Pop Mart pushes global expansion amid concerns of ‘peak Labubu’
Chinese toymaker plans store on New York’s Fifth Avenue as it faces pressure to continue momentum of its popular dolls
Pop Mart is set to significantly expand its global presence next year as the Chinese toymaker faces pressure to continue the momentum of its popular Labubu dolls and ensure it is not a one-hit wonder.
The Beijing-based company is planning to open a flagship store on Fifth Avenue in New York, according to a person familiar with its plans, as well as a separate location in Times Square. They are part of dozens of expected openings in the US, where it already has close to 60 stores.
This month it opened a 600-square-metre store in Sydney, its largest so far in the southern hemisphere, and expects to increase its footprint in Europe and Japan, the person added.
Pop Mart’s revenues and valuation have soared this year on the back of its furry elf character Labubu. Celebrities including Dua Lipa, Rihanna and Lisa of K-pop group Blackpink have been spotted carrying the palm-sized plush toys, and scuffles have broken out in stores over limited editions.
Their popularity has taken Pop Mart’s market capitalisation to $35bn, double that of US groups Hasbro and Mattel combined.
But the company is now under pressure to maintain its momentum, as recent declines in the toys’ resale prices raise the prospect of “peak Labubu”. Its Hong Kong-listed shares have fallen about 40 per cent from their all-time high in August, and analysts have pointed to the need for new products or characters.
“Labubu doesn’t actually have that much of a story behind it, it’s just a strange-looking doll,” said Chris Pereira, founder of consultancy iMpact. “I don’t think it’s what they were expecting, for it to go so crazily viral.”
He added: “The question is ‘what next’? The direction I expect them to be looking at is cross-branding . . . say with Disney or with some other movie chain.”
Pop Mart sells many of its products in “blind boxes” that typically retail for about $10 in China. Customers do not know which specific character in a series they have bought until after unboxing them, driving repeat purchases and a vibrant secondary market, particularly among collectors of full sets.
Investors, analysts and toy enthusiasts have closely watched the resale value of Labubu dolls for signs of whether their popularity is ebbing. Pop Mart has increased its production of plush dolls, including Labubu, 10-fold this year, the company has said, and produces about 30mn plush dolls a month.
The company is one of the few Chinese consumer brands to gain global recognition. Facing intense competition and economic pressures at home, companies such as Luckin Coffee, a lower-priced competitor to Starbucks, milk tea chain Chagee and electric vehicle maker BYD have looked abroad for growth.
“A lot of them, when they reach out to me, they’ll say the [Chinese] economy’s not great [nor are] the prospects for growth in mainland China,” said Pereira, who works with about 400 Chinese companies, including Pop Mart, on foreign expansion.
“Because of the competitive nature of the Chinese economy, going overseas really is easier for these companies. They’re more efficient, more scrappy than their western counterparts.”
Pop Mart said revenues in the Americas increased by 1,270 per cent year on year in the third quarter against overall revenue growth of 250 per cent.
The company did not disclose revenue by value for the third quarter but said its half-year revenues were just under Rmb14bn ($2bn), three times higher than the same period a year earlier.
“The pace of store openings has lagged behind the surge in consumer demand, particularly in the US,” said Lina Yan, a consumer analyst at HSBC, who noted there were more than 100 Pop Mart stores in Beijing and Shanghai each.
“Were it to mirror the strategy deployed in Beijing and Shanghai, it could open as many as 200 more stores in the country,” she said.