shop. And it's really important that for us, that we continue to innovate as-- on the experience layer, alongside these really rapid shifts in both technology as well as consumer demands. And so I think one just really good example of this is around conversational interfaces. So there's a lot of buzz and, and hype around AI at the moment, and I think in and of itself, it's really nothing new, right?
We've been leveraging AI through our tech stack and tooling landscape for a long time. But what is fundamentally different is... and the disruption we're currently seeing, is really on the natural language side. And this has the potential to fundamentally disrupt how you will start to interact with technology. And if you think about it, our generation, we've essentially been taught and really primed and learned how to Google. And just as we've quickly seen the shift from clicks to swipes, we believe we will now start to see the shift from keywords to really fluid conversations. In fact, we're already starting to see this behavior when we look into some of our search campaigns, as well as our on-site search behavior.
We will invest into both the UI experiences, as well as the underlying intelligence that enables us to adapt to this disruption. We're already in the process of building and piloting these conversational interfaces, and you can expect to start to see these elements become even more elevated and connected across the user journey. But when it comes to building these really intimate and close relationships with our customers, we won't just stop on On's e-com alone. So in fact, the growth with some of our key account partners, as well as the expansion of our own retail store network, which you'll hear even more about, opens up many more opportunities for us to provide an even stronger multi-channel and just very connected, brand-immersive experience. With that, I'll hand it over to Britt to touch on retail.
Cool. Yes, I primed you that retail is important, so we're gonna keep talking about it. Who here has been to a retail store, not including the Zurich store today? Okay, most of you. Great, especially in the front row. Nice. How was it?
Feedback? Good. Good. I got a lot of thumbs up. Okay, so a lot of people might not know this, but actually, our very, very, very first retail store came long before we ever even defined this as a channel or before we even had a team working on it. So about five, maybe six years ago now, we outgrew this very small ground-level corner office on 11th and Marshall in Portland, and Martin and I were packing boxes, moving out to our new office, and he said, "Hey, we still have six months on this lease. What should we do with the space?" And we're like: "Well, I don't know.
Let's paint a wall black and hang some shelves on it and put some shoes in there and see what happens." And we did it, and it's been six years, and the store is still operating and still doing extremely, extremely well. So we're happy that that team is getting a big new upgrade in the back half of this year. Well-deserved. So it's very much been an important channel, even long before maybe we all realized it. Hey... Oh, sorry. It goes back. Nostalgia aside, retail has been an incredibly successful launch for On in many ways, and it's something that we're super excited to build.
What we see here, again, with these channels playing together, this is an example that came directly from London, but it's something that we see in many markets where we open new stores, and that is, as soon as we opened the London Regent Street location, we saw the baseline and e-com traffic increase by three times. We also hear of a really great spillover effect in our wholesale channels in these markets as well. In addition to us seeing that, in addition to us seeing the spillover effect across different channels, I think something that, you know, Marc touched on earlier, but that we're super excited about, is this validation of On being able to play as a true sportswear brand and a true apparel brand. So we know that in this channel, apparel works for On.
You see here a few different ranges, whether it's 16%-26%. We have some stores where there's actually 30% apparel share. So when it is merchandised right, and in a very design-driven On way, we know that this has an ability to connect with consumers, and on the very human basis, it's actually a really great testing ground for us to get feedback directly from consumers for our apparel category. So, Sam, I'm not gonna tell you the number of stores that we're gonna open. I know you're gonna ask me. But I can at least tell you, by the end of the year, we'll have around 30 stores globally, a few of which you can expect to be coming soon, in places like Portland, Miami.
Spitalfields in Paris will open in the back half of this year, priming us for a big Olympic year moment. In Paris, what you see here is a mock-up of actually what you can start to expect in our new formatted stores. So we're evolving the customer experience, tying back to a bit the segmentation and tiering approach that I spoke about. So when a consumer walks into an On store, we really want to be speaking more personally to the community. And so what'll happen is a very guided, merchandised experience, where footwear and apparel for a specific consumer type will be merchandised in a store in a much more thoughtful way, versus having just apparel and footwear separated. So really trying to use design here to bring, bring the experience together.
In terms of formats, I think a couple of years ago, we had mentioned to this analyst group that we were staying very much focused on flagships and global city locations. That strategy has changed slightly, just given the success and how we want to accelerate this expansion. So we will be moving forward in retail with three different operating models. Flagship is very much something that you can expect to see on a high street. We should expect high volume, very big brand presence. In more of a chapter store, this is where we wanna just boost a community that's probably already a little bit aware of On, but we're really trying to attach to this performance core, building run culture, bringing a lot of brand moments to life. This is something you can experience at Williamsburg, as an example.
The commercial format is meant to be a place where we can scale a bit faster, so these are a lot of the stores that Rebecca mentioned in China. So typically, mall-based locations, where you would find that. So, the message that you should take away here is that we are significantly increasing the scale at which we plan to open stores, so we do wanna be opening 20-25 stores per year. Within that portfolio, you can expect 10-ish% to be flagship, and then the rest would be split 50/50 between chapter and commercial stores. Cool. Last but not least, we have our very important wholesale channel.
So this is a channel that helped us gain credibility in the very early days as we enter markets, and it still remains a very important channel for On. So I think something here, and some of the words of the biggest and best retailers that I wanna point out here, are things that we often hear as a team, which is, "On is attracting the most diverse customer of any brand we carry." These are direct quotes, by the way. Or, "I've never seen a brand gain such momentum in this amount of time before." Or my personal favorite: "Innovation and storytelling drive demand across the industry. On continues to drive deep consumer connection by bringing both to the market at a rapid pace." So what you see here is that we still have significant room to grow and build presence with our newest wholesale partners.
We are constantly fighting the asks to expand at a faster pace and to open up in more doors, but we've been incredibly intentional with that pace, and we're extremely careful about who we expand with and when. So currently, you see here we have roughly 20% penetration in some of our biggest key accounts. It seems like a bit of a coincidence, but I promise there's precision in this, in this math here, that it is 20%. And what's important to us now and in the future is that we are actually increasing efficiency of doors. So our teams really should be more focused on making sure that the visual merchandising is right, we're speaking to the right consumer, and that fans walking in those doors are getting the true On experience. So efficiency in existing doors versus expanding to new doors.
