Baiguan · China
TIER 4 Tue, 6 Aug 2024 10:06:46 +0000
How a Chinese toy company turned plastic figurines into a billion-dollar empire and set its sights on international expansion ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ | | ---|---|--- | | | Forwarded this email? Subscribe here for more --- --- Become a paid subscriber to gain access to our exclusive Discord group reserved for paid subscribers only. * * * # Will Pop Mart (9992.HK) become China's Disney? ### How a Chinese toy company turned plastic figurines into a billion-dollar empire and set its sights on international expansion | | Amber Zhang --- | Aug 6 --- | --- --- | | | --- | | --- | | --- | | --- | | READ IN APP --- _*This post is not sponsored by Pop Mart_ Pop Mart (9992.HK) emerged as a surprise winner amid China's not-so-enthusiastic consumer market after the pandemic. While domestic consumers remained cautious, resulting in a decline in the average selling price of most online purchases categories, Pop Mart was able to record increases in both sales and average selling price. Moreover, its expansion into international markets, particularly in Southeast Asia, met with significant success in 2023. | | ---|---|--- Pop Mart, founded in 2010, has uniquely positioned itself in the Chinese market by branding its products as "潮玩" (trendy toys). The company has created a phenomenon where its toys are not just playthings but collectibles with "investment" value. Pop Mart sells its toys through "盲盒" (mystery boxes or blind boxes), a type of product where consumers cannot identify which toy figurine they will receive before opening the box. This concept originated in Japan and became popular among young Chinese consumers. Many consumers trade Pop Mart's limited-edition toys (which require buying numerous blind boxes to increase the chance of getting one) on the second-hand market, treating them as valuable assets rather than mere toys. The business model wasn't without doubt when the company first began its journey. Some questioned whether Pop Mart's business model could sustain consumer interest (including myself, as I couldn't sympathize with buying a bunch of plastic toys just to get the limited edition ones in the blind box). After all, unlike companies like Disney or Japanese anime creators, Pop Mart doesn't own its content other than plastic figurine toys that can easily be copied. Upgrade to paid | | ---|---|--- One of Pop Mart's most popular limited edition action figure Skullpanda When Pop Mart's stock price peaked in February 2021, shortly after its IPO, the price went downhill from there, seemingly validating these doubts. However, few expected the stock to rebound amid the sluggish domestic consumption market in 2024. Surprisingly, the company's resilience is noteworthy not in the hot consumer market of 2021, but rather when consumers became more cautious post-pandemic. The company has gained over 86% year-to-date in 2024, while the Hang Seng hasn't turned green. | | ---|---|--- ### The domestic success At the heart of Pop Mart's success is its mystery box concept. These boxes, typically priced around $14.99 in the U.S., contain a possible surprise figurine from a collection of 12 designs. (The limited edition ones could be sold separately for a much higher price. It pretty much works like a lottery system. You pay the "expected value" if you want to buy the surprise figurine right away without having to buy blind boxes.) The allure of potentially receiving a rare or limited-edition figurine has created a collecting frenzy among consumers, with some saying they feel an OCD-like motivation to get that limited one to make their collection complete. Additionally, Pop Mart has gone all-in on strategic IP collaborations and partnerships with popular franchises like Disney and One Piece, which have helped Pop Mart broaden its appeal across different demographics. Such collaborations can move quickly, fast enough to catch all the trendy topics among young consumers. For instance, Pop Mart has launched a pre-sale of the Space Molly, one of the most popular action figures, in collaboration with China's female basketball team in anticipation of the 2024 Olympics. This action figure sells for a whopping 1299 RMB (~180 USD). | | ---|---|--- 2023 gave Pop Mart a significant boost. With the consumer market and job market (especially for young adults) in a less-than-ideal situation, the joy of opening a mystery box provided a much-needed moment of pleasure for young adults. I often think of it as another form of "lipstick purchase." An affordable fun experience and the joy of showing off limited editions came at just the right time for young adults in 2023. The trendy toy and action figure markets were generally good in China in recent years, as we have previously observed. However, in 2024, Pop Mart performed exceptionally well in online sales compared to its foreign peers, such as Sanrio and Bandai Namco. | | ---|---|--- Upgrade to paid ### Going global Beyond the domestic market, Pop Mart had a successful year expanding internationally in 2023. The company entered France, Malaysia, Thailand, and the Netherlands, with plans to expand into Indonesia, Vietnam, and the Philippines in 2024, and to open more flagship stores in the UK, France, the US, Japan, and South Korea. Pop Mart prioritized the Southeast Asian market due to its similarity to the mainland Chinese consumer profile. Research showed that both Chinese domestic and international consumers share similar demographics, with 75% female and 25% male, aged 15 to 35 [source]. Pop Mart's international strategy goes beyond just entering new markets. They've really put effort into creating localized toys that resonate with different cultures, languages, and religions in each country. For example, in Thailand, Pop Mart's most successful