The infinite game of POP MART is in danger

Author | Wang Xiaojun

Editor | Huang Yu

Recently, LABUBU, the "top artist" from POP MART, has gained more popularity.

Not long ago, at Paris Fashion Week, Thai Princess Sirivannavari was spotted with LABUBU hanging from her Hermès bag. This led many fashion trendsetters to follow suit, attaching LABUBU to their Hermès, LV, and other luxury bags.

Since last year, in many stores around the world, people have lined up for hundreds of meters to grab LABUBU. In terms of its contribution to POP MART's performance, in 2024, the revenue from the THE MONSTERS series, which includes LABUBU, reached 3.04 billion yuan, a year-on-year increase of 726.6%, accounting for 23.3% of POP MART's total revenue.

LABUBU is extremely popular globally, and POP MART has also become one of the most sought-after stocks in the secondary market. On May 20, during trading, its stock price once reached HKD 212.2 per share, setting a new record for its highest stock price, with a market value briefly exceeding HKD 280 billion.

However, POP MART's business is also an endless game that requires continuous creation of sought-after hit IPs. Otherwise, when today's "female stars" fade, and users lose their novelty, POP MART may fall into a slump again, just like a few years ago.

Whether it can cultivate the next top artist is the market's new expectation for POP MART.

Cultivating Hits

Even those who don't pay much attention to trendy toys have come across a mischievous elf vinyl plush toy with a furry body, pointy ears, and a mischievous grin showing nine teeth on social media over the past two years.

She is LABUBU, a character from the "THE MONSTERS" series created by Hong Kong artist Long Jiasheng, exclusively signed and operated by POP MART. After several years of development, she has now grown into a popular "female star" under POP MART.

LABUBU and her companions were signed by POP MART in 2018 and have been somewhat lukewarm over the past few years. Her explosive popularity last year was closely tied to endorsements from celebrities and the boost from the Thai market.

In the past year, she has been wildly shopped by Thai-born girl group idol Lisa and was seen hanging from the Hermès bag of Thai Princess Sirivannavari. Even the Thai government has contributed to the popularity of this IP. Last year, a LABUBU doll dressed in Thai attire arrived at a Thai airport, where the Minister of Tourism and Sports, Phiphat Ratchakitprakarn, personally welcomed her and awarded her the title of "Magical Thailand Experience Officer."

Recently, on social media, LABUBU has become the preferred accessory for luxury bags like Hermès. Some netizens even stated, "Because of LABUBU, I want to buy my first high-end luxury bag." This indicates that LABUBU can even drive sales for Hermès.

This pairing may seem abstract, but there are many similarities between the two. One is the "ancestor of allocation," and the other is the "SSR of trendy toys," both adept at creating scarcity through hunger marketingAs we all know, Hermès has a very strict distribution mechanism, with different consumer levels corresponding to different grades of bags. To buy the flagship star of POP MART, one also needs to go through a series of complex processes, such as limited-time purchases and bundling non-popular products for sale. If one wants to get hidden editions, continuous blind box openings are required.

From this perspective, both rely on distribution systems to cater to affluent customers and use hidden editions to "harvest" young people, products of extreme social currency competition. Previously, wealthy individuals competed over the crocodile skin patterns of platinum bags, while now trendy individuals compete over the rarity of LABUBU, essentially following the same logic.

Even on social media, industry insiders analyze that the buyers of Hermès and LABUBU are the same group of people, both willing to pay for emotional value.

In terms of the second-hand market logic, both have many similarities. Hermès has maintained relatively good value retention in the bag industry, while in the second-hand market, LABUBU has also become the latest financial product for collectors due to its scarcity.

Now that they have become CP (couple), Hermès has also radiated more youthful vitality, while POP MART has once again elevated its status.

While LABUBU is exploding in popularity in Southeast Asia, POP MART is also intensifying its efforts to ignite this enthusiasm overseas.

In terms of new store locations abroad, POP MART has chosen major core landmark business districts, becoming neighbors with various luxury brands. In France, it opened a store on Boulevard Haussmann in Paris, close to Galeries Lafayette; in the UK, the store is located on Oxford Street in London, adjacent to John Lewis department store and the University of the Arts London.

The stores themselves are situated in core business districts, supplemented by limited editions and co-branded products, making POP MART's stores a social check-in center for tourists and local trendsetters, naturally possessing high exposure and traffic conversion advantages.

Recently, LABUBU launched its third-generation vinyl plush product series "High Energy Ahead" globally, and that night, there were long lines at the U.S. stores. The next day, the POP MART app topped the U.S. App Store shopping chart, marking the first time this official app reached the top of the shopping chart and jumped to fourth place in the overall free App Store rankings.

It is evident that the whole world is going crazy for this cute and quirky rabbit, turning it into a money-making machine for POP MART.

