Minnie Wang
Oct 21, 2022

Brand Health Check: How can Pop Mart continue to stay relevant?

In a saturated domestic market, consumers are getting tired of 'blind box' strategies. So how should the toy retail company adapt to changing Gen Z preferences?

Pop Mart toys displayed at a store in Shanghai (Shutterstock)
Pop Mart toys displayed at a store in Shanghai (Shutterstock)

Pop Mart, a Chinese retail toy brand famous for its 'blind box' concept, launched with a toy store in 2010 by founder Wang Ning. What was just single store in a Beijing mall has since blossomed into a highly successful brand that could be on the cusp of making it big internationally. 

But this journey hasn't been a bed of roses for the brand. The now-public company has seen its share price plunge over 87% compared to its peak (HK$99.40) in February 2021. On Thursday, October 20, its share price reached another historical low to HK$12.06.

So how has a beloved brand come to this point? 

When Pop Mart released interim reports that showed unaudited gross profit margin drop from 63% to 58%, Chinese media attributed it to the global supply chain disruption due to the pandemic, which also caused a 15% increase in raw materials and a 10% rise in salaries. 

But, in China, this decline in profit is not the only trouble for the brand. Firstly, young Chinese consumers are getting tired of blind boxes and hungry marketing tricks, so the trend of overconsumption has cooled down. Secondly, the China Consumer Association criticised KFC and Pop Mart's collaboration in mystery boxes, causing food waste. One person is said to spend over 10,000 yuan (over US$1,500) on 106 meals to collect the Dimoo rare toy set.

Chinese media analysed the sales slump of brick-and-mortar stores because of the lockdown during the pandemic. But a sharp fall of sales was also recorded on its top online channel Tmall—35% drop YOY in June. To Chinese Gen Zs, the figurines' repurchase rate will continue to drop if the toy brand loses its freshness and novelty.  

Molly used to be the greatest IP figure for Pop Mart and was practically a money-printing machine for the brand in the past few years. Pop Mart sets Molly as a fashion icon but without any backstory. Molly contributed over 40% of revenues in 2018, but this rate has decreased to 11.5% in 2021.  

In late 2020, MediaCom published a whitepaper that predicted “Chinese consumers would spend more money on play and more time consuming and creating playful content”. Because of lockdown and travel restrictions, the Chinese market witnessed a surge of virtual play content and strong growth in adult consumers for brands like Lego, but toys like Pop Mart seemed to have lost its charm. 

Pop Mart began to explore a new way of making money and getting out of its blind box plight as the collectables craze in China cooled down. In 2022, it opened its first overseas store in London, and it hopes to open new markets in the West. In late August, the interim results of Pop Mart show that the revenue from markets outside mainland China reached 157 million yuan (US$ 23 million), about 6.6% of its total revenue, growing 161.7% YoY.  

So will the sun also rise in overseas markets for Pop Mart? How should the brand readjust its strategies? And how should it relook the toy and play category in China? Campaign turned this question to branding experts.

Saw Gin Toh (杜素盈) 
Head of strategy consulting
Dentsu Creative China  

There is opportunity for Pop Mart to move into the virtual play, NFT/metaverse/cartoon animation territories to ignite new interest on their offering. I am suggesting Pop Mart move into this territory to capture a fair share of growth for themselves in the virtual world. For example, Lego toys get into gaming, animation, movies, IP collaboration in merchandise in order to capture new growth market. 

Not all brands will be saved by international markets because every country is also going through tough economic times with high inflation and cost of living. Brands going overseas also need to assess the market potential before entry, and if people have higher disposable income or are willing to spend. In a tough economic environment, people are looking for high value and returns. In our report 'The Future of Play', we mentioned 'novelty' as a key motivation for play and this motivation may be an opportunity for Pop Mart to consider limited edition or high-value creation to meet this purpose where consumers buy with the purpose to resell. Or perhaps do more unexpected IP or brand collaborations.  