This is a bit of the strategy that we have here. Good. I actually love that in the early days, when On was very, very small, and we had much smaller marketing budgets, we pretty much spent 100% of it on creating in-store experiences with our retail partners. It's been so successful that we actually haven't really changed that approach. So it's very important that we're jointly building storytelling and bringing a little bit of our own DNA and some of what we're learning from retail into these wholesale accounts. This also has given us some really nice accolades, which we feel super fortunate for. So just in the last year alone, On has been awarded Vendor Partner of the Year at REI, Nordstrom, and Scheels. So those of you from the US are very familiar with those accounts.
This isn't just the best vendor partner in footwear or sports, sportswear apparel. This is the best vendor partner in that retailer, out of thousands of brands across all categories... so something to be incredibly, incredibly proud of. And on the performance run side, which is super important, we just had our biggest month ever at Fleet Feet. So again, this is giving us a lot of confidence that, with the models that Caspar presented earlier, we're we will be the number one brand on runners' bodies. Great! So I'm gonna wrap it up, but I think it's good to remember three key things, and you all have your laptops, so you probably wanna type this out.
We want you to remember three things: so one, we will continue to put a very big focus on building and playing all three of our channels very, very much together in a complementary way. Although it is important to note that D2C growth will outpace wholesale. The second thing you should remember is that we are launching a huge effort to scale our own retail as a channel. And third is that all regions will experience very strong and healthy growth. APAC will grow faster than Americas, Americas will grow faster than EMEA, but all of them will experience very strong growth. Good. Okay. So, now that we know APAC is going to be our fastest-growing region, and I know there's a lot of curiosity in the room about China and how we're connecting with consumers there, I'm gonna hand it back over to Rebecca.
Thanks, Britt. Yes, very excited to talk to everyone about China. I think many people know that this market opportunity in China is large, and that it's a growing segment of, in the sportswear category. It's already growing at high single digits and is expected to grow at high single digits over the next few years. I think this is something I knew when I moved to Shanghai, but going there and experiencing it is something completely different. So earlier this year, I had the opportunity to run a half marathon in Wuxi. It was my first marathon or first half marathon in China, and, you know, 30,000 people were running together. This is the energy and excitement that is now coming to life in China.
In a city that's, you know, not Shanghai or Beijing, it's probably a second-tier city. The level of professionalism, the level of energy of the crowds that are there, the level of energy of just the runners that are there, is something that you have to be in the market to experience, and what is making us super excited about the growth potential in China specifically. Even in the first half of this year, we already saw double the number of races in all of last year, and we expect that trend to continue over the next few years. Our growth story at On is just at the beginning. Since we've been in the market and since we've opened our first store in 2019, we've been growing at over triple-digit growth rate, gaining more fans to the brand each year.
When you look at other brands as well, you can see that we still have a huge room for growth, and we really wanna go after and win the hearts of consumers. So to talk a little bit about our approach so far, we believe we have strong product market fit and consumer affinity for a couple of different reasons. I'll start first with our innovation in products. So that's something that you've heard a lot about today and got to see some of that product so far. But our product really stands out in a crowded marketplace, where the Cloud and CloudTec and CloudTec Phase has become an iconic silhouette. So when I go to a premium fitness boutique in Shanghai, when I go to gyms, I can see Cloud X really all over the place. And it's...
From a data perspective, our Cloud X is the one of the top three models on Tmall, which is our which is a China's digital market platform where a lot of people shop. We also work with athletes to share and talk about our running credibility. So in the middle, you see He Jie, he's a Chinese marathoner. He was just the second fastest Chinese marathoner in Berlin a couple of weeks ago. He's someone who helps to tell our story of authenticity, credibility of running. You can see him here talking about that in our store with customers directly. Lastly, we've invested a lot in consumer activation. So this summer, we had a 10-week program where we went to inspire and educate many customers who are super new to running. And I had the opportunity to, to go to a couple of these events. It was incredible.
Someone came up to me and said, "I am so happy that you guys did this this summer. I'm new to running. I felt very comfortable here because you have multiple different pace groups. I can go at my own speed." And she said, "You know, I've even improved so much in these past ten weeks. I started in the slowest pace group, and now I'm working in the second fastest pace group." And these are the stories that we, we are inspired by, and that we love to hear in some of these markets where we're growing brand momentum. As we just talked about earlier, we're very intentional about how we grow and how we tailor our expansion approach to the unique marketplace of China. So, for example, we have a couple of different digital platforms here, and in China, everybody is very mobile first. It's...
People don't use their computers to shop, and so we have gone with a very digital native, social experience, and mobile-first approach to digital consumers. So we work with some of the major digital platforms like Tmall, JingDong, and Douyin, which is like a social e-commerce platform similar to TikTok, where we can reach a broad base of consumers and showcase our digital experience. Has anyone here ever watched a live stream shopping experience? I see some great nods, very excited. For those of you who have never, I want you to imagine that, you know, you found out about On, and you wanna buy a pair of Clouds.
So you can go onto our live stream, and you can say, "Hmm, what are the different colors that we offer?" And somebody will, as the host, I will put all the different colors, and you'll say, "Okay, let me see that. What, what does that look like on foot?" They can try it on for you. They can show you what it looks like. They can answer your questions: "Is it something I should buy half a size up? Is it true to size?" This is the kind of interaction that we are developing and we're working on to really showcase and socially talk to our customers throughout the digital marketplaces. We also have in China something that we launched last year called our WeChat Mini Program. And think about this like an app within the WeChat ecosystem.
WeChat is one of the most popular social media messaging platforms in China. This, for us, is a connected digital base for our fans, where we can enable our fully integrated omni-channel approach. As an example, you can register for a community event on this program. You can save the shoe you tried on into that program, and then you can purchase it directly in that program or buy it online using the store finder. Fully integrated approach through that program and something that really connects offline and online together. From an offline perspective, we strive to maintain a similar brand image and customer experience, regardless if that store is owned operated, so we operate it, or if it's operated by a partner, a franchise partner. We are building our retail stores in key cities, so key top-tier cities.
