2XU taps local partner as fitness booms in China

2XU-China-store-setupAustralia-based premium sportswear brand 2XU has officially announced plans to expand in China through a joint venture with major Chinese fashion retailer, GXG.

The partnership will see 2XU open up to 50 bricks-and-mortar stores in China and grow its fledgling online and wholesale presence to capitalise on the country’s booming fitness industry.

“Until recently, sport was frowned upon in China. People were supposed to work hard, show displays of wealth and party. That started to change around 2011, 2012, and since then the growth has been phenomenal,” Paul Higgins, chief executive of 2XU told IRW.

“They’re joining gyms, doing marathons, doing things outdoors [in China]. That change…I can’t tell you how profound it is.”

According to IBISWorld, China’s gym and fitness industry generated close to $6 billion in revenue last year. This boom has created an opportunity for 2XU to bring its premium sportswear proposition to China, where Higgins said there is a gap in the market for higher end products.

“What is the sports performance brand that the uber-rich Chinese consumer wears? They don’t have one,” he said.

This is where 2XU may have an advantage. With its range of scientifically tested sporting apparel, including compression wear, the LVMH-backed brand targets serious athletes, rather than the average athleisure consumer.

How to find the right partner

But opportunity does not necessarily lead to success in China, as Higgins knows from his previous experience launching the sunglasses brand, Oakley, in China.

“I’ve probably been to China nearly 60 times since 2008. The more I go, the more I realise how little I know about China. Finding a local partner that really knew the market right down through the Tier 4 and 5 cities was critical,” he said.

This was the thinking behind the joint venture with GXG, a leading men’s fashion retailer in China, which has over 2,000 physical stores and annual revenue of above US$600 million.

Higgins said the retailer’s ability to navigate the retail landscape across all cities in China, understand the design aesthetic and requirement of Chinese consumers, and scale well on ecommerce were key reasons he decided to partner with GXG, which he described as a cross between General Pants Co and Country Road, in terms of its demographic and market penetration.

“They’re really taking the lead without a whole lot of input from us on ecommerce platforms and the physical retail rollout. We’re not looking over their shoulder. When it comes to social media platforms, it’s a conversation we’re having together,” he said.

But Higgins cautioned that finding the right local partner could be difficult for first-time entrants in China. He said many businesses advertise themselves as retailers, but are really manufacturers in disguise.

“You’ve got to be really careful. Generally [manufacturers] are pretty average retail operators…that don’t have a clue about retail metrics,” he said.  

But avoiding them takes some legwork. Higgins suggested retailers should always visit their partner’s headquarters and stores.

“Grab a Chinese interpreter and walk the floors of their stores. Any good retailer will see straight through bad operators. They’ll have bad assortments, bad product knowledge of staff, cheap fittings in stores. Don’t restrict yourself to tier 1 cities, understand what all their stores work like,” he said.

2XU is not only growing in China. Within the next three years, the global brand expects to grow its retail presence to 100 stores in Asia Pacific, from South Korea to Hong Kong to Indonesia.

2XU has also launched a fully-owned subsidiary in Japan, consolidated its European distributors into an EMEA business and set up a new North American office in Santa Monica. It has also opened design centres in Hangzhou, Tokyo and Seoul, which help ensure its product design and fit are tailored to each market.

 

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