overseas market, the most popular item is the quirky "Labubu" character with sharp teeth and rabbit ears. In Japan, Pop Mart collaborated with well-known artists like Hiroto Ohkubo and Yosuke Ueno to create designs that appeal to Japanese tastes. In Canada, they incorporated iconic elements like beavers and maple leaves. And in Argentina, Pop Mart even had a Messi-looking action figure blind box that soon became super valuable on the second-hand market. | | ---|---|--- The Messi Labubu sold on eBay According to Pop Mart 2023 financial report, Pop Mart's total revenue was 6.301 billion yuan, with revenue from Hong Kong, Macau, Taiwan, and overseas markets reaching 1.066 billion yuan, accounting for 16.9% of the total. In the first quarter of 2024, revenue from Hong Kong, Macau, Taiwan, and overseas markets increased by 245% to 250% year-over-year. Upgrade to paid ### Pop Mart wants to be China's Bandai and Mattel Pop Mart's CEO Wang Ning has high hopes for Pop Mart to become the world's leading toy company. According to his plan, in 2024, overseas revenue will surpass the entire company's revenue from 2019, exceeding 1.68 billion RMB. To do so, the company realized that simply copying their success in China won't easily transfer to the global market. > Internally, they analyze data to observe market feedback for different IPs, local consumer preferences, and even understand preferences for movies, clothing, and books by the locals. > > However, some experiences "take three to four years to figure out," as Pop Mart executives have stated publicly. For example, American consumers prefer occupation-based figurines over generic human figure ones, Japanese favor monster images, and the South American market likes skull designs. > > Wang Zhining (pseudonym), a designer who has worked at Pop Mart for many years, believes that Pop Mart's localization attempts are just beginning. Some overseas toy versions only change colors and decorations without altering the mold. "Localization isn't just about changing an element; it's more about understanding the local culture," he says. - According to the interview by South Reviews Could Pop Mart become China's Bandai, Mattel, or even Disney, instead of a company selling plastic toys that prey on people's consumer psychology to collect figurine sets? I think the core challenge remains whether Pop Mart can tell stories and create content that resonate. When looking at Chinese companies going global, you really see two models: 1) the Temu model where low price is the core strategy (after all, wanting affordable products is an universal appeal for all consumers despite nationality and demographics) and 2) the Pop Mart model, which tries to sell products at a premium margin by creating emotional connections with consumers. The latter is certainly a more difficult path, and we haven't seen many Chinese companies that have successfully done so. In my previous post, I discussed how China awaits a time when "soft power" can create global influence and tangible economic potential, just like how Japanese soft power has been influencing China's consumers in a significant way. Although Pop Mart is still quite young when it comes to such content creation, I think it's still quite impressive that it has established itself as one of the few Chinese companies that didn't earn its global reputation for "cheap prices." On content creation, Pop Mart has also made some initial attempts. In September 2023, Pop Mart opened "Pop Land," a Disney-like amusement park in Beijing, elevating its brand beyond just plastic toys. The company has also explored anime and game creations: > It collaborated with Light Chaser Animation Studios to co-produce animated films like "New Gods: Nezha Reborn" and "White Snake 2," and launched its own mobile game "Homescapes." It has also invested in the Hanfu brand Shisanyu and the trendy boutique Solestage. Pop Mart wants to extend its reach, but these attempts still need more time and validation. - South Reviews Today's Pop Mart is essentially a giant marketing company that effectively captures trending themes among consumers and monetizes them. Whether Pop Mart can surpass itself and go from a trendy toy shop to a truly mature IP company with time-lasting content requires time to test. But I generally believe "emotional" consumption, whether from Pop Mart or similar companies, will see significant upside in China, as more consumers now seek novelty products that go beyond material needs. As for Pop Mart's global ambition? Time awaits. If you enjoy Baiguan, we encourage you to share it with friends, colleagues, or anyone who may find value in our content. _Our most supportive friend can earn up to**1 year free subscription ($150!)** through our referral program._ If you are already subscribed to the paid version of my newsletter, your subscription will be extended. Share ### Related Reads | | | #### What gets Chinese consumers to spend - Charts of the Week --- | | Amber Zhang| | * ---|---|--- | Aug 1 | | Read full story --- | | | #### A practical guide to 3rd Plenum's Decision for investors and business leaders --- | | Robert Wu| | * ---|---|--- | Jul 25 | | Read full story --- | | | #### Why is market unimpressed by 3rd Plenum? --- | | Robert Wu| | * ---|---|--- | Jul 30 | | Read full story --- We at Baiguan consider it our mission to act as a bridge between China and the rest of the world. By providing transparent information and world-class market intelligence, we aim to help all stakeholders achieve success in China's unique market conditions and help businesses make informed decisions. To this end, we have shared a portion of our premium data insights and market research to help you gain a quick understanding of the most important developments in China. 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