Here you see Beijing, Shanghai, Chengdu, where we really can solidify our brand positioning, as well as use that as a hub, as I said, to connect directly with consumers. So we do community events, we offer head-to-toe experience, and people can really come in and engage with us as the most close connection physically offline with them. Complementing this approach, we also partner with select franchise partners that help us to grow the brand in some of our new cities or emerging cities. So things like Wuhan, Hangzhou, Chongqing, where we have the ability to really scale more efficiently and amplify our reach to new partners directly through our franchise. So by the end of this year, we will have around 50 stores, both retail and franchise, across 18 cities in mainland China.
As we look to the future, we will continually strategically expand our distribution approach following this tailored marketplace approach, which really will deepen some of our presence within those key cities like Shanghai, Beijing, Chengdu, and also add new fans in emerging cities through our franchise partners. All of this will be complemented and connected by that digital landscape that I showed earlier. Looking forward, we really believe in the strength of the brand through our localized brand storytelling, through our strong innovation pipeline that's really resonating with consumers, and the full integrated approach, we believe will continue to strengthen the brand momentum that we have in the region.
So now, I know a lot of you have been waiting for some of the numbers to come out, so I'm very excited to welcome Martin and Sam to the stage to talk about financial ambition.
Yeah, I mean, if you have so many amazing products and you have such a power on the distribution side, it makes it actually very easy for us to talk about numbers. It's a very positive thing. So, Sam, our journey goes quite a long time back as well. We had a couple of adventures inside the office, outside the office. Very happy that we are now co-leading the finance area. So maybe you give a short introduction as well.
Yeah. Thank you, Martin. It would have actually been the same intro joke that you made, so we think alike. But for me, this goes even further back. So I've been with On for six and a half years and had the chance to see a few things, also leading the D2C team the last three years. But I remember sitting in the McKinsey office as an associate 13 years ago, and Caspar was actually walking in, trying to sell us the first version of the Cloudsurfer, and I was like: Sure, I give it a try, and I trashed it in less than 30K.
So I was telling him, like: "Hey, I count the months until you come back to a real job," and here I stand now, corrected 13 years after, and now even in this position, co-leading it with you, keeping count of all the amazing things we're doing. And so, super excited for this next plan period, and yeah, we can now bring it together, what you all heard in how the numbers are gonna look.
Good. Before we go into the numbers, there's a bit of rumor in there that we always guide conservatively, and I just want to express again what's our core belief here. It's linked to our culture, and there's a strong belief that if we are in a environment where we put ourselves in a position that we can exceed our goals, it creates much more happiness. And this is what we do, and this is driving also what you experience from us as our guidance philosophy. It's what is also now reflected in our 2023 guidance that is out with a 45% growth versus last year on net sales, 50% on gross profit, 60% on EBITDA. I hope-... You got away from us all of today.
There's a lot of confidence in our business at the moment, in the long term. We are here for the long term. So durable growth is not just a slogan that we made up, it's a slogan that everyone here in the, in the room lives. And that's also reflected in our aspirations for 2026. I already mentioned most of that earlier, and Sam will take you through this. So we want to double our net sales. We want to exceed CHF 3.55 billion in 2026. We will heavily focus on profitability with an 18%+ target, and all of that based on a very solid gross profit margin of more than 60%, really reflecting the premiumness of the brand. And now I let you dive into some of the details there.
Thank you. Yes, so, doubling net sales in three years actually reflects a CAGR of 60%-- twenty-six percent or more, which you know is currently above our long-term guidance of 20%-25%. And also, on the gross profit margin, when we look at our 2023 guidance of 58.5%, we're getting closer to our 60% target, which we clearly reiterate here as our 2026 aspiration. And as we have done in the previous plan period, our profitability, we have focused a lot on profitability. We expect this to grow the strongest out of the three financial metrics and to achieve an adjusted EBITDA margin of 18% or more over the next three years.
So when we now dive a bit into what drives this actually, if we start on the net sales side, and when we were sitting down a few months ago and really building up that bottom-up plan and looked at the regions, at the channels, we really can say we're in such a fortunate position because we have so much tailwind, and we currently have more runway for growth than we can execute on, given the aspiration for excellence and the focus on the priorities we have. What that means in terms of the geographies, again, you have heard this now throughout the day, Americas will stay our largest region, followed by EMEA and then APAC.
We're very excited about some of these markets, like China, which Rebecca just hinted to, where we see a lot of high growth, and that will really help us to further diversify the growth avenues from a geographical standpoint over the next years. We're also very excited about the acceleration opportunities we see in EMEA. You heard this at the beginning in the introduction from Martin and Marc, and also in the market section. Some larger European markets like Italy or France, still have a very low brand awareness, and we see room to accelerate there, especially combined with the accelerated retail rollout, which will fuel those markets a lot. Looking at D2C a bit more holistically, Brit just mentioned it before, we have the clear expectation that the D2C channel will continue to outgrow wholesale.
We will build on the strong e-com platform and the expanding e-com platform Amanda has hinted to, and of course, leverage this expanding retail network that will happen over the next years. From a category point of view, again, for the ones of you here in the room, you saw it in the product section. We have a lot of amazing apparel product hitting in this next plan period, so we expect the apparel share to increase versus the footwear share, and this will happen across all markets and channels. But again, looking at those apparel shares you saw in the own stores, with many China stores already north of 20% apparel share, Zurich at 19, Williamsburg at 16, we really see that apparel can work for On, and we have a lot of confidence in that growth platform.
On the gross profit side, again, clear iteration of the 60%+ target that we set ourselves. The remainder of the difference, we have the increasing D2C share over the next few years, as well as Martin has mentioned it on the price point. We clearly see a continued premium positioning across all the markets, and we also expect a continued high full price sell-through across all our channels and geographies. On adjusted EBITDA, it's gonna, as said, have the highest CAGR of those three core financial metrics. This will, on the one hand, of course, be the flow-through of the increased gross profit margin, but then we also see some clear SG&A improvements that will come to life over the next plan period, starting with the lower distribution costs. Again, you have heard this in the operational excellence part.