More and more, brands and products may need to rely on the virtual world to overcome the physical world restrictions—via the metaverse or virtual reality.


Lily Wen
Associate partner
Prophet 

Pop Mart has done a good job in marketing—driving interest, engagement and conversion, but it has not seemed to manage the brand as a strategic asset for sustainable growth. The result of this is product design that is 'reactive' rather than 'leading' and the value consumers see in 'one more set' becomes marginal.

A few things Pop Mart could consider on brand strategy and future growth moves:

Define a clear purpose to guide both product design and marketing: Why does Pop Mart exist? What is the core benefit relevant for consumers’ life? And what impact does it create beyond 'simply fun', for individuals, community, society and environment?

Develop clear logic and navigation in product portfolio and retail: What role does each IP play in Pop Mart’s world? Does each series have distinct value proposition?

One must-have on Pop Mart’s path to international markets is Web3 strategy and moves. Pop Mart has great potential to create immersive experiences by bringing the physical set to a new dimension, and tapping into the NFT ecosystem.


Bryce Whitwam
Senior advisor, Target Social
Co-host, ShanghaiZhan Podcast

Pop Mart became a massive success because of its ability to develop beautifully designed and collectible characters, delivered through the surprise element of a blind box.  Following the trend, blind boxes suddenly sprouted up everywhere—not just toys, snack foods, fast food restaurants, but even jewellery and luxury items. Blind boxes got so big they started to call it the 'blind box economy' (盲盒经济), and soon, Chinese people became tired of them. 

People also grew weary of the Pop Mart cast of characters, including the adorable Molly. Besides her design quality and aesthetics, Molly didn’t have a solid emotional back story to keep people engaged long enough in the toy. 

Pop Mart can no longer rely on the blind box and needs to use its unique vending machine distribution model to bring new toys to the market. I would follow the Lego IP model but partner with famous anime comic stories with solid and enduring characters that could keep consumers emotionally engaged over time. 

Pop Mart could also consider creating different playing scenarios for its existing lines, either in the physical space or the metaverse. In the physical area, doll houses, for example, have become a thing for young women on the social platform RED (小红书).  Pop Mart could create doll house sets for your home or office cubical space.

Not every Chinese brand abroad will find better opportunities, but I’m confident Pop Mart will do well.  Chinese pop culture brands that can ride the K-Pop/bubble-tea Asian hipster wave will undoubtedly find their target audience abroad. Go to any Miniso (名创优品) store in America, and you’ll find it packed with shoppers, and the average wait time at the San Diego Haidilao (海底捞) hot pot restaurant is 30 minutes to an hour.  To be cool with Western GenZ these days, you have to look good on TikTok.

Like many product categories, the lockdowns have impacted the toy industry’s core retail channels because fewer people have been going to the retail stores, forcing toy brands to become more innovative on digital commerce platforms. When things settle down and shoppers return to the stores, I suspect the market will return because collectible toys will remain highly desirable. But they’ll have to return with newer lines of toys and innovative ways for consumers to engage with them.

This post is filed under...
Brand Health Check: We assess and (if necessary) solicit suggested remedies

 

Related Articles

Just Published

2 hours ago

Creative Minds: Sui Yao was once an emo teen who ...

A far cry from those rebellious years, Yao turned out to be design director at TBWA Media Arts Lab, found her personality, and it wasn't emo.

4 hours ago

Mark Zuckerberg says 2023 will be ‘year of efficiency’

Meta CEO promises continued streamlining after reporting a 22% hike in costs and expenses in Q4.

5 hours ago

APAC agency rankings: Mindshare's wins help narrow ...

Meanwhile, WPP agencies continue to dominate the creative league.

7 hours ago

40 Under 40 2022: Oliver Budgen, Bud

Budgen has managed to build an indie PR outfit through carving a niche offering, making strategic hires, and cultivating a healthy workplace culture.