Keywords

1 Introduction

Blind box is a kind of new fashion nowadays. Just like its name suggests, consumers do not know what’s inside. Sometimes the boxes can surprise you and sometimes disappoint you. Blind boxes were first derived from Japanese ‘lucky bags’. In China, from 2012, the blind box gradually developed in the Chinese market but most of them are imported from other countries Qi and Jie (2022). In 2016, the Chinese local blind box company POP MART, greatly expanded the mainland market and made it popular around China. The rapid development of the blind box and its hidden marketing theory have attracted the attention of relevant scholars and caused discussions on the topic of the blind box in academia, such as reasons why it can quickly spread, habits of its targeted consumer—Z Generation, marketing strategy used under the blind box economy, consumer behaviors and psychology used, and the developing statement and future. Based on those useful references and secondary resources, this essay analyzes China’s blind box economy using a specific example, the leadership of the whole blind box market POP MART, and the success of POP MART using the SWOT model and psychological strategies. It also predicts the development of China’s blind box economy and indicates problems and possible solutions. The result of this essay expands the research range of the blind box economy and excavates how the blind box economy applies customer psychology. After reading this essay, people will have a deep understanding of the future development of China’s blind box economy and its problems and solutions.

2 The Background of POP MART

Wang Ning created POP MART in 2010. POP MART has so far developed a thorough platform that covers the entire chain of art toys and made significant contributions to the rapid growth of Chinese art toy culture. The development of POP MART can be divided into 3 periods. The first period(the exploration stage) is between 2010 and 2014. In this period, the business model of POP MART was defined as a grocery distributor selling trendy items, but it was faced with being replaced by others because of a lack of core competitiveness. The second period (growth stage) is between 2015 and 2016. Most of POP MART’s revenue came from the agency of the art toy, Sonny Angel, and after getting the authorization of IP-Molly, POP MART quickly became popular. The third period (development stage) is from 2017 until now. POP MART continues cultivating their own IPs, signing excellent artists, obtaining authorization from well-known IPs, and creating an entire service chain for both online and offline shopping. The total assets of POP MART increased from 142 million yuan in 2017 to 8.32 billion yuan in 2021, which shows POP MART has achieved explosive growth over recent years Annual Report (2020). POP MART has already been officially listed on the Hong Kong Stock Exchange in 2020 and its earnings per share increased from 0.31 yuan in 2017 to 0.62 yuan in 2021. POP MART was chosen as an example because it is one of the most successful and representative companies in the Chinese art toy industry and blind box economy. By analyzing POP MART, the theoretical nature of China's blind box economy can be better analyzed.

3 SWOT Analysis of POP MART

SWOT analysis is a situational analysis that takes into account both internal and external competitive settings and conditions, as well as internal and external opportunities and threats that are relevant to the study object. This approach enables a thorough and systematic examination of the research object's status, followed by the formulation of development strategies and plans that are appropriate given the findings of the study Helms and Nixon (2010).

3.1 S-Strength

Abundant and Strong IPs. Innovative IP images can highlight the differentiation of the brand and make it stand out from similar brands, so as to leave a deep impression on consumers’ hearts. POP MART’s propriety IPs don’t have animation, film or television content to support, mostly from the original ideas of designers. Consumers can give their expectations of human design, and emotion to the commodity and make them more imaginative and emotional. Proprietary IPs, exclusive licensed IPs, and non-exclusive licensed IPs make up the majority of Pop Mart brand products. The most well-known and profitable IPs are those with a questionable reputation, such as Molly, SKULLPANDA, Dimoo, Bunny, and others. The proportion of revenue from propriety IPs shows a significant increase from 39% in 2020 to 57.6% in 2021 Annual Report (2020). In 2020, SKULLPANDA created 40 million RMB revenue in three months, and became the fifth head propriety IP of POP MART, verifying the strong IP of POP MART. Exclusive licensed IPs including The Monsters, PUCKY and others; Non-exclusive licensed IPs including cooperative brands with famous characters such as Sanrio, Line Friends and SpongeBob, etc. Chen (2021).

Accurate Targeting. Targeting means evaluating each segment’s characteristic and selecting one or more segments to enter. The resource, manpower, material resources and capital of any enterprise are limited. Choosing the suitable target market, companies can concentrate on manpower, money, material and resources to strive for the advantages in the local market, and then occupy a share in the target market. POP MART divides its potential customers into several parts including the “Z” generation, artists, white-collars, parents and others. Z generation is people born between the 1990s and 2010s who are familiar with the internet and live in a relatively wealthy background Jiahui and Chen (2022). POP MART pays the most attention to this special group. Z generation is more willing to pay for their spirit satisfaction and can get great enjoyment and satisfaction from opening blind boxes. POP MART grabs the feature of blind boxes as the key to narrow the gap between young people, express their emotional demands and explore their values and the design of new IP always follows the taste of Z generation.