We have already some ongoing projects in our warehouses in Europe and in North America, which will automate, which will help us scale. These projects take time to come to life, so the flow-through will be gradual, but it's clear that over the next years we see those improvements. Also, on marketing efficiencies, we see this to come to life. We have a lot of these less mature markets with a low brand awareness, which will increase and which will help us from a marketing perspective. Alex talked about this. And we also have, for example, just to mention one, the halo effect of the store fleet, which will help a lot to grow the awareness. And then with the general growth of On, you have the economies of scale, so we also clearly expect to see some personnel and structure efficiencies and infrastructure efficiencies to come through.
Last but not least, and this is very important to us. Again, we have mentioned it a few times. In the past, we've always said we have a strong focus on top-line growth and on profitability growth, but now over the next three years, we really put a stronger focus on cash flow. We have, of course, continued areas of investment, so you heard this throughout the days. If you think about our eight strategic pillars, we have there, some have more capital investment requirements than others, so we have a few listed here. The accelerated retail rollout, of course, will come with continued investment. You have the physical spaces. You just saw this in the section before.
We see such a stronger brand awareness and sell-through at our partners if we go in with shop-in-shop installations and trade tools, that we clearly plan over the next years to leverage this. We will also invest in our general infrastructure, in technology, in offices, to drive these operational efficiencies, but also to have a greater customer experience and for our people to stay that high employer branding and talent attraction, where we want these offices around the world, where our culture can be lived and people come together. That said, there are clear areas for cash flow optimization. Starting with optimized product life cycle, we're clearly planning to optimize our product life cycle, have a very tailored approach by market, which will improve inventory demand on... based on the demand and supply signals we see very locally.
We also expect an overall inventory optimization to happen as we now transition from this very high growth into durable growth, and that, that will definitely come to life. As well, the higher D2C share growth will help our cash flow in the end. So if we sum this up with the higher adjusted EBITDA margin that we target and this area for cash flow optimization, despite the continuous investments, we really expect to have a strong focus on cash flow and generate a strong cash flow over these next three years. And I think with that, we can already look a bit beyond 2026, and, I will hand it back to, to Martin.
Yeah, and Marc, I think I actually let you talk about numbers first.
So one key takeaway of today is On has two CFOs, two CEOs, and three founders, so absolutely nothing can go wrong. But beyond that, so hey, you know, we asked you to visualize 2026 and beyond, and we hope the past two hours, three hours, kind of, you know, gave you some additional insights into that visualization. And we hope it gave you a lot of clarity of what we're trying to do. We're committed to a very long-term growth story. What we're doing, we're doing not for tomorrow, we're doing it for the day after tomorrow and the day after the day of tomorrow and so on. That's what we're doing, and the actions of the teams are guided by that, because in the end, that will deliver our long-term success. So three key takeaways.
We're already on the Dream On slide, so we would love to go one back, if that's possible. Number one, we're building the most premium global sportswear brand that is rooted in design, innovation, and sustainability. Our actions will be guided by that. Number two, On continues to be a growth company until 2026 and beyond 2026. What we're doing will allow us to continue to grow at the pace of roughly 20%-25%, not only until 2026, but also beyond. It's very calculated. We're very clear on what we're doing, and we're doing it because we want to be super successful in ten years from now. We're not building for 2026; we're building far beyond that. And this guides that number, this guides our wholesale decisions, this guides the number of retail stores we're putting up.
Then this has to lead to increased profitability.
Yeah. Which is number three. So really, the premium position will guide us in what we do. At the same time, it will allow, allow us to focus on profitability. And we see that our aspiration should not stop at 18%+. Our aspiration should stop somewhere at 20%+, and this is where we see ourselves in the, in the long term, based on a strong margin profile, based on a really premium position of the brand. And so with that, we conclude that session. Again, we will invite you to dream with us, to dream on, or as we are now in the second iteration, to dream on and on. We will continue with taking your questions.
For that, Marc and I will stay on stage, and we will also invite Britt up here, and very happy to take your questions. Jerrit will hand out the mics. We take a seat, and then-
Remember, we're just getting started.
That's four things.
If this one works. All right.
We good.
I saw Abby's hand first.
See what happens when you have two CEOs?
Then you have four CEOs.
Yeah, you don't have to take two.
Okay, I'm Abbie Zvejnieks with Piper Sandler. So we talked a lot today about performance innovation, which is obviously very important to longevity of the brand. You just closed those 200 doors in EMEA that were mainly, you know, comfort focused. So can you just talk about how you can use that as kind of a case study for other markets? And do you have any stats on, you know, how much performance has grown as a percentage of the business? And then do you need to change the perception of the brand in those markets where you closed the wholesale doors?
I'll probably start, and probably Britt can elaborate on how we're continuing to build the future. There was a lot of questions in one question. So, let's look, let's look, back a little bit, right? And I think, let's bring it back to what we're continuing to build and what we try to build. And, and we're building a premium sportswear brand, right? And we're building it with wholesale partners that are tapping into the communities that are rooted in run, that are rooted in tennis, that are rooted in Performance All Day . And so we've been very, very close to them, and we've been growing the brand very deliberately. And over time, we also came to the conclusion that in some markets, we probably stretched a bit too far on the distribution. So we're constantly reviewing that.
We close wholesale doors or comfort doors in the U.S. constantly, by the way, so we were part of DSW, and we're not working with DSW anymore. Now we—as already announced in the Q2 earnings, we were closing some of the doors in EMEA. Comfort doors mainly, where we feel they're not reaching kind of into the community that we want to reach, and some of those sales will also be able to convert to our own channel, which is very important to us, and to some other partners that we start to work with. So this is very much a one-off exercise, and this is not something that you can expect us to now do every year, because we are super happy with where we are with our wholesale distribution.
We feel we're in the right partners, we feel we have the right product in the right partners, we feel we're in premium partners, and we feel we can grow with them at the right pace. So this is really a one-off, and what we presented today should give you a very clear view on how we continue to build the future.
