The Australian brand 2XU, known for its compression wear, has entered the Chinese market. Is the sports goods market, driven by the upgrade in fitness culture, a blue ocean? ...

Dazzling lights and an omnipresent sense of technology defined the launch event for 2XU’s entry into the Chinese market. On November 2, this Australian brand, famed for its compression garments, made its debut in Shanghai. Different series of compression pants were displayed in glass cabinets, while numbers and technical explanations on the glass walls highlighted the performance metrics of the products.

This is the style of 2XU. If you buy one of their compression pants, you’ll also receive a yellow packaging box, with dense text on the back detailing the product’s features and benefits to the human body.

Go to China!

In 2005, former professional triathlete Jamie Hunt and his partners founded 2XU in Melbourne, Australia. The name stands for “2 Times You,” meaning “enhancing human athletic performance.” Twelve years after its founding, 2XU finally chose to enter China.

“We spent a year looking for partners, six months planning, and our first physical store will open in the second quarter of next year,” said Paul Higgins, Global President of 2XU, in an exclusive interview with reporters.

▲ 2XU showcases its different product series.

This is a prudent choice.

Higgins had been waiting for the Chinese sports market to mature and become more segmented, which would lead to greater demand among athletes for more specialized compression gear. His first trip to China was in 2008 to watch the Beijing Olympics. Over the past decade, he has visited China nearly 30 times and witnessed dramatic changes in the market. “I think if we had come here 10 years ago, our user base might have only been national team athletes, and table tennis was the most popular sport in China.But now, there are more and more gyms in China, and many beginner sports enthusiasts are becoming more advanced,” said Higgins. The size of the potential user base is a key consideration for 2XU.

On the other hand, to achieve global expansion, 2XU must capture the rapidly growing Chinese market. Competitors like SKINS and CEP have already started laying out their presence in China. Investors have also exerted pressure and provided impetus. In 2013, L Catterton Asia, a subsidiary of the LVMH Group, invested $75 million to become the majority shareholder of 2XU. “LVMH told us in 2015 that we had to talk about China. Soon after, 2XU began market research,” Higgins said, adding that 2XU needs three years to prepare before entering a new market.

▲ 2XU founders Jamie Hunt, Global President Paul Higgins, China President Li Shujun, L Catterton Asia Greater China Head Huang Hanji, and Zhongzhe Musang founder Yu Yong

GXG, a Chinese men’s apparel retailer also controlled by LVMH, became 2XU’s partner in China, and Li Shujun, who previously led GXG’s e-commerce division, became the president of 2XU China. Known as the “Million-Yuan Sister” for leading GXG’s Taobao store to exceed 10 million yuan in sales on Singles’ Day in 2010, Li Shujun has also served as General Manager of Tmall Fashion.

Li Shujun and Zhongzhe Musang, GXG’s parent company, established Ningbo Musang Max Brand Management Co., Ltd., together with 2XU Hong Kong (2XU HK LIMITED), forming Tuxun Sports Products (Ningbo) Co., Ltd., the entity registered by 2XU in mainland China. Currently, Li Shujun leads a team of 33 people and has headquartered the Chinese company in Hangzhou.

“Igniting” the high-end sports crowd

By focusing on compression wear as its core category, 2XU targets three major types of sports: running and triathlon, high-intensity cross-training, and team sports.With high-performance products averaging nearly $100 in price, 2XU’s target users are professional athletes and advanced sports enthusiasts.

“We have a very professional athlete demographic—national team and state team members—who are willing to do anything to improve performance. This group makes up just 1% but is very important,” said Higgins.

Undoubtedly, athletes and professional teams are 2XU’s core clients. According to data provided by 2XU, 29 out of 30 NBA teams have purchased 2XU products.

“LeBron James and Stephen Curry both buy our products with their own money,” Higgins stated,“Most brands spend a lot of money on marketing in the early stages, but we are completely different. We haven’t spent a single cent on marketing.”In 2012, 2XU also became the official compression product supplier for the U.S. Navy SEALs.

In its early days, 2XU did not allocate resources to marketing but instead invested more funds into R&D, including fabric development, product design, and testing. Higgins said that from 2005 to 2009, 2XU focused on developing PWX fabric—a material known for being lightweight yet strong with excellent compression properties—and R&D accounted for almost half the cost, reaching several million dollars.Investing in higher R&D costs to ensure product quality ultimately also improved product repurchase rates.

