Labubu/Molly Drives Stock Price to New Peaks-find out what is inside Pop Mart

As a leader in trendy toy culture, the company operates across the entire industry chain, creating a diverse IP matrix. Founded in 2010, Pop Mart has built a comprehensive operational platform covering the entire trendy toy industry chain, focusing on five areas: global artist discovery, IP incubation and operation, consumer engagement, trendy toy culture promotion, and innovative business incubation and investment. The company has successfully cultivated and operated dozens of IPs, including MOLLY, SKULLPANDA, and DIMOO, offering products in various forms such as blind boxes, figurines, and BJDs (ball-jointed dolls), continuously leading and driving the development of China’s trendy toy market.

1.1 Development History

The company’s development can be divided into three stages:

Phase 1 (2010–2015): Started as a distributor, initially exploring the trendy toy space. On November 17, 2010, Pop Mart opened its first offline store in Beijing. In January 2015, it launched a new LIFESTYLE flagship store in Beijing.

Phase 2 (2016–2019): Launched blind box products, transitioning into a trendy toy IP operator, and expanded consumer reach through omnichannel strategies. In April 2016, the company signed designer Kenny Wong, and in July of the same year, its first trendy toy product, the Molly Zodiac Series blind box, was released, marking its official transformation into a trendy toy IP operator focused on IP incubation and product development.

Phase 3 (2020–Present): Built a diversified product system, incubated innovative businesses, and accelerated overseas expansion. On December 11, 2020, Pop Mart went public in Hong Kong, becoming one of China’s largest and fastest-growing trendy toy companies. In terms of regional expansion, since opening its first overseas store in Seoul, South Korea, in 2020, the company has expanded to regions including Hong Kong, Macau, Taiwan, the UK, New Zealand, the US, and Australia. As of H1 2023, it had 55 overseas retail stores, 143 robot stores, and 28 cross-border e-commerce platforms. In terms of business scope, since 2020, the company has invested in art galleries, animated films, Hanfu brands, trendy boutiques, anime e-commerce platforms, and anime production companies. For example, in 2021, it partnered with Light Chaser Animation to co-produce New Gods: Nezha Reborn and White Snake 2: The Tribulation of the Green Snake. In September 2023, Pop Mart City Park (POP LAND) opened in Beijing, offering visitors exclusive trendy toys, performances, interactive experiences, and games.

1.2 Organizational Structure:

The company has a stable shareholding structure and a management team with extensive industry experience. GWF Holding Limited holds 42.17% of the company’s shares, with Mr. Wang Ning, the actual controller, owning 47.49% of GWF Holding Limited. Pop Mart Hehuo Holding Limited holds 5.38% of the company’s shares, with Mr. Wang Ning and Ms. Yang Tao owning 41.99% and 17.81% of Pop Mart Hehuo Holding Limited, respectively. The management team is young and highly experienced, aligning with the innovative and flexible nature of trendy toys. As of the end of 2023, the average age of the management team was about 38, with an average of over 10 years of industry experience.

1.3 Full Industry Chain Layout

The company has established a comprehensive IP full-industry-chain platform. The trendy toy industry chain includes IP procurement, operation, production, and consumer engagement, forming a well-developed ecosystem.

Pop Mart boasts a rich IP matrix and continuously develops multiple product series for individual IPs. The company maintains close ties with over 350 artists, enabling long-term access to high-quality IPs and in-depth exploration of individual IP potential. Products include blind boxes, figurines, BJDs, plush toys, pendants, and other derivatives. In product design, after receiving IP sketches, the company’s design team provides feedback based on market research to enhance commercial appeal. For consumer engagement, Pop Mart reaches users through offline channels such as retail stores, robot stores, and exhibitions, as well as online platforms like Tmall, JD.com, Xiaohongshu, Douyin livestreams, the WeChat mini-program “Pop Mart Blind Box,” the WeChat public account, and the PAFUL app community, deepening user engagement and brand loyalty.

From 2017 to 2021, the company’s revenue grew steadily due to continuous expansion of its sales and distribution network. In 2022, revenue was impacted by the pandemic. Core business revenue increased from RMB 158 million in 2017 to RMB 4.617 billion in 2022, with a CAGR of 96%. In H1 2023, core revenue reached RMB 2.814 billion, up 19.3% YoY. In Q3 2023, revenue grew 35%-40% YoY, with mainland China revenue up 25%-30% and overseas revenue up 120%-125%. In terms of profitability, 2022 marked the first decline in net profit since its IPO due to the pandemic, but recovery began in 2023. H1 2023 net profit reached RMB 477 million, up 43.2% YoY.