I would just add, 'cause you asked about brand, so Alex touched on it a little bit, and you saw a lot of our athletes appear in slides. We're spending an overproportionate amount of our marketing efforts and brand awareness dollars on running campaigns all the way through the funnel. So you see this through investments in OAC teams, which, yes, started in the US, but now are in all regions. And EMEA, specifically with, with the topic that you referenced, there, there's definitely an overinvestment in things like world champs, track nights, athletes specific to these markets. And of course, with the lead-up to Paris, we're really doubling down on, on those performance running efforts.
Thank you. Jim Duffy with Stifel. I wanted to ask about the SG&A leverage implied in the model. What gives you the confidence at this stage of the company's growth that that's appropriate versus making incremental investments, given all the growth opportunities ahead of you? Does that speak to, you know, kind of a front load, even investment of investments over the last couple of years? Thank you.
I think it's important to be very conscious of where can you scale and where do you need to invest. And we will stay fully on the throttle where investments are important in order to build a bigger future. So Noa was mentioning that earlier, we will not slow down in all proportionally hiring in those creative departments, into our tech team, into our digital channels. But then we see other areas where clearly we have economies of scale, on the people side, but also on the process side.
One big element is what we mentioned in the very beginning, the automation projects that are on the way in the warehouse, where as of 2025, we expect the cost per item to go down significantly, and so therefore, driving scale in our distribution cost. And then across the company, simply just yeah, leveraging the assets that we have, for example, filling the whole building here. Those are things that are baked in. But of course, a lot is also driven by just the profitability of the channels, the channel mix that is changing, which is an important part of that story.
Great. Jay Sole from UBS. And first, just want to say thank you so much for a great day, and welcome us into your headquarters, into your home. This is really a great way to experience the company, so thank you for this. I want to ask you a question about the culture of the company, because, you know, Britt talked about being careful, very thoughtful about distribution. It's come up a couple of times. Martin, you mentioned the guidance, how you approach the guidance. When it comes to culture, how do you think about maintaining that discipline?
Whether it's making sure, you know, we don't see too much inventory out in the marketplace, or as promotions start to kick in, or doing things, you know, in the short term to sort of maybe alleviate some issues which maybe could damage that long-term outlook that you have for the company. What is it that you make sure that stays not just within the senior leadership team, but across the company, to make sure that the spirit here, that the attitude about making sure that the company, the brand, is protected for the long term persists?
Yeah. Maybe you want to?
Yeah, Britt, why don't you take this?
I think it's probably a couple things. One is I, I think our culture is just naturally very much built on transparency, so I don't think there's a lot of secrets at On or within our teams. Noa spoke to this a little bit, even just through the interview process, right? We want to create a culture where it doesn't matter what your position is, you have access to anybody, regardless of the level. So I think we're quite a non-hierarchical, non-political organization, which, which allows some of those barriers to be broken down in the first place.
... And the second is, Noa will have to correct me on the stat, but we actually spoke about this recently when you did a culture session, and I thought it was really powerful and aligned with On. And it's basically after a thousand people in an organization, it's really tough to maintain culture unless you have a purpose or a very mission-driven focal point or North Star, which hopefully that's definitely come across to you in the years that you've gotten to know us. And therefore, we're able to make decisions based on that. So it might not be the traditional decision, but we're able to take decisions more for the people or more for what's best for our brand versus the transaction.
And just to add, part of that is, for example, our compensation philosophy, right? Which is linked to company goals. So there's absolutely no incentive, for example, to a salesperson in the U.S. to optimize his or her own number. So everyone is kind of very much incentivized on the same goal, and the goal is, in the end, our mission and what we show today. And this is super transparent, and everyone is working towards that. And I think so far, you know, we've been very consistent with how we executed since the IPO.
We heard a lot, you know, that there was a fear that the culture will break as the company gets bigger, and I think this very strong focus, as Britt said, on mission and that everyone understands the mission and to execute towards that mission, has really, really helped, and we are very confident that we can continue the journey.
Hi, Alex Straton at Morgan Stanley. Just two from me. First is on the five key verticals that you outlined with the clearer tiering structure. I think you outlined it very clearly to us, but can you help us understand how you'll make it clear to customers, how it's tiered and how it works? And then secondly, maybe for you, Martin, on the 20% long-term adjusted EBITDA bridge, you know I have to ask, from 15% now to there, can you talk to me about the key levers, how you get there? If you can quantify anything for us, it would be super helpful. Thank you.
Hey, on the On, on the tiering, let's start because you were talking about consumers. So I think let's, let's start with the communities, right? So in the end, Britt showed it. We're looking at which communities do we want to reach. So let's take the run community as an example, where you basically range from a very, very dedicated runner who aspires to run a marathon below two hours, to, let's say, very usual runner, which are most of us, and that's a person who runs once or twice a week and runs maximal, I don't know, five miles a week, right? And so we're trying to be very clear in, A, where do these people shop? So usually they shop in slightly different places, and therefore, these places get different products. And also, kind of, what do these people shop, right?
So if you're a below three marathon runner, you're really interested in the carbon plate, in the foam they were using, and so on. If you run twice a week, you most likely want to have a product that is very, very comfortable, that allows you to just have the best possible feeling while you run. And so this is the stories that we're trying to bring to life to those communities, and we're doing the same with apparel. So when you look at apparel, when you look at what, what got presented also in the product breakouts today in the morning, then it's very clear that we have apparel that is way more an entry, price point, not... Still very, very premium, but an entry into a category.
Then we have apparel for very, very aspirational ultra trail runners that need to run, I don't know, 60 mi a day, and, you know, they might hit some rain, but they can't carry any weight. So I think we're trying to be very, very clear of what the use case is, and then have that use case in the respective stores where the respective community shops.
And then, on t he 20%. So I think first and foremost, it's important to continue having that aspiration and that we always outline of combining top-line growth and profitability growth. If you look at the key message that you should have taken away today is, Britt mentioned it. We have the power of the multi-channel, but we invested so much into basically the D2C part of it, so both in retail as well as in e-com. So there is a lot on focus on those channels, and we expect that the D2C share is growing, as it has been growing in the past.
