"Blind box first stock" Pop Mart has gone public in Hong Kong, and its market value has exceeded HK$100 billion. Even investment veterans who have been in the capital market for years are exclaiming "I don't understand." This is a controversial company. Many people say they don't understand: who is buying their products? What supports such a high market value? First, let me introduce Pop Mart: it is a newly emerging company selling trendy toys, referred to as "chaowan" in Chinese, which young people call figurines or dolls. Don't think that just because it's called toys, it only does business with children. In China, 95% of trendy toy consumers are between 15 and 40 years old, and 63% of them are highly educated with a bachelor's degree or above. What Pop Mart sells are the trendy toys shown in the picture, with different characters and series, mainly priced at 59 yuan/69 yuan. More well-known is the "blind box" sales format, where you buy it without knowing which character is inside. To be honest, although I consider myself a "young person," I didn't understand Pop Mart's products at first, but that didn't stop my wife from buying a large pile, so much so that the only small table in our room is a bit crowded. After learning some information and listening to my wife's explanation, I found that Pop Mart has some characteristics that most current FMCG brands lack, and it's worth understanding and learning from. -01- Why learn from Pop Mart? Why should FMCG brands learn from Pop Mart? Because its annual sales reached 1.68 billion yuan, with net profit of 450 million? Because its valuation increased 58 times in 4 years, and its revenue compound annual growth rate has remained above 225% for 3 years? Because its net profit increased more than 280 times in 3 years, with a gross margin of 65% and a net margin as high as 27%? Yes and no. Looking only at performance, there are more outstanding companies, but what is truly rare is that Pop Mart achieved such results when almost no one was optimistic, with limited resources, and in a track that was not mainstream in the eyes of "big players." You should know that in the early days of Pop Mart, founder Wang Ning did not appear impressive. He started by imitating a trendy toy supermarket in Hong Kong, with a goal of opening three stores a year, but in reality, the only store was struggling, with few customers and staff resigning collectively... Wang Ning is not like many entrepreneurial bosses who are eloquent and articulate. Even Pop Mart's investors described Wang Ning as "average education, never had a regular job, speaks with a calm expression, not charismatic, and the team lacks elites." Of course, after Pop Mart's success, this changed to "Wang Ning is steady, speaks little, doesn't show emotions, and possesses many excellent qualities of a 'consumer entrepreneur.'" The "uninspiring" Wang Ning suffered a lot when trying to raise funds to solve difficulties in the early days. During the period when Pop Mart needed investment the most, Wang Ning contacted many VCs, but few invested. Completely different from the current stock price surge, investors analyzed Pop Mart's business content and profit model and were not optimistic about its future. That's how the market works: winners are kings, losers are villains. This shows how difficult Pop Mart's path to success was. However, on this path that no one was optimistic about, an investor, after talking with him for three days, invested 2 million yuan despite still not being optimistic about the Pop Mart model. Pop Mart survived and developed step by step to today, going public and breaking a market value of 100 billion Hong Kong dollars. It is worth noting that in terms of channels, Pop Mart does not overly rely on any specific channel. Their own mini-program, Pop Mart Draw Box Machine, achieved sales of 271 million yuan, surpassing their Tmall sales of 251 million yuan. In addition, Pop Mart has over 100 offline stores and over 800 self-service vending machines. For Pop Mart, the biggest role of offline channels and members is actually to promote their IPs and increase the success rate of becoming hit IPs. How did Pop Mart, which did not rely on mainstream channels and had no capital favor in the early days, get to where it is today? -02- What is worth learning from Pop Mart? First, we need to understand: what is the basis of Pop Mart's rapid rise? Many people say, isn't it just blind boxes? That's one-sided, isn't it? The blind box gameplay indeed played an important role in Pop Mart's rise, but it is not the only core. The blind box model is not new; the Water Margin cards in the once-popular Xiaowanxiong instant noodles, various lucky bags, and gashapon are all similar gameplay. It can be seen that this model has low barriers and is easy to imitate. Obviously, blind boxes are not the only factor in its success. The most fundamental reason behind Pop Mart's success is actually