Pop Mart crashes, OEM factories go wild with price hikes—can the trendy toy industry IPO still be saved?

Ask AI · Can Bubble Mart’s transformation into emotional consumption break through the growth bottleneck?

Author | Zhang Yihong

Once a vibrant interest-based consumption industry, it is now becoming a besieged city: outsiders want to enter, insiders are contemplating transformation.

On one side, Bubble Mart’s stock price has fallen for three consecutive days after its performance “just met expectations but did not exceed expectations,” dropping 30%, while Miniso’s net profit has been halved. Copper Master, once dubbed “Middle-aged people’s Bubble Mart” and “the most Xiaomi-like company in the trendy toy industry,” saw its Hong Kong IPO stumble on the first day, plunging nearly 50%, bringing to light the fact that: IP has never been anyone’s savior.

On the other side, the entertainment industry continues to place high hopes on IP business. Besides the multiple entertainment industry investment waves in 2025 reported by Xiaoyu, Alibaba has also further signaled increased support for the trendy toy sector. In March, Alibaba’s offline trendy toy collection store “Lucky Loop” quietly opened in Shanghai and Beijing.

In Xiaoyu’s view, the core logic behind Bubble Mart’s volatile stock price is valuation confusion. The success of LABUBU cannot be entirely attributed to consumer recognition and emotional attachment to IP, but leans more towards fast fashion. While fast fashion was once the key to success in the trendy toy industry, it has now become a narrative transformation shackles.

One side is high growth, high marketing, and fast-paced fixed business models, while the other side faces consumers in a world full of IP, with unlimited IP choices but limited consumption capacity.

This short-term dilemma has only one long-term solution: shift from emotional consumption to emotional engagement.

Transformation: Why Focus on Emotional Consumption

Last year, Xiaoyu once proposed: “Interest-based consumption, a high-growth, rapidly changing industry, has put on the unstoppable ‘Red Shoes’: from the capital market perspective, once growth indicators show pressure, the story of new consumption will lose its appeal; from the brand perspective, if the rhythm of creating hit products stalls, brands may soon be forgotten by consumers.”

Unexpectedly, within just a year, the capital narrative of new consumption has begun to waver. For many trendy toy companies queuing for IPO, this is indeed bad news.

What exactly has happened in the interest-based consumption industry? From the annual reports of three Hong Kong-listed companies (Bubble Mart, Miniso, Blucco), Xiaoyu believes the core issue currently facing this industry is not the rhythm of hit product emergence, but the sustainability of hits.

For Bubble Mart, creating hits is not difficult. By 2025, Bubble Mart will have 17 artist IPs earning over 100k yuan, an increase of 4 from 2024. Among them, Xingxingren, one of the main IPs throughout the year, achieved impressive growth, with revenue reaching 2.06 billion yuan. However, what truly worries investors is the 2026 revenue guidance of only “not less than 20%.” This indicates that the trendy toy industry is approaching a bottleneck: the explosive growth from zero to one is about to end.

Bubble Mart’s profit over the past five years

Data source: Wind

Miniso, which saw a high single-digit decline in same-store GMV in the Chinese market in 2024, finally turned positive in 2025, with mid-single-digit growth; overseas, North America performed well, with same-store GMV increasing by mid-single digits, achieving a 34% sales growth in overseas markets. Sub-brand TOP TOY’s Q4 revenue doubled compared to the same period last year, with annual growth exceeding 90%.

However, after excluding salary expenses calculated by shares, Miniso’s total expenditure increased by over 40% year-on-year. Sales expenses accounted for the majority, with growth nearly offsetting the increased gross profit. The indicator Xiaoyu analyzed multiple times, authorized fee growth, was 44.6%. This results in, excluding factors like Yonghui Supermarket, Miniso’s adjusted net profit only grew by 6.5%, a case of “revenue increase but profit stagnation.”

Meanwhile, TOP TOY updated its IPO prospectus on March 31 and is still in the Hong Kong listing process. It’s not hard to infer that 2026 will be a year for TOP TOY and Miniso to increase investments for growth, where high marketing spending to achieve high revenue will continue.

Miniso’s profit over the past five years

Data source: Wind

Contrary to Miniso, Blucco achieved “profit growth without revenue growth” in 2025. Although it turned profitable, its revenue plummeted from a high of 150% to 30%. Blucco, which has been working to reduce dependence on Ultraman, obtained several well-known IPs in 2025, including “Toy Story” and “Zootopia,” but its core problem is lacking the ability to turn hit IPs into hit products.