Very clearly for us, e-com has a superior margin profile to retail, has a superior margin profile to our wholesale channel, and so this will be a big driver of that profitable growth. And then together with the SG&A leverage that we talked about. At the same time, with the premium position is about protecting the gross profit margin and basically maintaining a high share of full price, with what Marc just mentioned, being in a position to actually drive higher price points, higher average price points. And so we feel taking everything together and again, looking in the long term, and this is a long-term aspiration, we feel this should be our aspiration as a company.
Thank you. Cristina Fernández from Telsey Advisory Group. Two questions on sort of like the market strategy. One, on the retail rollout, can you give a little bit more detail of the 2025 openings a year? Maybe if there's any color by region you can share or where that growth is gonna come from. Then second, wanted to see if you can also talk more about the apparel distribution. As you look to expand apparel into more of the verticals, are we gonna see a change in where apparel is distributed versus what we see today?
Yeah. So I think on the, the retail one, probably, probably can't share exact numbers, but I can let you know that it will be quite a diverse portfolio across all of our markets. So you'll see a few big key, key stores opening both in EMEA and Americas. We clearly have already laid great, great groundwork in APAC for retail. And then probably what would be the newest, market where you might see some, some retail door expansion would be in LATAM. And then the second question, I missed the last part, but were you asking about pricing of apparel?
It was distribution of apparel. Mostly on the wholesale side, are we going to see new partners versus what we see today as you scale into more categories?
Yeah, I think where you would notice more of a wholesale expansion would be in tennis or if there's really training specific. But, you know, I think as you've already seen, we're quite happy with our wholesale mix, and we're really trying to just increase door efficiency versus expanding that channel into new doors. So, hey, if it makes sense for the strategy, yes, but that's not at all the focus of the team at the moment. We think, especially given the success we've seen from apparel in our own retail, we have massive room to grow in existing doors. We just need to get the assortments and collections right, which we feel we're very close to.
Yeah. I wanna share a guiding principle a bit on retail and how we think about store expansion. So we would look at the city and say, "Hey, we wanna go into, let's say, Milan or Paris." The speed will be defined by the availability of location. So this is also why we're not gonna share, "Okay, next year, we're gonna be here and there." So I think it's really. It's, we're not gonna compromise basically the right place for an accelerated speed. And so I think you will see some cities maybe we're a bit slower, other cities we're maybe a bit faster, but all with the very clear design principle, that we wanna be in the right location at the right size to reach the right consumers in the key cities.
And then, sorry, just on the apparel, very important, the expectation clearly is that apparel distribution will be more skewed towards D2C. So I think this should also be a takeaway from today with retail, with the success that we have in e-com versus on the footwear side, where you basically have the current distribution.
Hi, Aubrey Tianello, BNP Paribas. I want to go back to the accelerated store rollout. Maybe you could just talk about how stores affect the margin structure. And then as a follow-up, how long does it take for stores to ramp to maturity and to hit your profitability targets?
Yeah. So Marc mentioned that in the beginning, that we, we clearly learned with, with the stores that we have now, that On retail works for us, and that, we can run profitable stores. At the same time, it's, it's very clear we are building a huge retail organization within the organization, and, very clear there are a lot of areas where we can significantly improve. So from build-out cost, to how we merchandise the store, to how we, how we service in the store. So this is a, this is a, a learning curve, and, and so, of course, over time, with those learning, our stores will become even more profitable than maybe the first 20 stores are. I think it's, it's very important we, we really accelerate in On retail.
It's very clear that the store in the first year and the second year is not having the same profitability as in years three, four, and five. So we invest in that, and this is an important investment because it's clearly improving our channel mix. It allows us to grow in regions where, as Rebecca showed earlier, where there's less presence of a premium wholesale business, and we are willing to do this. But we will see the benefits of that coming as, as basically our store network is maturing.
Thank you. I'm Sam Poser with Williams Trading. Two questions. One, with the CAGR that you put out there for the next three years, can you give us some shape on what that looks like? And then secondly, like by... I mean, it's-- are you looking at 26% a year? Are you looking to be stronger at the beginning and then cooling off a bit? And then also, in the stores, I've been to lots of stores, not yours, but the their wholesale accounts, and there's-- I see some inconsistency in how the goods are presented in the accounts and in accounts that were listed in your up on your board a few minutes ago. And my question to you is: Are you willing to take...
I mean, are you willing to say: "Look, you're, you're gonna either present our product the way we want it, or we're not gonna be there," versus, you know, you've cut back some distribution from the DSWs and so on, which is a different animal. So I was just wondering, you know, where that all fits in the way you look at the world going forward and, and focus on your brand. Thank you.
Yeah. So we will, I think we will give a clear guidance on the next year, when it's time for that. So let me maybe speak about this a bit more, philosophically. You also heard when Britt talks about wholesale expansion and the team talks about wholesale expansion, that is, the focus is clearly on growing same-store growth. And we entered into key—into like big key accounts in recent years, and clearly driven the massive growth that we have seen. At the same time, we want to stretch that growth over the next years. And as we want to continue to grow in a durable way, we will put strong focus on our D2C business in years to come.
A lot of the building blocks that you have seen, the apparel pipeline on the product side. We talked about the On retail expansion, the opportunity in China. So those will scale, and all of them provide upside potential on the CAGR already in year 2025, in year 2026. So I think this is how you should think about opportunity there. We come from a very high growth rate at the moment, going very much into a controlled expansion in our wholesale business with a strong focus on D2C. So it's not... And then also linked to our long-term aspiration with 20%-25%.
I think this clearly shows that our mechanic here is not we start strong and then we go flat, but basically the mechanic is we will stay strong on the growth side.
And on the distribution, I think we said it today, right? I think we are a premium sportswear brand, and this will guide our actions. We added a lot of product over the last years. We especially added apparel. And so I think I would turn it around, and I would ask a question: "Hey, you know, what are you as On doing to bring your brand to life in the best possible way with your wholesale partners?" And what we will do is we'll continue to invest a lot in the brand experience. So how can we not only build out branded spaces in our own shops but with our retail partners? You can experience that in Nordstrom. You can experience that at DICK's stores. You can, for example, experience that here in Zurich at Jelmoli, if you go there.
