Pop Mart's Strategy: Diversifying IP and Product Lines for Sustained Growth Beyond the Labubu Craze

South China Morning Post

The Rise and Decline of Labubu's Popularity [0:00]

• Labubu's Explosive Success [0:00]
  • The "ugly-cute" doll took the world by storm, generating over US$600 million for Pop Mart [Image 1] [0:01].
  • A Pop Mart store displays various Labubu merchandise, illustrating the brand's broad appeal [Image 10] [0:09].
  • This success propelled Pop Mart's founder, Wang Ning, to become China's 10th richest person [Image 13] [0:13].
• Signs of Fading Hype and Market Correction [0:17]
  • Several months later, there were signs the hype may be fading, indicated by declining resale prices. [0:17-0:21]
  • Experts note that anything which is a trend will go out eventually [Image 15] [0:23].
  • In September, Pop Mart's share price slumped after a downbeat assessment, wiping out almost a quarter of the company's value [Image 17] [0:28].
  • The video raises the question: "Can Pop Mart survive The Crash of the Labubu Craze?" [Image 23] [0:48].

Pop Mart's Business Model and Growth Strategy [0:49]

• The Blind Box Phenomenon [0:54]
  • Pop Mart stores feature "blind boxes" where customers shake boxes for clues to what's inside [Image 27] [0:56].
  • This mystery box strategy is crucial for building hype around the company's products, with a close-up showing the variety of collectibles available in a series [Image 31] [1:02].
  • Company's Transformation and Rapid Growth [1:06]
    • Founded in 2010 by entrepreneur Wang Ning, Pop Mart initially started as a boutique selling lifestyle products. [1:06-1:13]
    • In 2016, after 5 consecutive years of losses, Pop Mart introduced the blind box model, leading to a quick financial turnaround as shown in an infographic [Image 33] [1:14].
    • Only a year later, in 2017, the company was profitable, and by 2018, its net profits reached nearly 100 million yuan (US$14 million). [1:21-1:29]
    • The company has seen rapid growth since then, and the blind boxes have earned it a large fan base. [1:30-1:35]
• Psychology Behind Blind Boxes [1:36]
  • According to Pop Mart's prospectus, about 70% of toy consumers would purchase blind box toys three times or more for a specific design [Image 36] [1:36].
  • The blind box mechanism plays on "variable ratio reinforcement," which is ultimately the gambling mechanism behind slot machines [Image 39] [1:55].
    • Out of 144 blind boxes, one has a special edition, which can be resold in the secondary market at 20-30 times the original price, as illustrated by a display of collectible figures [Image 45] [2:14].
  • Pop Mart did not originate the blind box concept; it evolved from the popular Gashapon capsule toy machines in Japan during the late 1980s, shown with a wall of such machines [Image 48] [2:25].
• Focus on Intellectual Property (IP) [2:35]
  • Pop Mart's superpower is its focus on intellectual property, operating more like a talent scout for discovering and signing trendy toy designers from around the world [Image 57] [2:57].
  • Molly and The Monsters: Key IPs [3:32]
    • In 2016, Pop Mart discovered its first proprietary IP, "Molly," a child-like figurine created by Hong Kong artist Kenny Wong, who is seen with his creations [Image 68] [3:34].
    • More than 85% of the company's revenue came from exclusive products developed with artists in 2024, as detailed in a pie chart [Image 74] [3:51].
    • Consumers first fall in love with the IP, and then they are willing to buy the blind boxes; if the IP is not famous or popular, the blind boxes wouldn't be as phenomenal. [3:59-4:27]
    • An opened blind box reveals a Labubu plushie, highlighting the product [Image 84] [4:33].
    • Labubu originated from the elf family characters in "The Monsters" children's book series, created by Hong Kong-born artist Kasing Lung, who is seen with his original artwork [Image 86] [4:39].
    • For years, the figurines remained relatively niche but gradually gained popularity as Pop Mart made improvements, transforming Labubu into cuddly plushies in 2023 [Image 105] [5:44].
    • Pop Mart moved to attach keychains onto Labubu, turning them into bag charms, as seen on a customer's bag [Image 108] [5:55].
    • The product's star power, amplified by celebrities like Lisa from Blackpink showcasing her collection in April 2024, created a global frenzy within a year [Image 110] [6:02].
    • In May, fights reportedly broke out among consumers waiting to buy Labubu in the UK, depicted by a chaotic crowd pushing against barriers [Image 115] [6:15]. An "Important Notice" sign from Pop Mart UK announces a pause in plush toy sales [Image 125] [6:20].
    • In June, a first-generation Labubu figure sold for US$150,000 at an auction in Beijing [Image 128] [6:26].
    • Prices soared on the resale market, with a rare edition toy selling at 45 times its original retail price, as shown in a screenshot of online listings [Image 129] [6:31].
    • The hashtag "Buying Labubu is more profitable than buying gold" sparked on Chinese social media site Weibo [Image 130] [6:39].
    • The toy boosted the fortunes of Pop Mart, driving overseas revenue up fivefold in the first half of 2025. [6:46-6:54]