Gross and net profit margins have been under pressure since 2019. In 2020 and 2021, this was due to rising manufacturing and raw material costs, while in 2022, it was due to increased production costs and promotional inventory clearance. In H1 2023, gross/net profit margins improved to 60.4%/16.9%, up 2.3/2.8 ppts YoY, driven by optimized product design, stable supplier pricing, and reduced promotions. Additionally, the company has established a cost accounting department and plans to further improve profitability by optimizing new product designs, increasing mold reuse rates, enhancing bargaining power with manufacturers, raising product prices, and controlling promotional frequency.

Expenses are expected to continue optimizing, with further profit margin improvements anticipated. Due to increased staffing for retail and robot store expansion, as well as higher marketing expenses for online platforms, MEGA products, IP-themed exhibitions, and overseas business, the company’s sales/management expense ratios rose to 31.9%/14.9% in 2022. In H1 2023, expense optimization led to a net profit margin recovery to 17%. Future measures such as streamlining traditional business staffing, improving store efficiency, and optimizing inventory turnover are expected to further enhance profitability.

2 Industry: Interest-Driven Consumption Supports Trendy Toy Market Growth, Leading Players Gain Share

2.1 Continuous Expansion in Domestic and Global Markets, New Generation Consumers Drive Growth

The global and Chinese trendy toy markets are growing steadily. The global trendy toy retail market expanded from $8.7 billion in 2015 to $31.2 billion in 2022, with a 2017–2022 CAGR of 21.3%. It is projected to reach $41.8 billion by 2024. China’s trendy toy retail market grew from RMB 6.3 billion in 2015 to RMB 48.7 billion in 2022, with a 2017–2022 CAGR of 35.2%, and is expected to reach RMB 76.3 billion by 2024.

Gen Z is the primary consumer group for trendy toys, with self-indulgence being the main motivation for purchases. Gen Z predominantly purchases trendy toys through e-commerce platforms, offline stores, vending machines, and exhibitions, with over 60% of purchases made online.

2.2 Fragmented Industry Landscape, Pop Mart Leads in Market Share

Competition in China’s trendy toy industry is concentrated in North and East China. The number of trendy toy production and operation companies continues to rise. According to some online data, China had 5.207 million active trendy toy companies in 2023. As trendy toys shift from niche hobbies to mainstream trends, the expanding consumer base and market potential have attracted increasing competition. Leading companies are primarily located in Beijing, Guangdong, and Zhejiang.

The top five companies account for less than 30% of retail value, with Pop Mart leading. In 2021, the CR5 (by retail value) of China’s trendy toy industry was 26.4%, up 3.6 ppts from 2019. Pop Mart, the market leader, widened its gap with competitors, increasing its share from 8.5% in 2019 to 13.6% in 2021. While the market remains fragmented, Pop Mart’s leading position is solid, and its full-industry-chain IP operations are expected to further boost its market share.

3 Competitive Edge:

3.1 IP-Centric Strategy Breaks Boundaries, Explores Derivative Businesses Like Theme Parks to Enhance Monetization

Multi-channel IP pool expansion and collaborations enhance monetization capabilities. IPs are at the core of Pop Mart’s business. The company boasts a rich IP portfolio, including owned, exclusive, and non-exclusive IPs. According to its IPO prospectus, as of June 2020, Pop Mart operated 93 IPs, including 12 owned, 25 exclusive, and 56 non-exclusive IPs, with continuous expansion since then. Owned IPs grant full intellectual property rights, including toy development and sub-licensing. Exclusive IPs are developed under contracts with individual artists, granting exclusive rights in China and other regions, with most allowing sub-licensing. Non-exclusive IPs are licensed from major IP providers for toy development without sub-licensing rights.

The company has a clear IP development process and high commercialization efficiency. The typical IP incubation cycle ranges from 8 to 20 months, with owned/exclusive IPs taking as little as 8 months and non-exclusive IPs taking 10.5–14.5 months. Cross-border collaborations take 12.5–19.5 months. Post-launch, market response determines hit products and further IP development, making hit IP creation and monetization critical, alongside comprehensive consumer engagement.

Signing designers and artists expands product pipelines, while original designer incubation fosters owned IPs. By partnering with renowned trendy toy designers, Pop Mart secures IP ownership, leveraging creativity to accelerate product launches and market penetration. Top three IPs — Molly, Dimoo, and SKULLPANDA — were acquired, contributing 48.3%/46.2% of revenue in 2022/H1 2023. In 2017, Pop Mart established PDC (POP Design Center), including the Inner Flow art team and PDC original design team, focusing on original IP R&D. Successful in-house IPs like YUKI, Bunny, Hirono, and Sweet Bean were designed by PDC artists.