Then, we will invest significantly in visual merchandising, which is something that, together with basically growing apparel, we feel is very, very important to bring, to bring the brand to life. And then we're investing a lot in training the resources in the store. So how can we not only in our own store, basically provide a premium experience from a staff perspective, but how can we also work with our, our retail partners? We have over 9,000 stores globally, so you can imagine that this is a bit of an effort, but we're putting a lot of focus on it, and we're very confident that our fans and consumers will be able to experience On in a, in a premium way.
Yes, but Sam, I know, I know the point that you're, you're referencing, and I would just say in the past, we've also had incidences like that, that we've turned around through dedicated partnership and VM support. So yes, that has to be a focus.
Yeah. Thank you. Jon Komp from Baird. Thanks for all the events today. I want to follow up and ask about the transition from a running brand to a premium global sportswear brand. Are there specific insights or consumer reactions over the last couple of years that gives you the confidence to make that transition? And how does that impact ultimately the revenue potential for the brand as you look over the long term? Then, Martin, separately, if I could just follow up. Could you talk about the role price or ASP growth is having in the long-term plans, and is that a factor that could lead to upside over time versus the 60% gross margin target? Thank you.
So let me start with the insights. I think the first insight actually dates back to 2014, when we created a product called the Cloud, which was a performance running shoe made for the best triathlete, best female triathlete back in the days, who was Nicola Spirig. And we created that amazing product for her, and a lot of people started to wear the product all day and every day, right? And so we asked ourselves, "You know, why is that?" And I think there were two main reasons why that happened. One, the product performed not only while you were running, but it also performed as a product for all day and every day because of how we were able to bring the technology to life.
This is what you heard today in the presentation, very much from Thilo and Gerald and Caspar and David as well. So how we go about, for example, Performance All Day , is not compromise on technology and innovation that we bring in that product. I think the second insight was very much, hey, through its design, On was able to create desire beyond the core running community. And so that has really guided us, not only for footwear but also for apparel, because we learned, hey, actually, the consumer gave us the permission, through the products that we create, to play in different verticals. I think for me, it was very special and quite emotional to be in New York at the tennis activation.
It was a very beautiful way of basically, again, how the community reacted to On, to On showing up in performance tennis, not only from a footwear perspective, but also from an apparel perspective. And then how do these silhouettes transcend into an all-day use, like the Roger Spin that I'm wearing here? And so I think it really came from a consumer, right? And so we felt, "Hey, okay, the consumer loves it. We feel we got the technology, we got the innovation capabilities, we have the sustainability in product, and we have our design vision to bring it to life." And so that also allows us to tap into a much, much bigger TAM. This is why we're adding training, right? But before we added training, we already have tons of people training in the Cloud X in the gym.
It's not that no one is doing that, right? So, so we observe, we learn, and we do it. So we feel very confident that, that we have the ability to grow that. We have a very clear plan until 2026, and we're very confident there's a lot of, you know, room still left in the existing verticals, but probably also adjacent verticals, that, that will allow us to scale beyond 2026.
Yeah. And then to the second one. Clearly, if that premium market at a higher price point leaves a lot of room for opportunity to position products in there at a higher margin level. So there is clearly an upside potential to what we outlined. At the same time, at the moment, still our apparel margin is at a lower level than our footwear margin, so this is something that we factor in. I think you have seen the team also on the apparel side, there's a lot of knowledge on how to bring the cost down and with more scale. They are expected to come down.
So for us, it stays basically on the message that ultimately the D2C share expansion will be the core driver of gross profit margin expansion, with upside basically from the business itself.
John Kernan, TD Cowen. Thanks again for amazing day here. It's great to see the headquarters and the culture. As you think about marketplace management and working capital and cash flow optimization, how should we think about the normalized level of working capital and inventory turn as you expand in new SKUs, new distribution and categories? And just a quick follow-up on China.
Yeah. So, Sam mentioned it, besides profitability, cash flow will become more of a focus for all of us. We are clearly currently in a position due to the supply chain disruptions that we have seen as our inventory level is elevated, as well as our working capital level is elevated. We were always able to maintain a working capital level at around 30% of net sales. Currently, we are higher, but our aspiration is clearly to go below that. And, Sam mentioned some of the initiatives that we have already started. So optimizing our product lifecycle management, really, working with the key account partners on direct shipments.
And then, of course, it's also always a factor of growth, because in the end, your inventory level is a factor of what you need for the next season, versus you measure it versus the sales of the last season. So there will be focus on that. Again, always with the focus on we still want to be in the position that we can fill the growth that is there, and working capital will not be our guiding north star. That will be on the other elements. But clearly, the awareness is there, the team is there. Xiaohui, our CEO, is at maternity leave at the moment. Otherwise, we would love to have her presented here, but really, there's a lot of strong people there that are managing now that.
How we-
Just-
How we... Just to add to marketplaces, because I think, Amanda spoke about it, and I think it's very clear, to be very clear on, on what we're doing. So we feel, you know, there's an opportunity with some of our partners to, to reach and tap into new consumer groups, especially in certain regions. And some of those marketplaces can do that very, very well. And we feel there's also an opportunity to really control the appearance of the brand, and that's why we would manage this marketplace and not, and not give them the product. This is why, for example, it's also driven out of, out of our D2C team, right? So we very much manage it like our, like our own e-com. And the most prominent one is clearly Tmall in China. That is, that is, in the end, the marketplace.
And we'll be kind of very clear on where we're going into. So you, you have players like Farfetch, that, that obviously reach a very, very specific consumer. But don't expect that to be a huge part of the 2026 plan. This is very additive to what we're doing, but it's not that it's gonna drive a huge number. So this is just to be very, very clear on what the strategy is there.
Understood. Quick follow-up on China. Rebecca obviously gave us a great detail into what was happening on the ground there. How does Asia-Pac fit into the margin contribution? You're obviously building a lot of infrastructure there. For many of your peers, it's their highest margin region. How should we think about that?
No, it's clearly, it's a super high margin region for us on gross profit level. At the same time, it's clearly a market that we are heavily investing at the moment. So probably the market of the highest over investment. And I think we're doing well and continue doing that and investing in the market. But clearly from the mechanics of the market, so selling price versus product cost, one of the more profitable ones that we have. Middle East is another market where we currently see a super strong momentum, but we are still very small with a distributor there, which also offers a high margin environment. So yeah, clearly opportunities.
