POP MART connects with LV again: A mutually beneficial alliance

POP MART's trendy toy business is becoming more closely linked with luxury goods.

On December 10th, POP MART announced that Wu Yue, President of LVMH Greater China, has become the new non-executive director of the company's board.

Wu Yue joined the LVMH Group as early as 1993 and served as the head of Dior's fragrance business in China. After rejoining in 2005, he became the President of LVMH Greater China, responsible for the operations of several luxury brands in China.

Wu Yue's new "part-time" role may indicate POP MART's further exploration of initiating an international fashion trend core circle.

Since its performance explosion, POP MART's nearly 70% gross margin has frequently been compared to luxury brands like Hermès.

However, at just fifteen years old, POP MART is still a young company.

Compared to the past when "one toy was hard to find," the premium of POP MART products in the secondary market has significantly decreased, and the heat has cooled compared to before.

Wang Ning has expressed interest in how luxury brand LV creates a sense of "sufficient scarcity."

"I love art and business, but these two things are very contradictory because business pursues universality, while art pursues uniqueness. We have always wanted to find a balance," Wang Ning said.

In the current turbulent market value of POP MART, more connections and intersections with global luxury giants seem to be becoming a new expression of this balance.

Committed to Win-Win

"Scarcity" is a common pursuit in both the trendy toy and luxury goods industries.

The value of luxury goods lies not only in the products themselves but also in showcasing identity, status, and taste. The "exclusivity" of scarcity forms the basis of social stratification and identity recognition.

Trendy toy consumption is equally aware of this principle.

Scarcity directly elevates product prices and consumer desire, making the act of purchasing itself a form of "conspicuous consumption."

Whether it is the hidden variant mechanism of blind boxes, limited edition collaborations, or precisely controlled restocking rhythms, the essence is to artificially create a sense of scarcity, relying on stable collector communities and active secondary markets to continuously attract new players and maintain market heat.

However, pure and absolute scarcity cannot support the operation of a commercial system.

Brands still need sufficient sales to maintain operations and reach a broader mass market through products and promotions.

Traditional luxury groups have constructed a clearly defined pyramid system for this purpose:

By offering flagship products and haute couture series to serve top clients, they establish brand prestige; bags and leather goods attract the middle and affluent classes, reinforcing identity recognition; while beauty, fragrance, and accessories serve as "entry-level" products to attract the young and complete brand education.

POP MART has previously shown signs of borrowing similar logic, such as launching the MEGA collectible series positioned as high-end and collaborating with luxury brands like Moncler, BALMAIN, and Lamborghini.

In the first half of 2025, the MEGA series generated nearly 1 billion yuan in revenue, accounting for 7%.

However, trendy toys are essentially more mass-market consumer products.

POP MART's rich IP matrix gains widespread market appeal by establishing emotional connections with consumers and meeting self-expression needs The core revenue contribution still comes from figurines and plush products priced around 100 yuan.

However, with the global popularity of LABUBU, POP MART indeed has more leverage to open up additional markets.

In October, Moynat, a leather goods brand under LVMH, launched a co-branded bag series with LABUBU designer Long Jiasheng, and LVMH Chairman Bernard Arnault personally attended the event, highlighting its importance.

Behind this collaboration lies the current operational challenges faced by the luxury goods sector.

A research report released by Bain & Company shows that the global luxury goods industry is experiencing its first substantial slowdown since 2009. Both the core markets of the United States and China have stagnated, with the Chinese market recording negative growth for the sixth consecutive quarter.

At the same time, luxury consumers are increasingly pursuing personal expression and emotional connection, driving products towards a more social attribute.

The addition of Wu Yue may signify that the collaboration between POP MART and LVMH is beginning to transcend marketing levels and shift towards deeper strategic interactions.

Industry analysis suggests that the partnership between LVMH and POP MART is expected to achieve a "win-win" situation.

LVMH can leverage the emotional connections and young communities of IPs like LABUBU to maintain brand vitality and gain insights into consumer trends.

POP MART, on the other hand, can enhance brand value and broaden customer boundaries by relying on the operational experience of luxury goods, and learn from its mature systems in brand building and cyclical responses, achieving a synergistic leap in brand and IP influence.

