The blind box market has lost its way and is turning to IP shaping

This article focuses on the "problems" of blind box brands, and proposes breakthroughs and future directions for the challenges faced by blind boxes in the market. It is recommended for those who are interested in the blind box market.

Blind boxes, with prices ranging from a few dozen to over ten thousand, have attracted the attention and pursuit of countless young people.

The seemingly ordinary little box satisfies young people’s curiosity about the unknown and their social needs, and has gradually developed into a market worth tens of billions of dollars, giving birth to many well-known brands including Pop Mart.

However, while it is growing rapidly, the blind box market has also seen a clear "double-edged effect", with negative public opinion and improper market behavior gradually emerging. Poor product quality, excessive marketing, hype and other phenomena have caused a large number of loyal blind box users to gradually "quit", and blind box brands have collectively declined, with revenues gradually shrinking.

What is the "sticking point" of blind box brands? Facing the challenges of the market, can brands successfully find a breakthrough? Where will the future of the blind box market turn?

01 Blind box brand stalls

As early as 2018, blind boxes, which became the favorite of young consumers, became popular. Pop Mart, which became popular with the blind box model, took advantage of the opportunity to increase its revenue, with the growth rate once reaching more than 200%. Two months after its listing, Pop Mart ushered in its own highlight moment, with a total market value of nearly HK$150 billion, becoming China's "first blind box stock."

However, the company's 2022 financial report shows that Pop Mart seems to be falling from the "altar". The financial report shows that the brand's overall revenue in the third quarter of 2022 fell by 5-10% year-on-year compared with the third quarter of 2021, of which the revenue in mainland China fell by 10-15% year-on-year.

Coincidentally, on February 28, MINISO Group announced its half-year results ending December 31, 2022. Among them, MINISO's trendy toy brand TOP TOY achieved a GMV of 314 million yuan in the second half of the year, with revenue of 222.5 million yuan and a pre-tax divisional loss of 36.344 million yuan.

Not only have the leading brands lost momentum one after another, but the "players" occupying the middle and middle parts of the blind box market have also fallen into a downward dilemma.

Jiumu Zawushe, a trendy toy brand under Morning Glory Stationery, only achieved operating income of 635 million yuan in Q3 2022, a year-on-year decrease of 8.96%. The simultaneous decline in revenue of brands of all sizes largely represents the changes in the scale and market environment of the blind box industry. The industry as a whole has shifted from an accelerated expansion state to a cooling-off period.

When asked about the reason for the decline in revenue, Pop Mart's financial report gave the answer that it was due to the increase in production costs. There are related reports that Pop Mart has improved the craftsmanship quality of its brand products, and the product process has become more complex. In addition, the cost of raw materials has increased throughout the year, which has led to a decline in gross profit margin.

The management of Pop Mart also stated in a company conference call that the cost of raw materials for the company's products has increased by 15% and factory labor costs have increased by 10%, and the company is actively communicating with supply chain factories.

In addition to production costs, the loss of target consumers for blind box products is also a key reason for the market downturn. So far, there are more than 20,000 related notes on Xiaohongshu when searching for "Pop Mart quit the pit", and more than 10,000 notes related to "blind box quit the pit", and the number of notes read has exceeded 10 million.

One netizen said in a post: "Blind boxes used to be 59 yuan each, but now they are getting more and more expensive, and the quality is poor. It feels like we are being treated as leeks." Players have been complaining about the quality and after-sales service of blind box brands on social platforms, but most brands choose to "cold handle" them, and this after-sales attitude has exacerbated players' dissatisfaction. In the minds of consumers, the blind box market is not rational, various price gouging situations frequently occur, and the consumer experience is poor, which has gradually reduced consumers' enthusiasm for blind boxes.

Overall, the blind box market is experiencing a "cold wave" both from the perspective of brands and consumers. In response, brands have begun to pay attention to the added value of blind box products, starting from the perspective of marketing and trendy play, and exploring the second curve of brand revenue growth.

02Joint brands, trendy toys, marketing, can we learn from others’ experience to improve ourselves?

Blind box brands have always seemed to have noticed the bottleneck in the development of the blind box market early on, and have been constantly testing the waters to explore the added value of blind box products.

In 2021, Pop Mart launched the high-end trendy toy product line "MEGA Collection Series", initially entering the trendy toy market, mainly targeting high-end trendy toy users, with the slogan "Young people's first collectibles", and has launched more than 10 products. In the 2021 semi-annual report, Pop Mart specifically described this series separately. The MEGA Collection Series SpaceMolly × SpongeBob SquarePants co-branded model released in June, the 1000% version is limited to 3,000 units, which are purchased by lottery and attracted more than 1 million participants.

The picture shows the SpaceMolly × SpongeBob SquarePants collaboration

For brands, the trendy toy business is a deepening of blind boxes.

For the development of the brand itself, the concept of blind box is too small and easy to generate negative voices. User stickiness has not yet been truly formed, which will affect the brand's later development and positioning to a certain extent. However, the gameplay and benefits of trendy toys will be more diverse, and the user stickiness of trendy toy IP will be stronger, which will have more commercial value for the brand.

In addition to expanding into the field of trendy toys, co-branding with other brands has also brought new value increments to blind box brands. KFC once cooperated with Pop Mart to launch the DIMOO co-branded blind box package. Consumers can get a blind box for every 99 yuan DIMOO package they buy.

