From the source: Paul Higgins, 2XU
BIO: Paul Higgins is the global CEO of leading compression and high performance sportswear brand 2XU. Higgins joined 2XU in 2016, bringing his executive management expertise, extensive retail operations experience and proven leadership to the brand.
Prior to joining 2XU, Paul spent over a decade with Oakley in various roles, including both vice president and managing director of Oakley Asia Pacific. He is also a qualified physiotherapist and former triathlete.
COMPANY PROFILE: 2XU
2XU was founded in Australia in 2005 by former professional triathlete Jamie Hunt and business partners Aidan Clarke and Clyde Davenport. The brand produces compression and high performance sports apparel worn by elite and everyday athletes across all sports and activities. Today, the company has an annual turnover of US$75 million, employs more than 300 staff and sells in more than 70 countries. 2XU has offices in Australia, New Zealand, the USA, Canada, the UK, China and Japan.
IRW: How would you describe 2017 for 2XU?
PH: It’s been a really massive year and we’ve done a number of things, the most significant being around reorienting our innovation and product teams and then separately, making a few really big geographical changes.
On the innovation and product teams, we have moved from a model of having a single team that were handling research and development and everything from creating mood board inspiration right through to going to market. Essentially we’ve now got six functions within our product and innovation area. One of them is R&D, which is broken into fabric testing and innovation and works with the team creating garments and testing the performance of those fabrics.
The other part of the R&D team is on-body testing, like wind tunnel testing and on-body testing in conjunction with the Australian Institute of Sport. The other product teams we have are endurance and compression, which is what people know us for. We have apparel/accessories team focused on running and training and then we have a large custom team, which is a big area of the business not many people know about.
We have a special projects team, which is working hand in hand with R&D on some unusual projects. We’re working on a product line with Kanye West who wants to bring our viewpoint on performance fabrics into his world of fashion.
We’ve moved from having a single team juggling 60 balls to having a focus on vertical categories and research and development. That’s the first big change in the last 12 months.
The other massive thing we’ve done is open up a subsidiary in Tokyo and we’ve done a joint venture with China. We’ve appointed a South Korea retail licensee which will open 50 department stores concept areas.
We’ve moved our US office from sleepy San Diego up to West LA and we’ve now got 37 people working in our Santa Monica office. We’ve restructured our Europe business – we were running a distribution network from Melbourne and we now have Europe, Middle East and Africa sitting in London.
IRW: What plans do you have for 2018?
PH: Locally, we’re continuing to manage carefully that spectrum between our own physical stores and website presence as well as the wholesale accounts that have been with us for along time and everything in between – third party marketplaces, e-commerce only dealers. It’s a complicated world. We’re lucky that in the sense that we’re still a small business, even though we’re in 71 countries and north of $100 million in revenue.
It’s lovely. Where I sit if I lean over, I can grab the head of Australian us sales and behind me is the head of global e-commerce.
Essentially, we are committing to our strategy of opening up our 2XU stores in A-grade shopping centres We’ve opened up in the last 12 months in Chadstone, Doncaster and Chermside and we’ll continue to open a few, but not a whole lot [in Australia]. We’ll be de-emphasising a lot of our high street stores. The traffic in shopping strips from Paddington and Mosman to Camberwell, Hawthorn and Malvern – these areas are the first victims in the adoption of ecommerce and the next victims look like the B-grade shopping malls.
As a brand, we’ve lived through that experience in the US. We’ve had business there for 10 years and we’ve seen what’s happened in those shopping environments, so we’ll be maintaining a moderate commitment to A grade malls, but de-emphasising high street stores.
We’re also currently going through our wholesale retailers and committing more to those who are good operators, that’s a global strategy for us. I was in the US last week and part of my trip was spent going to all of our most significant specialty retailers as a mystery shopper. I walked into a store in northern California and was chasing a certain colourway of a certain shoe and the guy said, ‘No we don’t have it in your size, but which hotel are you staying at? We can ship it to you in four hours’. It was just amazing customer service.
On the other side of things, I walked into one dead store that had shocking merchandise and poor stock selection. Again they didn’t have the shoe I wanted in the size or colourway, in fact, hardly any colourways at all. The salesperson’s response was, “Oh gee, when are you leaving? We could get it to you in seven days. I think we have a shipment coming in Friday, but we can’t see on the system what’s in that shipment.”