In the long run, the fluctuations in POP MART's stock price are highly synchronized with the lifecycle of its IPs.

The market has begun to worry that if LABUBU's popularity peaks in 2026 without new hits to follow, the current growth rate and valuation will face pressure.

Since the beginning of this year, POP MART has leveraged LABUBU's popularity to vigorously drive the expansion process in overseas markets.

In the first half of the year, POP MART opened a net of 70 stores overseas, with the average area of new stores increasing by 25% year-on-year. The annual target for store scale is 200, maintaining an expansion pace of about 3 stores per week.

LABUBU's traffic has generated spillover effects.

Management has revealed that in 2024, the proportion of members purchasing two or more IP products has significantly increased, indicating cross-IP sales phenomena.

Currently, among the backup IPs, CRYBABY and Star People have shown outstanding growth: the former is the fastest IP under POP MART to enter the "10 billion yuan club," while the latter achieved revenue of 390 million yuan within just six months after signing in 2024, being regarded as the fastest-growing emerging IP.

However, replicating LABUBU's global popularity or rapidly scaling up in the short term is still a challenging task.

Clearly, POP MART needs to focus on breaking into the fashion industry and higher-end markets during LABUBU's peak influence.

Time is Needed

Finding a balance between IP value, scarcity, and scalable revenue is a long-term issue for POP MART.

However, the current market seems to expect a short-term answer that can yield results.

Since August of this year, POP MART's stock price has fallen over 45% from its peak of HKD 339.8, with a total market value evaporating by over HKD 200 billion For POP MART, any slight negative news, such as a decline in resale prices or third-party authorization issues, could trigger a significant stock price correction.

The sharp drop in second-hand market prices is one of the key triggers for the recent reversal of market sentiment towards POP MART.

The most popular item in the LABUBU 4.0 Heart Code series, "Heart," is currently trading at about 270 yuan on the Qiantao APP, a noticeable drop from 380 yuan two months ago.

In major overseas markets such as the United States, the United Kingdom, and Australia, both on the POP MART official website and Amazon, previously scarce products like LABUBU and Crybaby are now showing "in stock," indicating a dilution of scarcity.

Recently, POP MART has also faced a wave of collective bearish sentiment from foreign investors.

Deutsche Bank warned in a report that POP MART is encountering the "Availability Paradox."

Deutsche Bank believes that as the company's production capacity expands, the core IP LABUBU is rapidly transitioning from a scarce trendy symbol to a mass consumer product, and this trend towards popularization may signal a decline in heat.

A report from short-selling firm Bernstein stated that the market should be wary of the risks of slowing growth, high IP concentration, and falling second-hand prices for POP MART, predicting that LABUBU sales may peak in 2026-2027, earlier than market expectations.

Another report suggested that POP MART's core consumer base has shallow engagement and low brand loyalty, with growth primarily driven by fleeting novelty rather than a sustainable collector community.

Wang Ning has emphasized on multiple occasions that POP MART "respects time and respects operations."

However, the fluctuations in external traffic and attention may indeed be far more intense than they imagine.

In April, POP MART admitted that its production capacity had surged from an average of 300,000 units per month at the beginning of 2024 to 10 million units, stating that the current expansion curve "far exceeds the operational experience of normal enterprises."

At the August earnings meeting, management revealed that the monthly production capacity for plush products had exceeded 30 million units, several times that of the same period last year.

The unprecedented speed of capacity ramp-up has put the company in an unfamiliar and uncharted situation.

POP MART does not lack a long-term investment mindset.

It is filling IP content from multiple dimensions, continuously addressing the narrative shortcomings of its IPs to extend the lifespan of its brands.

Business registration information shows that in March this year, it completed the copyright registration for the first season script of "LABUBU and Friends."

Market news indicates that Sony Pictures has obtained the film adaptation rights for LABUBU, and related movie projects have entered early preparation.

In addition, the second phase of Beijing Urban Paradise is under planning and construction, aiming to deepen user emotional connections and interactive experiences through offline immersive scenarios.

IP needs a soul, which relies on a clear worldview and value system construction.

But all of this requires time to settle, and perhaps POP MART is in the same situation now