For investors in the footwear industry, recent class-action lawsuits against high-growth brands like On Inc. and chronic customer service failures exemplified by K-Swiss highlight a critical, yet often overlooked, investment risk: the erosion of brand equity through unresolved consumer complaints and product quality issues. These incidents underscore that long-term financial performance is inextricably linked to customer satisfaction and a company’s ability to swiftly address product deficiencies, signaling potential headwinds for even the most promising consumer discretionary stocks.
In the fast-paced world of consumer goods, particularly in the competitive footwear market, brand reputation is paramount. While financial reports often focus on sales figures and profit margins, savvy investors understand that underlying issues such as product quality and customer service can quietly erode shareholder value over the long term. Recent developments concerning On Inc. and historical complaints against K-Swiss Inc. offer a stark reminder of these qualitative risks.
On Inc. Faces Class Action Over ‘Noisy and Embarrassing Squeak’
On Inc., the Swiss-based running shoe company that made waves with its September 2021 IPO, is currently facing a class-action lawsuit filed in October 2025. The core of the complaint alleges that many of On’s popular running shoes produce an “embarrassing squeak” with every step, stemming from materials rubbing together within the shoe. Plaintiffs claim that despite numerous customer complaints, On has refused adequate compensation, forcing customers to resort to “significant DIY modifications” to resolve the issue themselves, according to USA Today.
The lawsuit specifically targets shoes featuring On’s signature CloudTec technology, which utilizes hollow pods on the sole designed to provide comfort and propulsion. Styles named in the complaint include:
- Cloud 5
- Cloud 6
- CloudMonsters
- Cloudtilts
- Cloudsurfers
- Cloudeclipse
- Cloudleap
- CloudSky
- Cloudswift
- Cloudzone
- Cloudrunner
With prices ranging from $140 to $180, these shoes target a premium segment of the market where expectations for quality and performance are exceptionally high. The lawsuit further alleges that On violated California’s Consumers Legal Remedies Act, implying deceptive advertising by promoting a product that does not meet advertised standards. While On Inc. has declined to comment due to ongoing legal matters, this situation presents a significant challenge to a brand built on innovation and athletic performance.
K-Swiss: A History of Unanswered Grievances
While On Inc. grapples with a burgeoning lawsuit, the long-standing complaints against another footwear brand, K-Swiss Inc., provide a historical precedent for how neglected customer service can impact a company. For decades, K-Swiss, a brand with over 58 years in business, has faced a pattern of consumer grievances related to product quality, refund processing, and delivery issues.
Records show multiple complaints detailing unfulfilled refunds, canceled orders not properly reimbursed, and a lack of responsiveness from customer service. One instance highlights a customer waiting months for a $42 refund, with repeated emails and calls going unanswered. Another details an order canceled by K-Swiss due to an “invalid coupon” despite the customer not entering any code, suggesting potential website malfunctions or “bait and switch” tactics, as claimed by the consumer. These consistent issues contributed to K-Swiss Inc. holding a “C-” rating and lacking accreditation from the Better Business Bureau.
In 2019, K-Swiss was acquired by Chinese sportswear giant Xtep International Holdings Limited. While the brand now operates under a larger corporate umbrella, the legacy of customer dissatisfaction remains a critical factor for Xtep’s overall brand portfolio management and its pursuit of international market expansion. This acquisition, valued at approximately $2.6 billion, aimed to bolster Xtep’s presence in global sports fashion, but inherited brand challenges can certainly impede such ambitions, as reported by Bloomberg at the time of the deal.
Beyond the Squeak: Investment Implications for Footwear Brands
For investors, these situations offer crucial insights into the qualitative factors that influence stock performance in the consumer discretionary sector. The impact of product quality issues and poor customer service can extend far beyond individual refunds:
- Brand Erosion: A negative public perception, whether from a viral squeak or consistent refund problems, directly diminishes brand equity. In a market saturated with choices, trust is a primary differentiator.
- Legal Costs and Settlements: Class-action lawsuits, such as the one against On Inc., are costly. Legal fees, potential settlements, and management distraction can significantly impact a company’s bottom line.
- Competitive Disadvantage: While other brands like HOKA, Nike, and Adidas have also seen sporadic complaints about squeaking, a public lawsuit against On specifically highlights their handling of the issue. This creates an opening for competitors.
- Reduced Customer Lifetime Value: Dissatisfied customers are unlikely to be repeat purchasers. For brands like On, which rely on a loyal community of runners, this can stunt long-term growth.
- Impact on Parent Companies: In the case of K-Swiss, unresolved brand issues can drag down the performance of its parent company, Xtep International, affecting overall portfolio value and investor confidence.
Due Diligence for the Savvy Investor
When evaluating investment opportunities in consumer goods, particularly in the premium segments of the footwear industry, investors should look beyond standard financial metrics. Factors to consider include:
- Customer Feedback Channels: Monitor social media sentiment, online reviews, and platforms like the Better Business Bureau for recurring complaints.
- Warranty and Return Policies: Scrutinize how companies handle product defects and customer returns. A robust and responsive system is a sign of good management.
- Competitive Landscape: Assess how a company’s product quality and customer service stand up against key rivals. A premium price point demands premium service.
- Litigation Risk: Keep an eye on any ongoing or potential legal challenges that could impact financial performance and brand reputation.
The success of companies like On Holding AG (ONON), which saw significant growth after its IPO, relies heavily on maintaining a strong relationship with its consumer base. Even minor product flaws, if mishandled, can amplify into major financial and reputational headaches. As investors, recognizing these “silent killers” of brand value is essential for making informed long-term decisions.
The Broader Footwear Market: Quality and Reputation are King
The broader context of the footwear market, as highlighted by observations from the Silicon Valley fashion scene in Article 3, also shows that shoes, particularly high-end ones, can be a tough sell. While the article notes general challenges for luxury shoe sales in a “fleece over Ferragamo” culture, it implicitly reinforces that when customers *do* invest in premium footwear, their expectations for quality and satisfaction are higher. This makes product defects and poor customer service even more detrimental for brands like On and K-Swiss, who operate in, or aspire to, the premium segment.
Ultimately, while flashy marketing and innovative technologies can drive initial sales, sustainable growth and investor confidence in the footwear industry are built on the bedrock of consistent product quality and exemplary customer service. Companies that fail to address these fundamental aspects risk not only losing customers but also seeing a significant erosion of their long-term market value.