According to POP MART's 2024 financial report, LABUBU and its monster family raked in 3 billion yuan, equivalent to 8.3 million yuan in revenue every day.

Overall, THE MONSTERS contributed 23.3% of POP MART's revenue of 13.038 billion yuan, while in 2023, this series accounted for only 5.8% of revenue. From the contribution of various series to performance, THE MONSTERS was a key variable in last year's performance for POP MART.

Infinite Game

The explosive popularity of THE MONSTERS series has also helped POP MART's stock price emerge from the gloom of previous years, continuously rising since last year. By May 20, POP MART's intraday stock price reached a maximum of HKD 212.2 per share, with a market value exceeding HKD 280 billion at one point.

In this round of increase, analysts from Morgan Stanley pointed out that the strong global demand for LABUBU V3, especially in the U.S. market, will drive new store openings and become a key growth factor for 2025 to 2026However, trendy toys themselves are an infinite game that requires continuous creation of new products to attract users' attention.

After LABUBU became popular, it faces homogenized competition and user aesthetic fatigue, and POP MART cannot rely solely on LABUBU to rest easy.

Although LABUBU can now "CP" with Hermès, there are still many differences between them. Hermès still holds a dominant position in the luxury goods sector, but LABUBU's explosive popularity in the trendy toy market has a certain element of chance. Hermès can traverse various aesthetic cycles, but LABUBU may, like many of its predecessors, one day become a tear of the times.

After all, the princess's Hermès may hang LABUBU today, but tomorrow it could hang Jellycat. People rarely discuss aesthetic fatigue with Hermès, while in the trendy toy market, new products are always more anticipated. It can be said that in this CP, Hermès is solid, while LABUBU and others are fluid.

Trendy toys have their own life cycle. For example, LINE FRIENDS, which once earned billions in a year and was an Asian cash cow, closed its last offline store in mainland China in 2021. The transition from needing to queue for hours during its peak to closing stores took only five years.

It is worth mentioning that in April 2021, before and after LINE FRIENDS closed stores, POP MART released a limited edition Earth Daughter 400%, which caused long queues to "snatch dolls," comparable to the Spring Festival travel rush. However, years later, although the Molly series still contributes 16% of POP MART's revenue, a notable characteristic is that the Molly of that year was still a top-tier star, but now can only serve as a supporting role for LABUBU.

This shows that there are no eternal gods in the trendy toy circle, only new gods replacing the old ones.

POP MART has also been actively cultivating a group of "trainees" in hopes of smoothly taking over when LABUBU fades. However, explosive popularity, in addition to operations, also has a certain element of luck, with significant uncertainty. Currently, POP MART relies on China's strong supply chain to thrive in overseas markets, but in terms of IP, the main IP that can perform is still LABUBU, and the issue of IP iteration is likely to trouble POP MART for some time in the future.

It should be noted that such past experiences are not without precedent. After the popularity of Molly faded and the blind box business faced stricter regulatory constraints, POP MART experienced a period of hot IPs being out of sync around 2022. During that time, the stock price once fell below HKD 10 per share. This also indicates that the fluctuation of POP MART's stock price is closely related to the popularity of its IPs.

In addition to the biggest uncertainty of IP succession, the crazy second-hand trading is also becoming a risk.

Currently, many new LABUBU products have a several-fold premium in the second-hand market. As new products are launched, previous models lose value significantly, but the scale of scalpers hoarding continues to expand.

The second-hand market can accelerate the popularity but can also be a booster for a sudden drop. If the second-hand market continues to overheat, it may trigger regulatory actions similar to the previous blind box overheating; and if the market heat dissipates and the bubble bursts, with scalpers no longer speculating, it may accelerate the decline of this IP, which will also affect POP MART itselfIn terms of the capital market, according to the latest stock price, POP MART's price-to-earnings ratio has exceeded 80 times, which is at a relatively high level, indicating that the current stock price has some bubble.

Previously, some capital has begun to withdraw. Borchid Capital stated that due to the imminent expiration of its first RMB fund, it has concentrated on clearing all shares of POP MART purchased before the listing through block trades in three transactions over the past week. According to information from the Hong Kong Stock Exchange, Borchid Capital has cashed out over HKD 2.2 billion.

In addition to Borchid Capital, since 2024, several shareholders, including Black Ant Capital and the Wang Ning couple, have cumulatively reduced their holdings by over HKD 2 billion. The exit of various capital also means that POP MART is transitioning into a mature trendy toy IP company, which will further test the company's operational capabilities in the future.

The infinite game continues. Although standing at the peak now, POP MART still needs to continuously gain insights into future aesthetics and emotions, and find a new star to succeed LABUBU in order to maintain its current momentum