understanding the latest batch of consumers from a new perspective: the Z generation represented by post-95s and post-00s. Pop Mart's main consumer group is those young people. According to the 2020 Douyin user portrait report released by Jushu Suanshu: the post-90s and post-00s account for 43%, and the Z generation, mainly post-95s and post-00s, shows strong interest in games and anime (the highest preference among all categories). In addition, emotional and cultural videos also show high growth. Many people cannot understand why the "Z generation," who have superior material conditions, have food, drink, entertainment, and work, are so "happy" yet so "picky"? Because today's China is in an era of economic takeoff and developed commodities. People born after the 1990s grew up in a relatively material abundance environment, especially the post-95s and post-00s. They are the first generation that has truly never experienced material scarcity. Material things bring them little satisfaction and happiness. They are indifferent to spending money; what is meaningful and valuable is extremely important to them. Moreover, their lives have too many certainties: what to eat, drink, and play are all certain content. They need uncertainty to bring them excitement; they need to buy products with stories and connotations. Understanding this helps us better understand Pop Mart's rise. A "gamble" full of uncertainty First is the blind box model, which is most praised. This model gives consumers a "gamble" without any psychological burden. Because even the least favorite one in a blind box is still a high-quality figurine with an IP, exquisite and cute, suitable for posting on social media. This experience is easy to get addicted to, which is why Pop Mart had 3.6 million registered members as of the end of June this year, and in 2019, the overall repeat purchase rate of registered members reached 58%. That is, more than half of people will buy again, which is why their revenue grows so rapidly. Emotional value, social drive Can blind boxes alone make these young people flock to them? Of course not. For them, the process of discovering, selecting, buying, opening to see the product, posting to share, and interacting with others can generate multiple emotional ups and downs. The figurine is just a byproduct of the experience; the experience that can be used for social interaction and provide emotional value is the real value. Some people say that Pop Mart might have become popular through marketing like many internet-famous products. Then I tell you: in 2019, Pop Mart's sales and marketing personnel employment expenses were over 79 million yuan, accounting for 4.7% of total revenue, but the advertising and marketing expenses spent by this team only accounted for 2.8% of total revenue. That is, they spent less money than their own salaries and benefits. Blind box players not only spontaneously spread Pop Mart, but also spontaneously organized a secondary market, making blind box products circulate like luxury goods, becoming a new social currency for consumers. According to data from the second-hand trading platform Xianyu, in 2019, there were over 300,000 blind box players on Xianyu. This shows that Pop Mart's sales are not driven by marketing, but by social relationships among users. Maintain quality, keep creating Although I said the figurine is just a byproduct of the experience, many times, byproducts have a huge impact on the experience. For example, if you stay in a luxurious five-star hotel that is perfect in every way, but there is a rotten apple in the fruit plate given by the hotel, what would you think? As mentioned earlier, blind boxes use a gambling-like mentality, but you should know that gambling is despised because a mistake can lead to total loss. How to make consumers feel that no matter which one they draw, they won't lose or be deceived also relates to the product itself. Each series of Pop Mart products is a well-known IP developed or purchased with a lot of resources, and the workmanship is very fine, at least considered top-notch among toys. Many people who don't understand trendy toys say that such a figurine is not worth 59/69 yuan. That's because you don't understand. Compared to figurines with genuine IP licenses that cost thousands or tens of thousands, Pop Mart has greatly lowered the threshold for trendy toys. Innovation is rare, but what is even rarer is continuous output. How many years has Pop Mart truly risen? But as of June 30, 2020, Pop Mart has operated 93 IPs, including 12 proprietary IPs, 25 exclusive IPs, and 56 non-exclusive IPs. Among them are top international IPs like Disney. You should know that many brands have to work hard to get one or two heavyweight IPs. Personalized, unique, limited, and quirky, Pop Mart deeply understands consumer psychology and launches many set designs around a large number of IPs to attract more people. The birth of