The Rise of Labubu: More Than Just a Trend?

The recent auction of a mint-condition, first-generation Labubu for a staggering ¥1.08 million has set social media ablaze, sparking discussions about the value of emotional connection in today's market. While some see it as a reflection of youth culture, others view it as an overblown craze.

Regardless, Labubu's global appeal is undeniable, with celebrities like Rihanna, David Beckham, and Lisa endorsing the brand. High demand has even led to temporary sales suspensions in London and Japan due to scalpers. This surge in popularity has significantly boosted the market value of its creator, Pop Mart, whose stock has soared by over 170% this year, making founder Wang Ning the wealthiest individual in Henan.

However, Pop Mart's rapid ascent is met with both fervent enthusiasm and skepticism. While fans worldwide are scrambling for the latest releases, critics question whether Labubu's success is simply a fleeting trend fueled by emotional impulse. But is there more to Labubu than just emotional value?

Riding the Wave of the Times

Pop Mart's founder, Wang Ning, may not have anticipated the immense enthusiasm of the capital market for ACG (Animation, Comics, Games) culture. Pop Mart's initial public offering (IPO) was met with both excitement and controversy. In December 2020, Pop Mart became the first trendy toy company to be listed on the Hong Kong Stock Exchange.

However, after its listing, Pop Mart's stock price declined, nearly halving in just one year.

The biggest concern was the uncertainty surrounding Pop Mart. On the one hand, the revenue growth of Pop Mart's main IP, Molly, had plummeted from triple digits to double digits, raising concerns about Pop Mart's ability to create the next Molly.

On the other hand, the blind box model was not new and lacked barriers to entry. As more competitors entered the market, the surprise element of the blind box model waned. Most importantly, Pop Mart's IP + blind box model resulted in high gross profit margins, but complaints about product quality and after-sales service persisted, leading to questions about whether the company was exploiting consumers' intelligence.

These issues persist to this day, but Pop Mart has unexpectedly encountered a consumer trend that is perfectly suited for brand growth: In an economic downturn, consumers are more cautious about large purchases, but emotional products priced around ¥100 have bucked the trend.

Labubu's popularity has arrived at the perfect moment.

Z世代 (Generation Z) consumers are seeking products that provide emotional value. Pop Mart's IP + blind box model offers both emotional companionship and the excitement of blind box surprises, amplifying the importance of emotional value. Social media amplifies the integration of emotions and social interaction, making Labubu a new type of social currency.

By posting pictures of their purchases, young people create unique social circles that align with their desire for weak-tie social connections.

Furthermore, cultural identity poses challenges for consumers across different countries and cultures. Labubu has emerged as a symbol of emotional resonance that transcends geographical and cultural boundaries. According to Labubu's creator, Hong Kong artist Kasing Lung, “I hope Labubu represents the unknown side of young people’s inner world”.

With its round face, pointed ears, nine pointed teeth, and mischievous smile, the toy resonates with the rebellious nature of young people, reflecting their desire to reject definitions and conformity, and serving as a symbol of self-expression.

Finally, the celebrity effect has further amplified Labubu's global influence. From top idol Lisa to A-list celebrities like Rihanna and David Beckham, Labubu's commercial power has snowballed. For consumers, Labubu has become an icon in the world of fashion and trends.

Pop Mart's Star-Making Machine

While emotional satisfaction appears to be the most obvious reason for Labubu's global success, the trendy toy industry is not short of similar characters. So why Labubu, and not others? The other side of the coin is that Labubu benefits from favorable human relations in addition to opportune timing and location.

On the surface, it seems like luck, but in reality, it reveals Pop Mart founder Wang Ning's star-making strategy.

First, breaking the IP metaphysics. From the beginning, the life cycle of IPs has been the sword of Damocles hanging over Pop Mart's head. IP success is more like a metaphysics, with too much uncertainty. To address this, Pop Mart has always attached great importance to IP development and operation, and has built a mature and complete IP incubation and operation system.

Pop Mart currently maintains close relationships with over 350 artists worldwide and owns nearly 100 IPs, 13 of which have generated revenue exceeding ¥100 million. By partnering with more artists, Pop Mart has accumulated more possibilities. Once the market shows demand for a certain type of IP, the team can quickly capture market trends and gain priority cooperation opportunities.

According to Wang Ning, Pop Mart has a mature system for incubating and operating IPs, based on data and market feedback, including IP value, market potential, and team capabilities, rather than personal subjective judgments.

However, according to Xu Xiaobing, IP cooperation and management director at Pop Mart, Trends cannot be deduced mathematically; they can be predicted, but they are not strictly a priori.. Therefore, Pop Mart needs to extend the life cycle of its IPs as much as possible.

In the face of Labubu's scarcity, Wang Ning has made it clear that he does not want to over-consume its value and would rather control production. He believes that IPs are assets that need to be carefully managed, and maintaining their uniqueness and long-term value is more important than short-term profits.