Challenges and Future Outlook [7:19]

• Market Saturation and Regulatory Scrutiny [7:19]
  • Cracks have started to show since Labubu's runaway success. [7:19-7:24]
  • It's a highly risky business because once a lot is bet into an IP, and if that trend dies out, all money can be gone [Image 142] [7:31].
  • Secondary market prices of Labubu toys have been falling since Pop Mart scaled up production, as seen in a screenshot of online marketplace data [Image 143] [7:38].
  • Industry experts say it is typical of most crazes, whether it be Labubu, comic books [Image 147] [7:48] or NFTs [Image 148] [7:50].
  • But if the bubble ultimately bursts, those who stock up on goods can lose everything, illustrated by a large crowd of people waiting in line [Image 151] [8:05].
  • As more products flood the market, the value derived from scarcity is inevitably diminished. [8:13-8:21]
  • At the height of the frenzy in June, The People's Daily, the Communist Party mouthpiece, poured cold water on blind boxes. [8:34-8:41]
  • Citing legal experts and academics, the newspaper called the products "business traps," designed to use unpredictable rewards to encourage repeat purchases, with a large Labubu display in a store accompanying the text [Image 162] [8:45].
  • A few months later, US corporate bank JPMorgan Chase downgraded the firm due to weak catalysts and an unattractive valuation [Image 168] [9:03], with Labubu plushies in a store representing the "weak catalysts" [Image 170] [9:07].
  • The forecasts erased billions of dollars from Pop Mart's value [Image 173] [9:18].
• Strategies for Long-Term Sustainability [9:19]
  • The drawbacks of this business model are that if one cannot extend the life cycle of a successful IP, all investment becomes a sunk cost, as seen in a vibrant store interior filled with merchandise [Image 176] [9:27].
  • The typical lifespan for popular intellectual properties like trendy toys has historically been two to three years, according to Goldman Sachs. [9:35-9:48]
  • Some companies have made good bets, like Hello Kitty creator Sanrio, which owns a character that has survived 50 years, shown by a person in a Hello Kitty costume [Image 183] [9:52], or Disney, around for over a century, as depicted by Disneyland's iconic castle [Image 192] [10:30].
  • While Pop Mart has already won its first gamble by sparking the Labubu craze, its next step is to outperform the typical IP lifespan [Image 187] [10:09].
  • Pop Mart's CEO Wang Ning states that their young team has plenty of patience and hopes to build something that endures [Image 190] [10:22].
  • To extend the lifespan of its top-tier IP, Pop Mart has continuously pushed out various types of related merchandise, including launching mini Labubu phone charms in August, as shown with a customer holding a charm [Image 203] [11:18].
  • Pop Mart also developed "Pop Land," a Beijing theme park where visitors can interact with life-size Labubu characters, such as a large Labubu mascot interacting with guests [Image 206] [11:29].
  • The company is developing a film and an animated series starring Labubu [Image 208] [11:36], as well as launching the jewellery brand POPOP [Image 211] [11:41].
• Optimism Amidst Uncertainty [11:44]
  • Some experts remain optimistic about Labubu's popularity, viewing the excitement's decline as a healthy development stage. [11:44-11:59]
  • A customer having a Labubu-themed bracelet tried on at the POPOP store indicates Labubu's continued evolution [Image 217] [11:58].
  • Experts believe Labubu is "not done yet" and will continue to surprise with new ways, with a high chance it can become a lifestyle brand, potentially the "next Hello Kitty," as shown with Labubu-themed hats and plushies [Image 225] [12:30].
  • Analysts at HSBC believe worries about Labubu may be overblown, and that supply and demand of the toys will not tilt 180 degrees, as illustrated by a busy Pop Mart store [Image 231] [12:44].
  • In China, a "lipstick effect" economy exists, where people seek small, affordable purchases that make them feel good during economic downturns, which Labubu toys fulfill, seen with a customer happily interacting with a Labubu display [Image 236] [13:17].
  • Pop Mart is not just betting solely on Labubu, but is diversifying with other intellectual properties like Crybaby (a top-selling collectible), shown in a display of the figures [Image 242] [14:02].
  • Collectors are also chasing other intellectual properties like Twinkle Twinkle, Hirono, and Peach Riot, with a display showing a variety of these figures [Image 250] [14:27].
  • Pop Mart's releases in recent years have resembled a continuous relay race, with walls of diverse figures on display [Image 251] [14:31].
  • If you relied on only one IP or two IPs, then your business will be in trouble. [14:37-14:51]
  • Pop Mart's website showcases many IPs, suggesting a continuous effort to find the next Labubu, despite inherent uncertainty, and mascots in a parade at Pop Land symbolize this ongoing search [Image 267] [15:10].