Various Marketing Channels. Marketing channels are ways to deliver goods or services from manufacturers to customers. The rapid development of the commodity economy makes the level of economic cooperation and professional division of labor constantly improve. In the face of numerous consumer groups, manufacturers should not only produce or provide products and services to meet the needs of the market, but also quickly deliver products and services to target consumers at an appropriate cost. POP MART has both online and offline marketing. Offline marketing for POP MART has retail stores and roboshops. The retail stores are mainly located in the core business circles of first and second-tier cities. Retail stores aim to grab fans, experience new products, enhance the shopping experience and expand brand awareness. With an initially low investment cost and high operation efficiency, the roboshops have functions like a strong penetration of the second-tier cities and location mobility. Online marketing of Pop Mart includes Pop Draw (WeChat mini program), Tmall flagship store, JD.com flagship store, PAQU and other online channels. In particular, the popularity of Pop Draw increased by 92.6% from 2020 to 2021 Annual Report (2020). With the help of Pop Draw, the “selection-payment-unpacking” step can be restored online, shortening the user’s purchase process. The PAQU app provides an online platform for blind box lovers, where people can get the latest information about blind boxes, communicate unpacking and changing experiences, and do second-hand selling.

3.2 W-Weakness

Single Product Portfolio. As the art toy market continues to increase, the blind box is more of a commercial model than a fixed product. Most revenue of POP MART comes from sales of blind boxes but blind boxes are not exclusive to POP MART. As the novelty of blind boxes wears off, the strength of blind box sales will also fade. Compared with the most successful IP company-Disney, the composition of its revenue includes film or TV entertainment, media networks, parks and consumer goods. Disney continues to establish the layout of the whole industry chain and to maximize it commercial value. Single product portfolio has the poor ability to resist risks and if the industry profits decline and competition deteriorates, it will cause a short period of capital chain rupture. The market cycle of products is unstable due to consumers’ fatigue of using similar products. POP MART are becoming less competitive with the appearance of other blind box competitors like 52 Toys and MINISO.

Lack of IPs’ Contents. The core competitiveness of POP MART is the IP training system. The threshold of blind box development is low but the incubation period is a long-term process. Most blind box companies just satisfy consumers’ needs for facial attractiveness same as POP MART’s popular IPs. Those characteristics lack the support of story and culture and are only image selling. The extension of the vitality of IP products needs the support of IP content, which can easily connect the relationship with customers and make them sympathize.

3.3 O-Opportunity

Developing Art Toys Market. The market scale of the global art toy industry is expanding day by day. Influenced by social and emotional needs, the popularity of Chinese art toys is rising. It can be predicted that the scale of China’s fashion game market will continue to expand. According to the research, the proportion of Chinese art toy market in the global market scale increased from 11.18% in 2017 to 19.74% in 2020, and it is expected to reach 23.03% in 2023 Qi and Jie (2022). Blind box economy will take advantage of the art toy market and gradually develop into one of the core markets of global blind box consumption.

Potential Male Consumers. More than 60% of male consumers buy hand-made products, while only 37.4% buy blind boxes. It is expected that in the next five years, the blind box economy will gradually favour males, and the penetration rate of the male group will increase too, which will further promote the sustainable development of the blind box economy Qi and Jie (2022).

3.4 T-Threat

Risk of Losing Consumers. According to the data, more than 30% of Chinese netizen think the blind box is not practical and more than 20% of them think the price is unreasonable Qi and Jie (2022). Consumers’ favour of IP is random with low brand loyalty. Once the market dividend subsides, there will be a risk of consumer loss. At the same time, the more customers buy, the greater the opportunity for customers to buy again, which means that in the whole collection process, the unpacking experience will be worse and worse.

Fierce Competition. China’s blind box economy keeps rising, and blind box companies are also expanding, considerably but at present, the blind box industry and the market pattern are uncertain. The high-profit margin of blind boxes attracts more and more enterprises to enter the competition track. POP MART now has powerful competitors like 52 Toys, Dream, MedicomToy and MINISO Shi (2022). For instance, TOPTOY is an independent sub-brand of MINISO, the top retail company. Now it has launched TOPTOY mini-program, and later launch the platform mall and exhibitions in 2021. MINISO currently has 1, 697 overseas stores, covering more than 90 countries, which provides a great opportunity for TOPTOY’s further expansion. The price of its blind boxes is relatively cheaper than others, so in the blind box industry, it has price advantages.

