Summary of the News
This news highlights the contradictory situation faced by Pop Mart, a leading brand in the trendy toy industry. In the first half of the year, the company earned 5.1 billion yuan, and its financial performance seemed solid. However, it has encountered several challenges: the popularity of its top-selling IP, Labubu, has declined, revenue growth slowed significantly in the second quarter, and sales in overseas markets such as Asia and the United States have dropped. Even the founder has publicly stated that “the toughest times are yet to come.” On the positive side, the company has introduced a new popular IP, “Xingxingren,” which has seen its revenue soar by six times in half a year, and four new IP lines have been successfully launched. Additionally, the attendance rate at its physical stores in China has increased. The initial investors who were speculating on blind boxes have mostly left, leaving behind only the core enthusiasts who are willing to continue purchasing products. The industry and investors are now debating whether Pop Mart is on the decline or whether it can develop a new growth trajectory with its existing foundation.
Detailed Explanation
1. Earning 5.1 billion yuan and still facing problems? “Slow growth” is far worse than losing money
Many people may not understand why Pop Mart is in trouble when it has made such a substantial profit. After all, 5.1 billion yuan in half a year is equivalent to the annual profits of many small and medium-sized listed companies. You can compare Pop Mart to an internet-famous restaurant that became successful thanks to a hit product. For several years, Labubu, its signature product, helped the company achieve annual revenue growth of 40% to 50%, leading both investors and the industry to expect it to continue this high growth and even become a billion-dollar brand.
However, in the second quarter of this year, its growth rate plummeted to single digits. It’s like expecting to earn 10 yuan when you only managed to earn 1 yuan—although it’s still profitable, the previously projected high growth narrative has been shattered. The main reason for this slowdown is the decline in the popularity of Labubu, which means customers have become tired of this “signature dish,” and no new products have yet taken its place. This kind of growth stagnation is much more serious than a temporary decrease in profits.
2. Why is Pop Mart struggling in overseas markets?
Pop Mart was once seen as the “Disney of China,” aiming to sell trendy toys worldwide and earn money from foreign consumers. However, sales in Asian and American markets have declined, indicating that the initial overseas success has faded. Initially, its overseas stores were frequented by Chinese tourists and a group of local young people who tried the products out of curiosity, but there was no repeat business. Local consumers in Europe and America have their own preferences for well-established IPs like Lego, Marvel, and Disney, and they find Pop Mart’s products, especially the expensive blind boxes, too costly. As a result, Pop Mart has not yet built a loyal base of overseas fans. Its previous growth relied on temporary interest, and once that interest faded, sales dropped.
3. New IP’s six-fold growth: Pop Mart’s hidden strength
The sudden success of Xingxingren proves that the company’s IP development process, which was previously questioned, is actually working. Years ago, Pop Mart was criticized for relying on a few established IPs like Molly and Labubu and for its inability to create new ones. Many believed that the company would fail after Labubu’s popularity waned. Now, not only has Xingxingren’s revenue increased by six times, but three other IPs have also emerged, forming a new IP portfolio. This is like a talent agency that once had only one star artist but now has four new talents who can host their own concerts and take on endorsements. In contrast, 99% of Chinese trendy toy companies struggle to produce another hit after one IP becomes popular. Pop Mart’s ability to consistently produce new IPs is a significant advantage.
4. The departure of speculators: The real foundation of the business
During Pop Mart’s peak, the market was distorted by scalpers and enthusiasts who bought hidden products at inflated prices. Many people who didn’t really care about trendy toys joined in the craze. Now, those who speculated have lost their money, and the remaining customers are genuine enthusiasts who visit stores regularly and make regular purchases. This high customer retention rate indicates more stable consumption, indicating a healthier business model than the previous bubble-like situation.
5. The founder’s warning: “The toughest times are yet to come”
The founder’s statement that “the toughest times are yet to come” is not an attempt to exaggerate difficulties. Pop Mart used to easily generate profits through popular IPs and limited editions, but those good times are over. It can no longer rely on single hits; it must invest in content and derivative products to sustain IP longevity and expand into overseas markets. Every step requires careful management. Any mistake in this new approach could lead to the failure of its growth momentum. Pop Mart is currently at a critical juncture, transitioning from a model based on hit products to one built on a sustainable system.