Thank you. David Roux from Bank of America. Just a question on the Paris Olympics next year. How many athletes do you expect to represent On? And then the second question is just a follow-up on inventory. What's the nature of your current inventory? Do you have a good sort of good stock of high sell-through products, or is there quite a bit of sort of less popular colors, et cetera? Thank you.
... Hey, on the athletes, I would love to give you names and numbers, but you know, for most of them, the qualification is still out, right? So for example, if you look at the women's marathon, most of the countries, they look at what's happening now. So we will know early spring on who will exactly be there, but it's gonna be a significant number. I think what we saw on how we accelerated this year, so looking at the wins we had in tennis, looking at Budapest, looking at the wins we achieved in the Diamond League meetings, looking at the wins that we had in the triathlons and so on.
I think you can expect a lot of On athletes being there, but the final number we'll probably know pretty close to the game. And we hope that Dominic Lobalu, who is inspiring us, you know, very, very much with his story, and you saw the movie, we will fight for him to be there, too.
Yeah. From athletes to inventory. Our inventory position is elevated, but it's fresh. Because we all know it, it's basically just came in too early, but it's fresh inventory. We expect that this sell through at full price. And we are not concerned there.
Thank you. Aneesha Sherman from Bernstein. A lot of your bigger competitors in running have been talking about fighting back in running specialty and trying to regain share and perhaps refocusing on the channel that they haven't focused on recently. As you do your discussions into H2 2024, have you seen any change in tone or dynamic with the running specialty channel as you've had discussions with them?
Hey, I think for us, we've always been focused on the run specialty channel. I mentioned that when I spoke about market entry. It's the first wholesale channel that we ever enter in a market, and so we feel a deeply close connection to run specialty. We've built teams around to support it. We very much have a mission to continue being the number one player in run specialty, and you heard it from me, you heard it from Caspar, you heard it from a few people. We don't achieve that without continuing to put the pressure on the amount of resources and support that we give that channel. So there will be no change from us in what we offer them.
Maybe the last one?
We got time for one more. Yeah.
Thank you. Peter Park. With Cloudmonster, Cloudrunner and Cloudsurfer scaling to become around half of On sales, and you releasing Cloudmonster Hyper, the Cloudtilt, and, you know, new shoes, are the expectations for some of these franchises that you're launching to kind of join that echelon of like 5%+ franchises? And given, you know, Monster and Surfer were launched relatively recently, is the cadence for those franchises actually on the pace of, let's say, a Cloudmonster or a Cloudsurfer?
So the very clear answer to your first question is yes, very clearly, and I think that leads to your second question, which is basically, hey, I think that the launches that we saw and given the fact that most of these products actually came in post-IPO. So Cloudmonster was the biggest launch back then. Cloudsurfer was the biggest launch, right? I think the Cloudrunner was a huge launch in terms of how it's been adopted, and so it's very clear that the silhouettes that we're creating and how we're now scaling these franchises is with the very clear intention to create multimillion pairs franchises. What is a bit new to it is that we're basically... and it was explained before, we're basically able to transition from the different communities that we tap into with one product.
So you have the Cloudmonster, then you have the Cloud, the new Cloudmonster that will enter Cloudmonster 2, and you have the Cloudmonster Hyper. These products have different price points. They're all playing in the premium segment, but while today you basically have a couple of products sitting at between $150 and $180, and then you have one product sitting at $280, we're now able, thanks to that strategy, to basically bridge from $150 - $280 and to cater to the different communities that do a certain sport with, you know, kind of different intensities. And so we can do that in many different product categories. We can do it in running, we can do it in outdoor, trail, tennis, and obviously Performance All Day . And so very intentionally, we'll do that.
Then on Performance All Day , I think this is where you want to be able to play different franchises and silhouette and also use them a bit over time, right? So I think, you know, we were very, very happy to see with the Cloudnova example, how it's been, how it's been accepted in the market, how we've been able to scale, and now we need to be able to continue to deliver innovation. So we bring newness to the consumer, and we can phase products in and out. So this is, this is very clearly the path we're on to bring significant scale to the different verticals and to On as a brand.
I think when we have 21 franchises with more than 5%, we will stop.
That was a really
That was a nice closing. Yeah.
That was... It couldn't be a better closing.
Okay, do one more.
One more, because you're such a loyal investor.
Thank you, guys. I have another closing question, I guess. You've done such an incredible job navigating the macro environment over the years and delivered the margin. Growth was always exceeding all our expectations. Now you're telling us that the margin will be better, growth will be strong. Can you talk about some of the puts and takes around what could be—could, what could go right? So what would you need to see to invest more and take that margin down to 15% and boost the growth? Or what, what are some of the things that potentially could go really well over the next two to three years than, you know, when 2025, 2026 comes around and you say, "Hey, we knew we promised you 25%. Unfortunately, we were wrong. It's 35, 40," whatever the number may be. What, what could really work?
I think there are a lot of upside potentials on the top line. So if you look at apparel and we laid down the 10% aspiration, there's a lot of opportunity for growth. If you look at the size of the Chinese business that ASICS brands have, I think there's a lot of opportunity for growth. In PAD, so Performance All Day, we always know that if franchise are really resonating very strongly, there is a big upside potential to the number that we have. We are very aware that our investment in On retail is something where we need to stay very close to.
So there's always an, an, a risk of going too fast in, in retail and going into the wrong locations, with, with the, with the wrong rental contract. So this is something that we are aware of and, and need to manage very, very carefully, but I feel we have the, the, the, the right team, to that. And then, of course, you never know what the world, holds up for us in the, in the years to come. Yeah.
But it's actually a great closing question because we can answer it with significant opportunity in most segments that we presented to overachieve. So thanks for that question.
Hey, thank you very much for your attention and for your questions and for the great day. I think, Jerrit, you know what we do next.
Thanks. Yeah, I'll come for the final logistical one, I promise. Hey, also from our side, thanks so much, everyone, for being here. We-