Blucco’s profit over the past five years

Data source: Wind

But from Xiaoyu’s perspective, the most noteworthy is Bubble Mart’s next step—the home appliance business. As a leader in the trendy toy industry, when the growth from zero to one in trendy toys is about to bottom out, Bubble Mart has taken its first step into lifestyle from zero to one.

Behind this is an upgrade from emotional consumption to emotional engagement, i.e., a shift from short-term to long-term, from disposable to sustainable logic.

And this trend is not unique to Bubble Mart. During the earnings presentation, Miniso founder Ye Guofu mentioned the need to “transform from traffic business to fan business”; the success and importance of collaborations like Jennie and Miniso, as well as the emphasis on “check-in” and “secondary creation” functions on social media, also indirectly confirm Miniso’s future strategy—moving toward high-end, high-value, and high-emotion.

Meanwhile, Blucco is seeking a way out of the “elementary school economy” by using adult emotional consumption. At the 2026 Global Partner Conference, Blucco mentioned that in 2025, the proportion of adult line products increased from 11.4% in 2024 to 16.7%, and this business will continue to be promoted.

Space: Why Can Emotional Consumption Be Achieved

How large is the market space for emotional consumption in China?

Just looking at Sanrio, the parent company of Hello Kitty, and its sales data in China, reveals the desire of both domestic and foreign companies to carve out a share in China’s IP economy. From January to September 2025, Sanrio achieved RMB 1.15 billion in revenue in China, with an operating profit of RMB 440 million; including licensing fees paid to headquarters, the China region contributed RMB 720 million, accounting for over 60% of total revenue.

Sanrio China Business Unit Profitability

Data source: Company announcement

From Sanrio’s data, Xiaoyu believes the space for Chinese emotional consumption comes from two aspects: high IP premium tolerance + space for IP consumption structure transformation.

Looking at Sanrio’s profitability across regions globally, Sanrio mentioned that although their cooperation with Alibaba Fish adopts a revenue-sharing model, the profit contribution is not inferior to other overseas regions.

From the perspective of operating profit margin: 1) generally, developed countries have higher operating profit margins; 2) China’s profit margin ranks among the top, even surpassing Japan. From this, it can be seen that domestic consumers have a high acceptance of IP and corresponding IP premiums, with a persistent willingness to pay.

Sanrio’s operating profit margin in various countries over the past 12 months

Data source: Company announcement

Note: According to Sanrio’s disclosed data, except Japan, other countries/regions use data from October 1, 2024, to September 31, 2025; Japan uses data from January 1, 2025, to December 31, 2025.

Meanwhile, at the February earnings call, Sanrio explicitly stated: “By category, thanks to the expansion of the trendy toy market, the proportion of toys and apparel in the Chinese market is relatively high. But if we can achieve progress in multiple categories like Japan, we believe there is still room for growth in China.”

At the same time, Xiaoyu compared the sales of the latest series of merchandise for MiHoYo’s mobile game “Honkai: Star Rail,” specifically the “Full Moon is the Time When Gods Are Absent” series. Among 54 items, traditional items (metal badges, standees, ornaments, postcards) accounted for 30, about half; in the total sales of over 10k yuan, traditional items contributed about 55%, while two sets of apparel with 10 products contributed 13%; electrical and lifestyle products only contributed 3%.

Honkai: Star Rail merchandise sales by category

Data source: Taobao, as of March 28.

In other words, whether from the perspective of domestic emerging IP brands or foreign established IP companies, the “practical valley” product lines of Chinese IP consumption have broader imaginative space than the currently saturated traditional trendy toys.

Reviewing Bubble Mart’s multi-category layout, from the aesthetic attempt of the 2025 Xiao Ye IP flagship store “Emotional Fusion Living Space,” to recruiting for home appliance lines starting in June, Bubble Mart’s ambition to break beyond trendy toys and upgrade to a lifestyle has never stopped.

As the first step in Bubble Mart’s “lifestyle” creation, the small home appliance, Xiaoyu speculates that Bubble Mart will focus on “display and companionship.” “Display” means product selling points will focus on design and texture rather than disruptive technology or functions; “companionship” means product categories will focus on common life scenarios.

Based on Bubble Mart’s past audience, Xiaoyu predicts its home appliance products will be centered on “artistic living” or “texture of life,” with application scenarios probably covering workstations, living spaces, and light travel. This will distinguish Bubble Mart’s product line from Miniso’s textile and clothing products and Disney’s stationery and toys.

For Bubble Mart’s potential consumers, IP is a symbol, a spiritual totem. While the premium space is higher, it still requires more marketing buzz and KOL influence.