This outcome also significantly reduced 2XU’s return rate. “The return rate for most companies is 1.5%–2%, but ours is 0.17%. People say that’s great because fewer returns save money, but behind the scenes, we’ve spent a lot on testing,” Higgins said. Despite the relatively high unit price of around $100, the low return rate helped build a positive reputation for the products.

At the other end from professional athletes are entry-level sports enthusiasts. “They don’t work out too intensely—maybe doing a bit of yoga or Pilates—and they want comfortable, good-looking sportswear. There are already thousands of brands serving them, so they’re not our target audience,” Higgins said.

The largest group is the intermediate-level sports enthusiasts—those who engage in high-intensity training and are top performers in their groups. In Higgins’ view, this group wants sportswear that looks good and also helps enhance their performance. “For example, in the U.S., this group numbers around 85 million people, including those involved in team sports, CrossFit, or Soul Cycle classes. They work out four times a week—that’s a huge market. Maybe 10 years ago, this group was only about 20%,” Higgins said.

Compared to professional athletes, 2XU’s products offer greater benefits to intermediate-level sports enthusiasts. “An average person might go skiing for a week during holidays, but by the second or third day, their legs are extremely sore because they aren’t trained enough—they need the kind of support 2XU provides more than professional athletes do,” Higgins illustrated with an example.

▲2XU has many celebrity clients.

At the channel level, 2XU currently has over 5,000 retail stores in 75 countries and regions, including 49 full-price stores.

In addition to the mature U.S. market, 2XU also values emerging Northeast Asian markets such as China, Japan, and South Korea. “Northeast Asia is what excites us the most. We’ve just opened a store in Tokyo, and we’ve also established a joint venture in South Korea.”

2XU has set up design centers in Tokyo, Seoul, and Hangzhou, and provides tailored products for these markets. Over the past 12 months, 2XU’s Asia market has grown by as much as 51%, making it the fastest-growing region globally for the brand.

But even between China and Japan, there are significant market differences. “Japanese consumers run a lot, love baseball, and already have a mature sports market. In China, many people are just starting to get into sports,”“People at all levels—cycling, marathons—looking for fun and social interaction,”Higgins said.Differences in sports concepts and habits also lead to varying product demands, but this gap is narrowing. “In 2009, I’d say the Japanese cared a lot about quality, while the Chinese preferred flashy, stylish brands. But now, Chinese consumers are starting to pay for quality, focusing more on their own experience, the product experience, the sports experience. They want products that not only look good but also truly benefit them,”Higgins said.

The Blue Ocean of the Sports Upgrading Era

As Higgins said, sports upgrading is the premise for 2XU to establish itself in the market and achieve expansion.

As more beginner sports enthusiasts transition into passionate, high-level athletes, their demands for product performance have also increased. Although China’s sports population has grown rapidly over the past decade, it’s undeniable that the consumer base for high-end compression wear remains small.

Li Shujun understands this gap. She believes the gap between domestic and international sports industries is 20 years, and even 10 years compared to Japan and South Korea. “Abroad, we go skiing, kayaking, and camping on weekends, but in China, a large number of people are still focused on running and fitness, which are relatively low-cost activities,” Li Shujun said. “But look at buying a set of skiing or diving gear—it’s expensive. That requires material foundations, as well as time and mental investment.”When small gyms are everywhere, it shows that China’s sports level is still quite basic and at an early stage.”

On one hand, the market for all-category brands integrating shoes and apparel is almost saturated. Globally, Nike and Adidas have become the unshakable duopoly. In the domestic market, Anta is widening its lead, while Li-Ning is striving to catch up. From this perspective, the mass sports goods market is undoubtedly a red ocean. During “Double 11,” Nike launched many products around 200 RMB.

But on the other hand, as both sports and consumption continue to upgrade, segmentation is becoming an inevitable trend, and people are placing higher demands on single-category products.This is also why a large number of high-end niche brands have entered the Chinese market in the past one or two years, such as Lululemon, which started with yoga pants, Descente, known for skiing and cycling, as well as outdoor brands like Arc’teryx and trail running brands like Salomon. Among domestic brands, there are also emerging names like Little Triangle, Muscle Dog, Monster Guardians, and Balance Faction, targeting broad outdoor, fitness, and women’s sports categories respectively.

What she values more is the future potential. In terms of per capita sports consumption, China is only one-fourth that of Europe and the U.S. Research by Euromonitor shows that in 2016, China’s per capita expenditure on sports goods was $18.04, while most developed countries were above $100, and in the U.S., the figure reached over $300.

