Labubu has nothing to fear from Wakuku or Lafufu
Pop Mart’s elflike doll has its rivals but the greatest threat may be the temporary nature of viral toy crazes
The global mania for Labubu dolls has given parent company Pop Mart a huge boost. The Hong Kong-listed stock has shot up 470 per cent over the past 12 months. With a market cap of HK$367bn ($47bn), Pop Mart is now worth more than Mattel, Hasbro and Japan’s Sanrio combined.
The profitability of the toothy elflike creature and Pop Mart’s “blind box” business model has given rise to a host of would-be competitors, such as Wakukus — launched by Chinese retailer Miniso — and Lafufus, as the fake Labubus flooding the market are called. Fears that they could take a bite out of Pop Mart’s colossal success, however, look misplaced.
Miniso looks like the chief challenger. The launch of Wakuku dolls drew long lines at its flagship stores across China, and the group has a far bigger physical presence than Pop Mart itself, with 7,900 retail stores worldwide against Pop Mart’s 443 stores and 2,437 vending machines. While Miniso is best known for selling budget-friendly knick-knacks such as home goods, toys, snacks and fashion accessories, it has form in selling products licensed from brands such as Disney and Marvel.
Yet the $42bn-a-year global collectable toy market is vast and can accommodate both Labubus and the nascent Wakuku. And striking viral toy gold is easier said than done. Pop Mart’s doll only became the fashion accessory du jour after K-pop singer Lisa of Blackpink posted about her collection to her 100mn followers on social media.
Rather than Wakuku sales, a better indication of longer-term demand for Labubu may be the resale market. What started as a $22 toy was regularly being flipped for three or four times that. Speculative buying appears to be cooling, with anecdotal evidence suggesting resale prices are falling. But a healthier secondary market may actually make it easier for Pop Mart to expand Labubu’s fan base.
Pop Mart has made a mint from its success. A gross margin of 67 per cent last year puts it on a par with luxury groups such as LVMH, rather than traditional toy companies. At 26 times forward earnings, too, the group now trades at a premium to the luxury behemoth.
Trouble is, viral toy crazes have less durable appeal than buttery-soft handbags. This means that Pop Mart has to keep releasing new products to keep its star brand relevant, while also developing its next superstar. The risk for Pop Mart is not that consumers will prefer a different toothy doll. It is that they will eventually lose their taste for them altogether.