To this end, Pop Mart will continue to develop multi-form products through collaborations with artists and brands to extend the life cycle of IPs, such as toys, jewelry, and peripherals, giving these IPs new value and continued vitality.

Second, Pop Mart has its own supply chain code. According to a person in the trendy toy industry, The design of an IP is not difficult, but the difficulty lies in the finished product, which involves hundreds or thousands of processes, and many samples from OEM factories are very different from expectations.

Therefore, Pop Mart has been increasing investment in building a flexible supply chain in recent years, realizing smooth information flow from IP design to terminal sales, which can improve the synergy between the production chain and the marketing end. Last year, Pop Mart's gross profit margin increased from 61.

3% in 2023 to 66.8%. The company explained that continuous optimization of supply chain costs was one of the reasons.

However, as Pop Mart moves towards globalization, its supply chain capabilities still need to be optimized. For example, after the popularity of Nezha at the beginning of the year, the Nezha IP hand-made doll was out of stock. Global sales will bring about logistics fluctuations and data delays, which Pop Mart must address in order to prepare for globalization.

Finally, Pop Mart has successfully integrated IPs into the daily lives of global consumers through comprehensive marketing promotions. In recent years, Pop Mart's IPs have frequently appeared around the world: For example, the Pop Mart version of The Little Prince was exhibited at the Louvre, demonstrating Pop Mart's unique artistic design and aesthetic style.

The Bangkok store is set up as a coffee social area, extending the consumption scene to lifestyle. There are also Pop Mart stores all over Japan, France, Britain, Italy, and the Netherlands.

In the process of going global, Pop Mart will make full use of all available resources for linkage. For example, one month before the opening of its first store in Thailand, it booked 11 large screens in the shopping center for advertising broadcasts.

It also invites online celebrities to check in and interact, and forms a series of short video marketing to ensure store popularity. Today, Pop Mart is moving from virtual to real, transforming IPs into sustainable trendy cultures and exporting them to the global market, trying to occupy users' early mindsets as much as possible, which is also a key step in its globalization.

Is Capital a Bubble or Boost?

Indeed, Pop Mart's success is not only due to opportune timing and location, but also to its own star-making strategy. However, whether the barriers of this model can support its ¥100 billion market value is a topic worth exploring. As of the end of the first quarter of 2025, more than 200 funds in the market hold Pop Mart.

Behind this is Pop Mart's almost broken-layer leading operating conditions. In 2024, Pop Mart's total revenue was close to ¥17 billion, while TOP TOY and 52TOYS were ¥980 million and ¥630 million, respectively. In this context, the secondary market naturally chooses to invest in Pop Mart, which is one of the reasons why its stock price has been soaring.

However, as the stock price gets higher and higher, coupled with the clearance-style high-level realization of Pop Mart's founding shareholder, Bee Capital, it has triggered market concerns about the company's valuation bubble. But Wang Ning doesn't seem to care about this.

At a recent earnings conference, when Wang Ning was asked about the ups and downs of the company's valuation, he said that any company will experience cycles and winters, and the company will prove its value with practical actions..

Earlier, Pop Mart's stock price also experienced a process of soaring, falling, and rising again. Wang Ning said, (I) try not to look at the stock price, and also ask the management team not to look at it as much as possible, so as not to let the stock price affect the company's long-term decisions and short-term management.

No one can always fly on the cusp of the storm, and Wang Ning is also aware of this. Therefore, he focuses more on the company's long-termism. When all aspects of Pop Mart's ecosystem are completed, it will be able to establish an ecosystem with a flywheel effect.

For example, when more fans pay attention to Pop Mart, its global voice will continue to rise, which will also attract more excellent artists to join, which is a positive cycle, thereby deepening the company's moat.

Therefore, what Pop Mart should be most worried about now is not whether the valuation bubble will be squeezed. After all, if the time dimension is long enough, a phased adjustment in its stock price is bound to happen. The key is whether Pop Mart has the ability to continue to gain the trust of consumers and the capital market.

At present, Pop Mart already has the ecological ability to continuously create IPs, but it still needs to try its best to eliminate possible uncertainties. For example, Pop Mart mentioned in its annual report that it cannot guarantee that it will be able to design and develop products that are popular with consumers in the future.

Considering that an IP takes a long enough time to grow, it is imperative to start building the next Labubu.

In addition, as the global layout is further deepened, Pop Mart must also try its best to solve problems that may damage the brand image, such as supply chain efficiency, scalper speculation, and quality control. Overall, Labubu's success is a star-making myth that combines new consumer trends, global social needs, Gen Z's emotional consumption, and capital assistance.

However, market trends will not remain unchanged. Pop Mart's real test is how to allow IPs to successfully traverse cycles in one vent after another, rather than blindly betting on an uncertain future.