each IP is supported by very strong creator stories or well-known film, TV, and game IPs, making it a representative product with culture first. Therefore, similar to content industries like games, movies, and cultural creativity, Pop Mart also needs to rely on continuously launching hit products to attract customers. So Pop Mart also has concerns: once consumers' enthusiasm for hit products fades, whether it can continue to produce the next hit becomes a key issue. Whether there is a bubble in Pop Mart is not discussed here, but just from the fact that Pop Mart's blind boxes use one product to satisfy consumers' multiple emotional needs such as consumption, curiosity, and social interaction, it is enough to make most FMCG brands feel ashamed. Pop Mart's essence is a brand that integrates three elements: content IP, offline experience, and social circles, and achieves a direct relationship with consumers, bypassing the reach stage. That is its strength. Whether it is building private traffic in its own community or making products not rely on marketing but on consumers' spontaneous spread, it is actually based on establishing relationships with consumers, which is also a attribute that many FMCG brands need. -03- What should FMCG brands do? After understanding why Pop Mart succeeded, should FMCG brands learn everything from it? Of course not. Pop Mart, as a trendy toy product, has its uniqueness, and not everything can be learned. Below are some personal opinions to share. For big brands: As a big brand, you can think about a question raised by Tang Binsen of Yuanqi Forest: how much should be spent on product and how much on communication? Big brands have an obvious problem: they like to pile up resources. Because in large enterprises, executives think differently from the CEO. They consider the boss's KPI and company strategy. When solving problems, they often think of using company resources rather than the product. So you see that executives in big companies tend to have a "short-term mindset" and don't consider long-term issues. The short-term method is to ask the company for resources and make PPTs to leaders; the long-term method is to solve the product problem. For big brands, having too many resources often leads to a "resource curse." What does that mean? Countries with abundant resources often have poor high-tech industries, like Brazil and Arab countries, while Japan, Israel, and South Korea, which lack resources, do well. Resource-rich countries make money too easily, just like a big company executive who finds that to boost traffic and complete the boss's KPI, the best way is to apply for a budget, inject a stimulant, and get it done immediately. When there is a shortcut, no one wants to work hard on the product. Generally, consumer companies maintain a marketing team to help them spend money on advertising and marketing, so usually the money they spend is dozens of times or more than their own salaries and benefits. Take cosmetics companies, for example: they usually spend half of their total revenue on marketing expenses, while other regular consumer goods categories spend at least 30% on marketing. In contrast, Pop Mart spends more on personnel than on marketing. A large amount of funds and resources are spent on developing and operating IPs, which is actually on the product itself. Do you understand? The era of consumer sovereignty has arrived; shouldn't you still do a good job on the product? In addition, from the proportion of Pop Mart's sales channels, it can be seen that their private traffic operation is excellent, which allows them to repeatedly reach fans, understand their preferences well, and truly understand consumers. At least my wife is happy when she receives new product pushes from Pop Mart on WeChat, rather than rejecting or blocking them. For innovative brands: For innovative brands, what needs to be done more is to be clear about what you are actually selling: product innovation? Model innovation? Targeting needs? I think we should return to the value of the product itself. Value is the meaning that a thing, a product, or a brand can truly deliver. Many innovative brands say they are building a brand, but I find that many people are also changing the concept, thinking that building a brand is brand marketing or even hype. This is not value, but a sense of value. You are just creating an illusory feeling of value. Is this called building a brand? I completely disagree. To build a brand, you must first have value, and then have a sense of value. Even if you are very capable, you cannot create a sense of value for something that has no value; it is very difficult. In other fields, you might try, but in the consumer goods field, it is very difficult. The term "new consumer brand" is not a gimmick. You must first create value, and then you can present the so-called sense of value. If a tip is adopted, a payment of 400-2000 yuan will be made.