How Labubu Catapulted China’s Pop Mart to $1.8B in Revenue — The Economics Of

[00:00:00] Speaker 1: Whenever Chinese retailer Popmart drops a new Lububu designer toy, it sells out within minutes. It's sold out. Insufficient stock. These hard-to-get toys are packaged in blind boxes, meaning customers buy them without knowing what's inside. [00:00:18] Speaker 2: Oh, this is the main one that I actually wanted. [00:00:21] Speaker 1: And they drive the majority of Popmart's revenue, which more than doubled in the past year. Unboxings have flooded social media. Fans flock overseas to buy exclusive products, and Lububu dolls have been spotted dangling off of celebrities. I go Popmart everywhere. But can the company continue to grow beyond this viral moment that has seen its share prices rocket more than 1,200% since the beginning of 2024? This is the economics of Popmart. The 15-year-old company was founded by Chinese entrepreneur Wang Ning as a variety store. But it was the blind box packaging that really helped Popmart take off. You're all set, right? You're fine. Appreciate it. Take care, guys. In 2019, over 70% of Popmart's revenue came from mystery boxes. [00:01:07] Speaker 2: There's a long history of blind box, and what we've done is just added our own flavor to that. [00:01:14] Speaker 1: Now, the company has more than 500 stores and 2,000 vending machines worldwide. When you decide to splurge on a Popmart blind box, which could cost around $20 to $30, you don't go in totally blind. Take this collection. There are six possible characters you could unbox, and a secret one that you have a 1 in 72 chance of getting. [00:01:35] Speaker 3: One of the things that the brand can do to keep engagement, to encourage consumers to get a little more excitement out of it, is to label the box. This one says, have a seat. I know the range, so I still get that surprise. But at the same time, I know I'm not going to get anything crazy. [00:01:54] Speaker 1: That specific range also creates a set. [00:01:57] Speaker 3: It's a well-known, well-supported phenomenon that most people, under certain conditions, have a very strong tendency to want to complete a set. [00:02:07] Speaker 1: This is version 1. This is the have a seat. This is version 2. [00:02:10] Speaker 2: I have all the, you know, everything that came out. [00:02:13] Speaker 1: But Popmart isn't just for the thrill seekers. [00:02:16] Speaker 3: For a lot of people, there's a little bit of a feeling that you are being nurtured, in a sense. The universe is about to give you a gift. So, ah, take a look. Oh, I think it's the light, or the slightly darker blue one, for no reason at all, except that I chose a favorite. Now, what's the cost if I'm wrong? Almost nothing. I'm dead wrong, but it's still fun, right? [00:02:44] Speaker 1: Popmart didn't invent blind box packaging, but it is successfully leaning into what customers like about it. [00:02:50] Speaker 2: We started as a retail store, and we've spent 15 years refining that experience. Our collectibles bring people together naturally, and our stores offer a place for them to have that experience. [00:03:04] Speaker 1: When it launched the big into energy Labubu line in April, a crowd of 2,500 people showed up at its Century City location before 6:30 a.m. And that's become the norm for many of the company's releases. Stores are a key part of Popmart's strategy to grow beyond China. Sales outside of China more than tripled in 2024. Overseas revenue now makes up nearly 40% of the company's sales, up from 17% in 2023. The company plans to open more than 20 stores in the U.S. by the end of 2025, nearly doubling its footprint in the country. But to drive that foot traffic, it's really about what's inside the boxes. Though Popmart does license some existing IP, like Disney and Marvel characters, over 85% of its revenue in 2024 came from exclusive products developed with artists. [00:03:55] Speaker 2: After having a store for six years at that point, I think that we were looking for a new way to innovate. The CEO of Popmart, he put out a survey online and asked people, "What artist would you want to see? What characters would you want to see in a blind box format or as a collectible toy?" And so he connected with Kenny Wong, who's a Hong Kong-based artist, and worked with him to bring his Molly character into our first series, which was the Zodiac series, which we released in 2016. [00:04:28] Speaker 1: And LeBubu is a part of the Monsters line, designed by Hong Kong artist Ka Sing Leung. The line is now the biggest driver of Popmart's growth. Its revenue saw a 726% growth from the previous year. Customers love the characters so much that LeBubu products go for massive mark-ups on the secondary market. Finding the right artists and characters is a key part of the company's growth strategy, too. In 2023, the company released the Peach Riot series, with its first U.S.-based artist Libby Frame. Popmart says it's now the company's top IP in average figurine blind box sales in North America. [00:05:07] Speaker 2: We want to continue to create for the Western market as well and look for more Western artists to bring in. [00:05:18] Speaker 1: Its mix of IP and retail situates Popmart in between its blind box competitors: Japanese company Dreams, which primarily develops IP like Smisky and Sunny Angel, and Chinese retailer Miniso, which primarily sells and distributes other companies' IP products. All of those companies have made blind boxes go viral. Fans have hoarded huge collections, spending hundreds of dollars along the way. [00:05:41] Speaker 2: The army has gathered. Well, I think I've spent around $300, I think it's around $600, or more. They add up! [00:05:50] Speaker 3: Blind boxes, for many, many of the consumers, is an experience, not a product. And so you've been investing that anticipation. And you want that big payoff. So in that sense, it resembles very strongly gambling. [00:06:05] Speaker 1: So much so that several countries have regulated the industry in Asia, where blind boxes have already become a billion-dollar market. Singapore has proposed capping the value of mystery boxes to 100 Singaporean dollars, or around 77 U.S. dollars. And China banned the sale of blind boxes to kids under the age of eight. [00:06:24] Speaker 2: The target audience for our product is an adult collector. We are specifically hitting that Gen Z kid-old customer. So they're more collectible items than anything else. And so they're definitely not marketed for children. [00:06:39] Speaker 1: And as with any viral phenomenon, there's a risk of the fad dying out. So the company is working to diversify. [00:06:45] Speaker 2: Our sales have shifted significantly from blind box figurines to now it's much more plush. And we're also expanding in our accessories category. That's one of the fastest-growing categories that we have. [00:06:57] Speaker 1: Still, amid an uncertain trade war with China, those products might get a little more expensive to sell in the U.S. Popmart declined to comment on the U.S.-China trade environment. [00:07:07] Speaker 2: Longevity is key to everything that we're doing. And we will continue to innovate and offer new ways for people to interact with the characters that they have come to love. Whether that's something like our theme park, where you can interact with mascot versions of our characters as well, digital content we're developing, there will continue to be ways that we can build the stories of these characters, continue to build those narratives, continue to give people a way to interact with all of the characters that they've fallen in love with.