4 The Application of Consumer Psychology on the Blind Box Economy

4.1 Gambler Effect

Living in an era of material affluence, young consumers lack self-control, and the blind box economic model perfectly uses the mechanism of gambling to trigger young consumers’ addictive psychology. Blind box consumption can be considered an act of gambling. The goal of purchasing blind boxes is to get the hidden style, but the probability of drawing the hidden one is only 0.69% Xinyue (2019). Consumers are over-confident and hope to turn a low probability event into a high one. Gamblers who lose money are more likely to invest more money in the casino than gamblers who win money. This is because people are willing to take risks have failed and they always want to win back what they lost, when they are failed and they always want to win what they lost but they just always lose more and form a negative investment. When blind box consumers have spent part of their time and money on blind boxes and the hidden style is not received, they will have a loss aversion. They think they have invested too much. If they stop, the previous investment will be meaningless. However, if they continue, the previous investment may be compensated Dongjian (2020).

4.2 Hunger Marketing

Hunger marketing refers to the marketing strategy that the supplier decreases the output to control the supply and demand relationship and then creates the "illusion" that demand exceeds supply Zhang (2021). Consumers always think rare things are worth more so the supplier can maintain the product image and high price. Hunger marketing is widely used in sales such as ‘limited products’, ‘seckill’, and ‘long queues in front of stores’, etc. The probability of getting the hidden style is almost zero so the scarcity causes the high value of it and at the same time the huge profit drives people to continue investing. For instance, POP MART published 3000 sets of MEGA collection series Space Molly × Spongebob co-branded by lottery sales, and more than 1 million people participated. Toys are sold out in a second and a toy with previous price-4999 yuan was fired to 80,000 yuan. When demand exceeds supply, the price flies and finally, the company can earn considerable profit.

4.3 Conformity and Comparison Psychology

Young consumers will take the popular products on the market as the optimal choice for their consumption, but their consumption standards may not be accurate. Therefore, they are easily influenced by information on social media, which leads to a great degree of conformity. The blind box companies put a large amount of information, and videos into various media channels so now the publicity of blind boxes is covered both online and offline. When young consumers see lots of people all recommending and sharing their unboxing experiences, they will be influenced by the conformity and begin to purchase Chenxue (2021). When consumers see someone around them have the hidden one, the comparison psychology will push them to buy for the inner sense of achievement. The comparison psychology makes the blind box a symbol of wealth, lifestyle and even luck, thus inducing more consumption.

5 Discussion

According to the SWOT analysis of POP MART and its application of consumer psychology, we can conclude that POP MART is still in a rapidly developing stage. Now, blind boxes are not just those toys but also food, stationary, pets, air tickets, and so on. With the development of the Internet, the blind box economy has to cooperate with the Internet to achieve sales goals and expand markets. Under the promotion of China’s blind box industry, which successfully entered the peak of development, consumer groups also became stable. With the blind box economy hot, the phenomenon of brand-vicious competition gushed out. Faced with problems, major blind box brands need to adjust their strategy and fully consider their future development direction. Companies can promote the derivatives of blind boxes and IPs and make the structures of companies more stable and diverse or enrich the diversity of IP to gradually expand the blind box consumer group. Relative departments should strengthen the supervision of the blind box market and standardize the commercialization level of the blind box market. China’s blind box industry will continue developing and account for a large portion of the global market.

6 Conclusion

The blind box economy is a popular topic in society and there are many mysteries about both marketing and consumer psychology under it. According to the development tendency, China’s blind box(art toy) market still has a large space to develop. POP MART now has a completed service chain, a strong IP system and various selling channels including online programs, offline stores and roboshops but it still faces problems like the lack of IP content, the risk of losing consumers and fierce competition. The fast growth of the blind box economy largely depends on consumers’ irrational consumption. The application of the gambler effect, hunger marketing, conformity, comparison psychology plays an important role in the development. Even though the blind box economy is growing so fast in China, many problems have been revealed in recent years; the second-hand market of blind boxes is crazy; the quality of blind boxes is bad; blind boxes are not useful in daily life. If the blind box economy wants to be standardized, the government has to improve laws and regulations and intervene in the supervision. China’s blind box economy will attribute a lot to both China and the global economy in the future. The major limitation of the present article is that the most analysis is based on existing literature and data, without the author’s own survey. In the future, the author will combine specific market research and consumer surveys for more in-depth data analysis.