Does Pop Mart need to tear off the “blind box” label?

This article mainly analyzes the current status of Pop Mart IP and its future prospects, and makes it clear that making good use of IP culture is the way to future development and operation. It is recommended for people who want to understand IP operation.

Pop Mart, known as the "first blind box stock", has slowed down its profit-making pace.

The 2021 financial report released by Pop Mart shows that in the past year, Pop Mart achieved revenue of 4.49 billion yuan, a year-on-year increase of 78.67%, and adjusted net profit of 1.002 billion yuan, a year-on-year increase of 69.6%. Even though Pop Mart's performance achieved double growth in revenue and net profit, compared with the previous period, the growth rate of brand revenue has slowed down significantly, and both gross profit margin and net profit margin have declined. After the performance was released, Pop Mart's Hong Kong stock price fell rapidly at the opening of the afternoon, with the maximum decline exceeding 8%.

For a long time, when people mention blind boxes, they often naturally equate them with Pop Mart. But Pop Mart is not equal to blind boxes. More often, Pop Mart emphasizes that it is an IP operation company, and blind boxes are just their marketing method and product category. However, can Pop Mart, which is gradually cooling down, still tell a good IP story?

1. Costs increase, and independent IP is in short supply

When asked about the reasons for the slowdown in profit growth at Pop Mart, the financial report gave the answer that the brand improved the craftsmanship quality of its products in 2021, and the product craftsmanship became more complex. In addition, the cost of raw materials increased throughout the year, which led to a decline in gross profit margin. It is reported that Pop Mart's management once said in a company conference call that against the backdrop of a 15% increase in raw materials and a 10% increase in factory labor costs, Pop Mart spent a lot of effort on the supply chain and communicated with the factory. This year's goal is to control the gross profit margin at 61%-63%.

In addition to product costs, Pop Mart's sales costs are also continuing to rise. According to public data, Pop Mart's sales costs in 2021 were 1.732 billion yuan, an increase of 88.4% compared with 919 million yuan in 2020. Among them, the cost of goods increased from 749 million yuan in 2020 to 1.445 billion yuan in 2021, mainly due to increased sales and an increase in the unit price of commodity costs.

At the same time, due to the increase in publicity and promotion costs for online channels and event planning, advertising and marketing expenses in sales expenses also increased from RMB 92.2 million in 2020 to RMB 158 million in 2021, an increase of 70.9%.

The picture comes from Pop Mart’s official Weibo

In addition to the increase in various costs, another important problem facing Pop Mart is the lack of new popular IPs and the continuous decline in the influence of traditional IPs.

Looking at the development history of Pop Mart, Molly, an IP, has supported half of Pop Mart's development. At the beginning of its listing, Molly, which could sell for 456 million yuan a year, became Pop Mart's IP myth. But at the same time, the "monopoly" sales situation was also seen by the market as a hidden danger for Pop Mart's future development. In recent years, Pop Mart has been trying to avoid over-reliance on Molly and support other independent IPs, but the results have been unsatisfactory.

According to the IP sales data released in the 2021 financial report, the 15-year-old Molly had an income of 705 million yuan, and its revenue share dropped from 27.1% in 2019 to 14.2% in 2020, but increased to 15.7% in 2021. According to market rules, as the number of new IPs continues to increase, the market share of traditional IPs will be divided to a certain extent, but Molly's revenue share has risen in 2021, which shows that Pop Mart's new IP still has room for growth.

In order to solve the problem of the connection gap between new and old IPs, Pop Mart's choice is to innovate the expression of popular IPs and try to extend the life cycle of IPs. In June 2021, Pop Mart launched a collection series called MEGA based on the image of Molly, focusing on the high-end trendy toy market, and was nicknamed "Big Molly" by consumers.

MOLLY's "growth" is an important attempt by Pop Mart, and does not represent the real innovation of IP. The product threshold of blind boxes is not high, and the bonus of the window period has ended. After incubating the consumption habits of IP fans and larger circles of users through blind boxes, developing new IP expressions will help brands extend the influence of IP.

From the actions taken by Pop Mart in the past two years, it is clear that its core competitive strategy is to control the production source of IP, integrate excellent designer resources in the industry, and use IP to drive product sales. Pop Mart has always been committed to finding the hit IP that can connect with consumers, rather than cultivating consumers' loyalty and dependence on the Pop Mart brand. This is also the bubble that Pop Mart may face in the future. While considering how to develop IP in the long term, how to improve the brand's own value is also a difficult problem facing Pop Mart.

2. Self-help has begun, IP culture and overseas markets have become new goals

Pop Mart's business model is to realize IP monetization by building an integrated platform for the entire industry chain. Blind boxes are just the "vanguard" for brand monetization and consumer acquisition. Pop Mart's rapid growth is not due to the blind box business model. Its core element is still the IP itself. How to develop its own IP that can obtain continuous traffic and increase the layout of IP around IP is the way to future development and operation.

At present, Pop Mart is enhancing its own cultural value by giving IP cultural attributes. In June 2021, Pop Mart will announce that its own IP DIMMO will be stationed in the Lost Spaces and Aquarium of Atlantis Sanya; in the same year, the brand teamed up with the Shanghai Yuyuan Lantern Festival to create the Molly "Niuqi Lantern Day" theme exhibition; recently, the first Pop Mart Virtual Trendy Art Week was held, and the concept of the metaverse has also become Pop Mart's entry point to impress consumers.

Creating theme exhibitions seems to be an important move for Pop Mart at present. The theme exhibitions are not a breakthrough point, but one of the ways Pop Mart wants to empower IP. Including entering theme parks and combining Pop Mart's own IP with artworks, the purpose is to transform brand products from trendy toys into handicrafts with cultural value or even collectibles, and make its products a trendy culture.

If an IP has no connotation, it is just a temporary trend. No matter what form it is, IP ultimately needs to be given a real story and character setting so that it can become a trendy toy while allowing consumers to have a greater sense of involvement and form psychological companionship.

IP with cultural attributes can serve as the core of the industrial chain. Brands can carry out more diversified development based on it, including related stories, film and television dramas, variety shows and even related theme parks, cultural activities, etc., which can all become diversified IP presentation forms.

In addition to the creation of cultural activities, the overseas market has become Pop Mart's second "lifeline". In July 2022, Pop Mart opened local flagship stores in South Korea and Japan, and opened the brand's No. 1 store in Melbourne, Australia in August. In the first half of last year, Pop Mart's overseas market revenue was 157 million yuan, a year-on-year increase of 161.7%, and the revenue share increased from 3.4% in the first half of 2021 to 6.6%. Wang Ning, the founder of Pop Mart, said that he hopes that overseas revenue can reach 50% of the total revenue in the future.

Cultural IP creation, overseas store openings, theme exhibitions, theme parks...Pop Mart is doing more and more innovative operations, but these are not "one-shot success". Only by truly forming a diversified industry can the brand gradually accumulate culture and then form an exclusive ecosystem. In this regard, Pop Mart still has a long way to go.

3. Final Thoughts

Overall, Pop Mart's rapid growth is due to the development of the blind box business model in the commercial market, but the core is still the IP itself. Discovering better IPs and obtaining cooperation licenses, developing proprietary IPs that can obtain continuous traffic, and increasing the layout of IP's surrounding areas are the future development and operation methods.

We look forward to Pop Mart telling its own new story, and we also look forward to the emergence of a true "domestic Disney" in the future consumer market.

Author: Dake

Source: WeChat public account "Marketing Kanke" (ID: yingxiaokanke)