Collaborations with global IPs/artists and cross-industry partnerships broaden reach. Pop Mart partners with Disney, Universal Pictures, and other major IPs for crossover appeal, leveraging fan bases to boost visibility. Collaborations with artists infuse fresh creativity into established IPs, extending their lifespans. Cross-industry partnerships span cosmetics, apparel, food, gaming, and more, maintaining brand identity while exploring new revenue streams.

Pop Mart leads in IP quantity and innovates with boundary-breaking ventures. Compared to peers, Pop Mart has nearly 40 owned/exclusive IPs, consistently creating hits and monetizing them effectively. It actively invests in innovative ventures, expanding into pan-entertainment and contemporary art. In May 2023, Pop Mart released its first self-developed mobile game, Dream Home, targeting diverse age groups. On September 26, 2023, Pop Mart City Park — China’s first immersive IP-themed trendy toy park — opened, offering unique experiences to broaden IP appeal.

3.2 First-Mover Full-Industry-Chain Advantage

3.2.1 Pioneering Full-Industry-Chain Layout

Full-industry-chain presence and trendy culture cultivation solidify first-mover advantages. Pop Mart is currently China’s only trendy toy company with a full-industry-chain layout, while others focus on upstream IP operations or downstream retail, gradually expanding toward full chains. Pop Mart adopts an IP-centric platform model, covering five areas: global artist discovery, IP operation, consumer engagement, trendy toy culture promotion, and innovative business incubation, forming its own trendy culture ecosystem.

Diverse product categories enrich offerings. Products include blind box figures, figurines, BJDs, and derivatives. Blind box series feature unique themes, typically with 12 designs, including a “hidden” variant. Popular IPs spawn high-end figurines with refined designs and premium materials. BJDs feature customizable ball-jointed limbs, catering to collectors. Derivatives include plush toys, pendants, and pins.

Blind box mystery mechanics drive purchases, while scarcity satisfies collectibility. Each blind box series has a 1:144 hidden item probability, stimulating demand. Standard blind box series (excluding limited editions) have a 9-month to 2-year lifecycle, exceeding the industry average of 9–12 months.

Blind box average selling price rise, secondary markets boost brand influence, and core IPs dominate. Blind box average selling price increased in 2023, with most new releases priced at RMB 69+. To chase rare items, buyers often repurchase, fostering trading that amplifies brand impact. As of December 27, 2023, on resale platform QD Trendy Toy Tribe, Pop Mart ranked first in brand attention (30,500 followers). Among the top 10 most-followed IPs, seven were Pop Mart’s, with DIMOO, SKULLPANDA, MOLLY, and LABUBU leading at 224K, 200K, 136K, and 118K followers, respectively.

High-end MEGA line drives new growth. Launched in 2021, the MEGA Collectible Series targets “young people’s first collectible.” Revenue grew from RMB 178 million (4% of total) in 2021 to RMB 467 million in 2022 and RMB 242 million (8%) in H1 2023. In 2023, Pop Mart introduced five MEGA series (GRAND, LIFESTYLE, ART, JOY, ORIGINAL), featuring MOLLY, SKULLPANDA, and DIMOO. Sizes include 100% (~70mm), 400% (~280mm), and 1000% (~700mm), with 100% as entry-level blind boxes, 400% for broader reach, and 1000% emphasizing exclusivity. MEGA average selling price rose steadily, with 400% products increasing from RMB 1,042 (2021) to RMB 1,309 (2023) and 1000% products from RMB 4,999 to RMB 6,117. New releases average seven per quarter, with collaborations outpacing non-collaborations.

Innovative POP BEAN interactive products expand playability. Launched in June 2022, POP BEAN features Q-versions of IPs in a “light DIY” format, where buyers purchase empty bottles online and fill them in-store within 10 minutes. 2022 releases included Sweetheart Cup and Colorful Cream Roll series, covering 10 IPs like MOLLY and DIMOO. 2023 added cherry blossom, Daruma, and dim sum-themed beans, plus a L’Occitane collab.

3.2.2 Omnichannel Penetration

Online + offline full coverage, with retail and robot stores as primary revenue sources. Sales channels include offline (retail stores, robot stores, exhibitions, distributors) and online (Tmall, JD.com, Douyin(Tiktok), WeChat mini-programs, PAFUL app). Overseas channels include Pop Mart’s website, Amazon, Shopee, and Shopify. As of H1 2023, Pop Mart had 340 mainland China stores, 55 overseas stores, 2,185 mainland robot stores, and 143 overseas robot stores. Retail and robot stores contributed 58.3% of H1 2023 revenue.