The eventual advice was, “Why don’t you try going two miles away to our competitor’s store?”
As a brand, we want to continue to commit to wholesale operators, but when we see some of them getting it really right, that’s where we want to increase your commitment by spending our own money and installing better trade fixturing and mannequins and better presentation in their stores.
As for the others where they’re getting it wrong, we don’t want to walk away, but we’ll implement a new business-to-business ecommerce system that allows them to order online so they get their product a bit cheaper, but they won’t be receiving any of our capital expenditure on store fixtures or regular servicing because we need to de-emphasise that part of the channel.
IRW: It sounds like you spend a lot of your time sussing out stores, then.
PH: I’d say I’m in stores 22 weeks of the year and 16 of them are spent overseas. Next week, I’ll be in Japan, Korea and China and I’ll be spending most of that time not in meetings, but in the market. I often start meetings where we talk about product or distribution strategy and I’ll often start by saying, “Everyone in the room who has spent less than 100 hours talking to consumers or those people who serve them, please stand up and leave the room.”
If you haven’t spent that time in the last three to four months talking to frontline staff or consumers yourself, then what place have you got to open your mouth in the meeting? It’s something i believe in strongly, as I have or many years.
IRW: How are things going domestically for 2XU?
PH: 2XU is growing well in Australia, we’re still growing 18 per cent year-on-year, which we’ve done for the last three years in a row, which is pretty staggering growth. With new accounts, stores, ecommerce and competition store growth, it’s been a good run.
That’s on the back of two things. Clearly, the Australian consumer is starting to get serious about training. They’ve moved into significant part of the world population – around 10 per cent, we reckon – who are actually training really hard, be it doing these functional training and high intensity training, right through to high rate spin classes and reasonably high heart rate yoga classes.
It seems like the uber cool thing isn’t just exercise, it’s about smashing it hard – I’m talking about the average person between 20 and 45 years old who has a busy life, starts their day with a 45-minute session and their heart rate’s at 150 to 170.
That didn’t happen five years ago, so there’s been a movement also beyond athleisure to high performance exercise. So we’re the beneficiary of having always occupied this premium high performance space. 2XU has always been an incredible product innovation and development company in terms of distribution, but in terms of aggressive marketing and branding, we’ve almost been asleep at the wheel for the last few years. But because 2XU has always made this high performance product and not let the consumer down, the brand is healthy, despite not having had a lot of discipline around band management.
We’ve been lucky that we occupy the space where it’s happening in many cities around the world. The trick now is for us to do brand work so we can claim it was all our own doing rather than just being a matter of good timing.
IRW: What’s it been like learning about Asia and the consumers over there?
PH: I’ve been working in Asia now for 15 years. I started the Oakley brand in China and India and I remember very early on, the head of marketing asked me about the Asian consumer and I said, “You can’t even make that statement.”
People generally understand the difference between an Indian and Japanese consumer, but the differences between Japanese and Korean consumers and the pride and beliefs they have is vast. Even within China, the difference between consumers in the north, south, east and west are vast.
That’s the difficult thing in approaching Asia, not just in terms of different consumer mindsets, but things like silhouettes and fits. Comms strategies also need to be really tailored. One example of that is in the last 12 months as we’ve entered more seriously into these regions, we’ve started a design centre in Tokyo and Hangzhou, where we do apparel creation just for those markets. It adds a lot of complexity in terms of getting the global colour stories and graphic stories right and getting the brand DNA consistent across critical pathways for each of those development centres is difficult, but it’s paramount.
If you were to create an Asian range and just sell it across Asia, you’d be selling to an Indonesian who’d look at something for a person in Korea or northern China and it wouldn’t suit them. Or selling it to a Japanese consumer who thought, ‘That isn’t anywhere near sophisticated in terms of aesthetic as I want and I want a higher quality finishing and quality fabric.’
We think about different consumer segments, the Japanese consumer, versus the northern Chinese consumer versus the eastern and southern Chinese consumer. And then we group together the Hong Kong through to Singapore and Indonesia, we call South Asia. Our comms, product development and segmentation strategies are all oriented around those five different Asian clusters. It adds a lot of complexity, but it ensures that when you’re in the market, you’re reasonably well localised.
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