Pop Mart, the Beijing-based toy company whose Labubu dolls became one of the defining consumer crazes of the decade, has reported that global sales in the three months to the end of September fell by as much as 50 per cent against the same period last year.
The decline was steepest outside mainland China. Revenue in the United States was down by at least 70 per cent.
The dolls were sold mainly in blind boxes: sealed, mystery packages whose contents the buyer cannot choose, typically priced at 15 dollars or more, with the rarer figures changing hands for far more on the resale market. Pop Mart did not invent the format, but Labubu, launched in 2019, took it worldwide.
At its height the line made Pop Mart worth more than the American toy giants Hasbro and Mattel put together. The monsters became fashion accessories, carried by celebrities including Kim Kardashian and Blackpink's Lisa. The company had to pull the toys temporarily from its British shops after reports of customers fighting over them, and one buyer paid more than 150,000 dollars for a human-sized version.
The firm remains formidable. It has 500 shops in more than 30 countries and 2,000 vending machines, it listed in Hong Kong in 2020, and it is worth nearly 24 billion dollars, even with its shares down by more than half from last year's peak.
Analysts trace the allure to supply. Samer El Hajjar, a marketing lecturer at the National University of Singapore, says a key part of the appeal was how hard some of the dolls were to find, which kept collectors buying boxes until they got the one they wanted.
Ashley Dudarenok of the China research firm ChoZan says that sense of exclusivity faded as Pop Mart increased production to meet demand. Investors, El Hajjar says, now worry that the global success was a viral moment rather than growth built on lasting customer loyalty.
The company has been building out accordingly: a theme park in Beijing, a Labubu film, the apparatus of a franchise. Competitors have moved in, among them the blind-boxed Sonny Angels and glow-in-the-dark Smiski figures, and Miniso, founded in Guangzhou, which sells blind-boxed Disney and Marvel characters in more than 8,000 shops globally.
Pop Mart declined to comment on the share price and did not respond to questions about the fall in sales.
This newspaper would like to be clear about what was being sold, because the accounting matters. The item in the box was a vinyl monster. The item in the transaction was the chance that it might be the wrong one.
On that reading the company was not short of stock. It was short of scarcity, and it spent the past two years converting the second into the first at industrial scale. Every additional unit shipped reduced the value of the units already shipped, which is an unusual property for a toy and a familiar one for a currency.
Our analysts therefore record the quarter not as a fall in demand but as a successful supply response. The company identified a shortage and eliminated it. The shortage was the asset.
Dudarenok puts the coming year plainly: "The real test for next year is whether Pop Mart can make people love a character without a celebrity holding it." The Department of Unnecessary Research regards this as the wrong test, and proposes a simpler one.
The ideal blind box, on the firm's own economics, is one that is impossible to obtain and contains nothing. It would carry no manufacturing cost, no inventory risk and no disappointment, and its resale value would be limited only by the number of people who had failed to buy it.