Switzerland-based sportswear manufacturer On, famed for its cloud-soled running shoes endorsed by tennis legend Roger Federer, is under intense scrutiny after a recent investigation by consumer magazine K-Tipp brought to light troubling ethical concerns about the company’s pricing tactics.
On, which outsources its production to Vietnam, pays a minimal cost of 17.86 Swiss francs (a little over $20) to produce its ‘Roger Advantage’ model, according to K-Tipp. However, the company retails the model for an astonishing 190 francs ($219) on its online platform, yielding a staggering margin even after accounting for logistics, marketing, and personnel expenses.
The discrepancy is even more egregious for its hiking shoes, such as the ‘Cloudtilt Loewe’ model, where production costs in Vietnam are a mere 20.80 francs ($24), the K-Tipp investigation revealed, yet On commands a steep retail price of 445 francs ($513) – over twenty times the production cost.
The company charges, on average, eight times the production costs to its customers. Other sportswear bands such as Puma and Adidas, for example, charge around four times the manufacturing cost.
The criticism of On is further amplified by concerns over the quality of its products. Medical professionals caution against potential health risks due to the softness of On’s shoes, while consumer protection agencies report recurring complaints about low quality. One retailer of On shoes even describes them as “classic disposable products.”
The controversy surrounding On extends beyond the exorbitant prices charged for what many see as a subpar product. There are also questions about the company’s commitment to ethical business practices. On has pledged that “100 percent” of its key suppliers in Vietnam will pay “livable wages” from 2025 onwards. However, specifics on what constitutes a livable wage remain lacking. Reports suggest that Vietnamese shoemakers currently earn minimal wages that are often insufficient to cover basic living expenses.
While questions remain about the adequacy of the wages paid to the company’s factory workers, three Swiss founders and two CEOs collectively took home 19 million Swiss francs (almost $22 mln) in 2022. The financial details of Federer’s compensation through his involvement with On remain undisclosed.
Vietnam, a major manufacturing hub in Asia, plays a pivotal role in producing goods for leading Western brands across various industries, such as technology, garments, and sportswear.
On’s sourcing strategy involves utilizing subcontractors in Asia, a practice that, while common in the industry, has nevertheless raised concerns regarding labor conditions and wages. Manufacturing jobs in Vietnam are known for their challenging working conditions, with facilities often plagued by poor ventilation. Workers can also be exposed to toxic chemicals both inside and outside factories.
On has come under particular scrutiny for a combination of factors, but prominent among these is the company’s pricing strategy.
This broader context highlights the multifaceted issues surrounding On’s operations, encompassing labor conditions, financial practices, and corporate responsibility, further deepening the ongoing scrutiny of the Swiss sportswear brand.
For more stories on economy & finance visit RT's business section