3.2.3 Domestic Offline Expansion + Online Multi-Platform Marketing

Single-store sales poised for recovery, domestic offline expansion accelerates. Since 2019, Pop Mart has penetrated lower-tier cities, with 121 stores (35.6% of mainland total) and 935 robot stores (42.8%) in tier-2+ cities as of H1 2023. Single-store sales declined post-2020 due to pandemic disruptions but are expected to recover.

Online multi-platform presence, with blind box machines as top revenue driver and Douyin(Tiktok) surging. Launched in September 2018, the WeChat blind box mini-program quickly became the leading online channel. Pop Mart’s Tmall (6.17M followers), JD.com (1.934M), and Douyin (1.018M + 18.171M) stores drove H1 2023 online revenue, with Tmall (19%), blind box machines (45.6%), and Douyin (13.4%) as key contributors.

Integrated omnichannel system enables seamless online-offline conversion. Since 2019, Pop Mart’s in-house tech team has unified cross-platform IDs, sales data, and membership perks via mini-programs. Membership integration across offline, Tmall, and WeChat enhances engagement. As of H1 2023, registered members reached 30.388M (+4.384M YoY), contributing 92.2% of sales with a 44.5% repurchase rate. While deeper user engagement may take time, membership growth remains robust.

3.3 Overseas DTC Business Soars

3.3.1 Trendy Toy Globalization

Chinese trendy toys go global. 52TOYS began overseas licensing in 2017, now covering East/Southeast Asia, the US, and UK, with 2022 overseas sales nearly tripling. MINISO’s TOP TOY plans offline overseas stores after distributor success. TOYCITY, LAMTOYS, APEX-TOYS, and Robotime also use e-commerce and distributors. Pop Mart, expanding since 2018, now operates in 20+ countries/regions via 55 stores, 143 robot stores, and 28 cross-border e-commerce platforms as of H1 2023.

Online (e-commerce + official site) + rapid offline expansion. Pop Mart entered South Korea first via e-commerce, then offline, followed by Japan/Southeast Asia. In 2022, it expanded to the UK, NZ, US, and Australia, adding Amsterdam, Auckland, and Paris in 2023. By H1 2023, its 28 cross-border platforms reached ~100 countries. Offline, “flagship stores + IP exhibitions + pop-ups + robot stores” drive DTC growth. By end-2023, overseas stores may hit 80–90 (70% Asia, 30% West), with 200 robot stores.

3.3.2 DTC-Fueled Overseas Growth, Product Strength Drives Scale

Overseas shift to DTC, higher margins than domestic. 2022 marked Pop Mart’s overseas DTC pivot. H1 2023 overseas revenue hit RMB 376M (+139.8% YoY), with profit RMB 78.89M (+183%). Offline sales reached RMB 190M (+392.4%), stores/robot stores contributed RMB 165M/RMB 25M (+374.2%/+556.5%). Online focused on Amazon, Shopee (RMB 15M, +145.8%), and its website. Mainland/overseas offline gross margins were 63%/75.9%; online were 59.8%/75.3%.

Localization is key, with tailored product mixes. Southeast Asia/Korea preferences mirror China’s (Molly/Dimoo/SKULLPANDA). Japan’s 70% female users favor cute IPs (DIMOO/PINOJERRY). France prefers HIRONO/DIMOO/SWEET BEAN; the US leans toward edgy designs. Besides owned IPs, Pop Mart stocks 20% local trendy toys and 10% local artist products in Korea. Localized exclusives (e.g., Japanese Maneki-neko, Canadian maple leaf, Mexican Tycoco skulls) and overseas-first launches (e.g., Dimoo Social University in Korea, LABUBU Maneki-neko in Japan) fuel enthusiasm.

3.3.3 Exhibitions Promote Trendy Culture

Domestic/overseas exhibitions and design contests attract artists, amplifying global reach. Pop Mart hosts biannual Beijing/Shanghai PTS (International Trendy Toy Exhibitions), showcasing hundreds of artists. 2021’s online PTS drew 2M+ views and RMB 40M+ GMV. Overseas, it joined UK DCON, US DCON, and Dubai Expo. The 2022 inaugural design contest encouraged emerging talent. September 2023’s first overseas PTS in Singapore featured 90+ artists and 20K+ attendees.