“After China’s per capita GDP exceeds $20,000, a large number of people will start diving, skiing, and surfing. At that time, the market will need more niche brands, and we pioneers will have an absolute advantage,” Li Shujun said. She hopes 2XU can become a market pioneer through early layout and thus seize the opportunities when the market takes off.

“Today, China as a whole lacks upgraded service brands, upgraded apparel brands—any kind of upgraded brand. From the perspective of sports upgrading, there is still huge blue ocean potential in sports,”Li Shujun said.

Along with this upgrade, consumers’ acceptance of higher prices has also increased. Like most foreign brands, 2XU’s pricing is not low. For example, compression pants range from 349 RMB to 1,399 RMB, with an average price of 499 RMB. Li Shujun believes 2XU wins on cost-performance.

▲2XU Aims to Be the Industry Leader in Compression Wear

In the compression wear niche, 2XU pursues steady, long-term growth. “I think 2XU will definitely make a splash, but not in the way of massive sales that people might expect. I don’t want a flash-in-the-pan internet sensation. I want it to slowly grow from low awareness to high recognition in China.”

The challenge for 2XU is that when this niche market hasn’t fully exploded yet, the user base is still small. Li Shujun isn’t worried about this.“I’d be very satisfied if 8 million out of 200 million middle-class people buy our products. Let’s take it slow in the first phase—we’re not in a rush.”She plans to sell 140,000 pairs of compression pants in the Chinese market within the next three years and open 50 stores in 30 cities. One of her bases is the “China’s Best Sports Cities” list published by Yicai Media, which features 30 Chinese sports cities. In the first year, 2XU aims to open 10 physical stores in cities like Beijing, Shanghai, Shenzhen, and Hangzhou. In addition to company-owned stores, 2XU will also seek partnerships with agents.

In terms of expansion speed, Lululemon, which has been in China for nearly a year, serves as a reference. Currently, this Canadian brand has opened 8 physical stores in Shanghai, Beijing, Chengdu, and Guangzhou, all under a direct-operated model.

For 2XU, another major challenge lies in marketing resources. “Many events and activities are basically monopolized by big brands,” Li Shujun said. 2XU’s marketing strategy in China will include three approaches: pop-up stores in CBD complexes, sponsoring professional events like triathlons, organizing 2XU training camps and compression runs, establishing 100 running groups nationwide, and collaborating with fitness groups for tour performances. However, 2XU currently has no plans to sign brand ambassadors but will leverage influencers to build a fan economy.

To reach more consumer groups and scenarios, 2XU has also launched a casual sports series for the Chinese market, accounting for 20% of its total products. “Fashion is a lifestyle. I might be working during the day, doing business collaborations, but like last night, I took off my coat and started exercising with my boss—I like to mix sports with business style,” Li Shujun said, pointing to her outfit: a black 2XU polo shirt layered over a long black vest.

▲The casual sportswear collection of 2XU made its debut at the launch event.

But she also noted that currently all compression series products are purchased from the Australian headquarters. "In China, we may only consider local production when sales volume reaches a certain scale, but for non-compression products, we will consider designing and manufacturing them in China."

Amid the trends of sports upgrading, consumption upgrading, and the rise of athleisure wear, "new retail" is a topic no retail brand can avoid. "In GXG’s financial reports, there’s 'sales' and 'offline sales'. We were puzzled about what 'offline sales' meant, but later realized it’s what we understand as 'retail'. The world has changed dramatically," Higgins remarked. Although Higgins had not previously heard of this concept, he believes 2XU has already been experimenting with "new retail" in Australia and the United States. "Customers can place orders online and pick up or return items in-store—essentially integrating online and offline channels."

The so-called retail winter is due to the lack of full integration between online and offline channels. "It used to be the traditional era where channels ruled, then came the internet+, and now it’s about coexistence. Among those that can still lead after coexistence, that’s the top player," said Li Shujun.

However, 2XU’s first step into the Chinese market was still focused on the online channel. In September, the 2XU Tmall store went live. Although for this year’s "Double Eleven" shopping festival, Li Shujun stated, "In the first year, we had no strategy and didn’t set any targets for ourselves."

But ultimately, "Double Eleven" gave Li Shujun an optimistic signal: on the first day, the 2XU Tmall flagship store achieved a shopping cart conversion rate of 96.8% within the first hour, with traffic four times that of a normal day, and sales six hours into the event reached 120 times the daily average. For 2XU, it was a promising start.

Source: Lazy Bear Sports