After the launch of the set, it was quickly "snatched up" by consumers. According to KFC staff, in order to collect a set of blind boxes, many consumers bought six sets at a time. One consumer even posted an order for 106 sets of sets, with a total cost of more than 10,000 yuan.

The cooperation between KFC and Pop Mart has indeed brought great popularity and attention to both parties. However, the marketing tactics and excessive premium in the secondary market have also brought certain negative public opinions to the brands.

Since the package of this cooperation is sold in limited quantities, there has been a situation of price gouging in the secondary market. On the second-hand platform, the price of KFC's full set of blind boxes ranges from 500 to 900 yuan, and the hidden blind box is even sold for 800 yuan each, which has been questioned by many consumers. The China Consumers Association even published an article titled "Using "blind boxes" to induce excessive food consumption, we should resist!", naming the blind box package jointly launched by KFC and Pop Mart. The content pointed out that as a catering company, KFC's characteristics are that it is purchased on demand and eaten immediately. The sale of limited-edition blind boxes is a means of "hunger marketing" to stimulate consumption, which is easy to cause consumers to make impulse purchases in order to obtain limited-edition blind boxes, and cause unnecessary food waste due to excessive purchases.

Indeed, cooperating with other brands to launch joint and limited products is an important way for blind box brands to increase their own popularity and drive revenue growth. However, in the process of cooperation, attention should be paid to the compatibility between brands and marketing methods. Just as the attribute of KFC fast food is "buy on demand and enjoy in time", and the limited sale of blind boxes has a certain attribute of "impulsive consumption", the combination of the two has conflicts and contradictions, which requires the brand to make a balance and trade-offs.

Whether it is deepening its presence in the trendy toy field or cooperating with other brands, it is an attempt by blind box brands to explore commercial growth and a commercial application of the blind box IP attributes and collection attributes. Therefore, the key to blind box brands lies in strengthening the value of their own IP, cultivating consumers' loyalty to the IP, and breaking out of the shackles and framework of blind box products.

03The blind box jumps out of the “box”, what’s the next step?

Blind boxes represent, to a certain extent, the life concepts and lifestyles of some young consumers. Therefore, blind box brands should first pay attention to their own youthful life concepts and cultural concepts.

The "PaQu" launched by Pop Mart essentially hits the community culture of young consumers. This APP classifies the IP circles that blind box players are interested in. Blind box players can choose the IP circles they are interested in to communicate, share and even exchange their favorite blind boxes with other players. At the same time, the brand will regularly release offline theme activities through the online community to enhance users' sense of identity with the community.

In addition, blind boxes and trendy art complement each other to a certain extent. There is room for blind box brands to explore in the fields of trendy art product retail, art media promotion, art curation and auction, which is also an important entry point for blind box brand transformation. The International Trendy Toy Exhibitions in Beijing and Shanghai are both hosted by blind box brands, which not only amplifies the influence of blind box brands, but also attracts the attention of trendy people from all walks of life. Imperceptibly, the brand has not only expanded its target group, but also accelerated the brand's trendy transformation.

From the perspective of conversion, the online exhibition held by Pop Mart last year achieved cumulative sales of 25.2 million yuan in just three days, the cumulative number of paying users reached 50,000, and the brand added 863,000 new registered members.

The holding of fashion exhibitions has brought new platforms for brands to sell their products, which has actually increased sales. Blind boxes are essentially an IP industry. Even the founder of Pop Mart defines the company as an IP incubation and operation company. Therefore, only by building a complete IP operation system and broadening the form of IP display can the vitality of blind box products be extended and the commercial value can be continuously expanded. For example, Pop Mart has established a new park management company, whose business scope covers urban park management, amusement parks, ticketing agents, etc.

At the same time, the brand IP DIMMO has settled in the Lost Spaces and Aquarium of Atlantis Sanya; the "Niuqi Lantern Sky" theme exhibition was unveiled at the Shanghai Yuyuan Lantern Festival; the country's first scenic spot custom store settled in Chengdu Kuanzhai Alley... Through the combination of traditional culture and the landing of theme parks, the brand is empowered with cultural attributes. In general, whether it is holding an exhibition or building a cultural park, it is essentially one of the ways for brands to empower IP, including entering art exhibitions to combine IP and artworks. The purpose is to change the positioning of blind box products from toys to handicrafts with cultural value or even collectibles, and to change its products from trendy toys to trendy culture. In other words, the key to the future development of blind box brands is to change from toys to culture.

04Written at the end

The reason why blind boxes are popular among young people is not only because of the blind box products themselves, but more because of the social and collection attributes behind them. It has become the spiritual sustenance of contemporary young people and a topic among common enthusiasts, bringing people with the same interests together quickly.

However, with the unfair business practices of some merchants and scalpers, many undesirable phenomena have appeared in the market for collectible goods such as blind boxes, reducing consumers' experience and enthusiasm.

Brands in the blind box market need to reach a consensus that blind boxes are not a means of profit, but a carrier of their own IP. If IP has no connotation, it is just a temporary trend. No matter what form it takes, it is ultimately IP that gives consumers a greater sense of involvement and forms psychological companionship. With the core foundation of IP, more diversified development can be carried out based on it, including related stories, film and television dramas, variety shows, and even related peripheral cultural creations, stationery products, and daily life. Diversified online and offline development can be carried out to extend the vitality of the brand itself.

Author: Dake, WeChat public account: TopKlout