How to excel in emotional consumption

“Emotional consumption” sounds attractive, but truly doing “emotional consumption” rather than repeatedly exhausting consumers’ emotions and spending power, Xiaoyu summarizes three challenges for IP brands.

The first is competition.

On one hand, there is competition among IPs. Take Sanrio as an example again, Sanrio and its investors show strong concern and ambition for the Chinese market. They mention: “While ensuring current profit margins, strategic initiatives to expand higher-margin licensing businesses will be promoted.” In addition, Sanrio’s strategic plan in China also includes increasing direct-operated and franchise stores (to 100), and customizing new character IPs for target customers.

On the other hand, product homogeneity and piracy threats persist. Despite LABUBU’s deep-rooted image, various brightly colored LABUBU products still flood roadside shops.

In terms of merchandise, take water cups as an example. Many brands are selling “authentic Sanrio licensed water cups,” but not all have reliable licensing proof. Moreover, identical priced, similar styled cups labeled “authentic Hello Kitty collaboration” appear repeatedly across different Tmall official stores, increasing consumer difficulty in distinguishing authenticity.

On Tmall official stores, apart from Bobo & Baba’s pricing (299 yuan) and sales (over 100k units), most other brands are priced below 100 yuan, with Miniso at 79.9 yuan and over 10k units sold.

大量相似产品在淘宝搜索“三丽鸥水杯”

Another challenge is consumers’ bottom line for “cost performance.” Although domestic consumers have shown high tolerance for IP premiums in emotional consumption, this does not mean they will unconditionally accept brands’ arbitrary pricing and quality risks. On the contrary, “cost performance” may lead consumers to “find alternatives” or “wait for group buying (jointly customizing similar styles),” returning to the first competitive threat Xiaoyu mentioned.

This year, the top domestic hit “Love and Deep Space” launched a character perfume as birthday merchandise, but caused controversy due to its price exceeding Hermès. Similarly, WenYuan’s Good Things launched a “Full-time Master” fragrance spray, with a 10ml bottle priced at 158 yuan—an even more “luxurious” level. Although quickly taken down and rectified, it exposed the backlash from mispricing.

In Bubble Mart’s entry into the small home appliance field, safety and after-sales issues are even more critical.

It is reported that Bubble Mart will cooperate with Xinbao Co., adopting OEM (original equipment manufacturing). If Bubble Mart follows Xiaoyu’s prediction to pursue a high-quality or high-end route, it must achieve both design and quality “texture” to maintain high gross margins.

Xinbao Co., as a leading OEM manufacturer, earned 85% of its revenue from OEM in 2024, with an approximate gross profit margin of 19%. Relatively, Xinbao has experience in kitchen appliances, with 85% of its small home appliance revenue coming from this sector. According to its official website, Xinbao manufactures products for internationally renowned brands like Philips and Bosch, and in kitchen appliances, Starbucks and DeLonghi are also key clients. Domestically, brands like Jingdong Zhizao, Netease Yanxuan, and Xiaomi have had multiple products made by Xinbao.

Xinbao’s profit in the first half of 2025 in the small home appliance industry

Data source: Wind

Finally, the real difficulty of emotional consumption still comes back to the IP itself. The threshold for emotional consumption IP is much higher than that for fleeting emotional or impulsive consumption.

In Xiaoyu’s view, whether in film and television, games, character images, or even celebrities, the key to successful IP operation is consumer emotional investment + identity recognition. The former is the foundation for IP to become an IP; the latter determines whether consumers will buy products derived from the IP, which is the fundamental logic of IP commercialization.

This image may be AI-generated

AI illustration by Entertainment Capital

Past experience shows that consumers’ intrinsic high sunk costs are often highly correlated with outward expressions of “long-term affection.” Sunk costs include not only money but also emotional and time investments.

Compared to games, character images, or even celebrities, film and TV IPs are the weakest in this regard. Once the broadcast or screening period ends, only a few works can continue to attract attention and discussion. The serial development of long series remains in early or experimental stages.

If the entertainment industry wants to achieve a two-way push between IP and works, aiming at mature foreign IP operators like Sanrio and Disney, using collaborations to open consumer cognition is only the first step in emotional consumption. If the market remains stuck at this step, waiting for manufacturers, the inevitable result will be consumers’ increasingly difficult-to-motivate emotions and tighter wallets.

For domestic IP, the real question is not how to generate hype or create hits, but how to develop the long tail and companionship.

Recent popular TV series collaborations (incomplete statistics)

Source: Publicly available information