On the night of March 25th, Pop Mart International CEO Wang Ning and COOSTER caught the flight to Beijing headquarters.

At this time, it is less than 20 hours away from Pop Mart International's annual report performance call.

During the day of the 25th, bad news and good news followed. The bad news is that Pop Mart International's share price plummeted, as low as HK $46, down 56.6 per cent from its peak of HK $107.6 on February 17th.

The good news is that after visiting the Pop Mart International head foundry in Guangdong, Wang Ning and Side got a positive reply: "the resumption of work is smooth and the pressure on the supply chain will be alleviated." "

The supply chain has become the sword of Damocles on the head of Bubble Matt.

After the best part of sales due to festivals and new products appeared in February this year, Pop Mart International once again encountered a "shortage of goods." A number of blind boxes of the head IP are out of stock or the pre-sale period is extended in offline stores and online channels. Take the "DIMOO Siamese Cat" series blind box as an example, this new product launched on February 26th, the delivery date is October 31st.

Similar things have been haunting Bobo Matt for a year. In 2020, Pop Mart International caused consumer complaints in the "315 consumer insurance" many times because of "unable to ship goods". But on the other hand, for Bobo Matt's 125 operating IP, "shortage" is sometimes a kind of luck-at least it means that something can be sold.

Throughout 2020, the seven IP of Bobo Matt, led by Molly, contributed 50.8% of Pop Mart International's total income (Pop Mart International's seven IP: a total of seven independent IP and exclusive IP with annual sales exceeding 30 million yuan).

The remaining 37 "exclusive IP" (autonomous IP and exclusive IP) are not so lucky. Pop Mart International's 2020 annual report shows that the company's inventory increased by 134% compared with the same period last year, and the number of inventory turnover days increased from 46 days in 2019 to 78 days. The average sales contribution of these 37 IP is only 10.12 million yuan, which is not even as good as the "country Love" blind box launched by outsider Youku in March this year. The sales score of 20 million yuan a week has exceeded Pop Mart International's annual sales of more than 30 "exclusive IP".

The epidemic does not cover up all the problems.

Although China's largest trend game company, which once had a market capitalization of more than HK $110 billion, has 1351 offline robot stores (connected robot vending machines) and 37.9% sales are based on WeChat Mini Programs and Tmall Mall, however, it has not been truly informationized: as of March 2021, Popomat's online and offline inventory has not been fully opened.

An industry insiders familiar with Pop Mart International revealed that it was not until less than 30 days before the bell rang that Bubble Matt hurriedly carried out "information rush" for himself. Pop Mart International, who is about to go public, signed up with Fuller Technology, a company specializing in supply chain informatization. Before the intervention of Fuller's products, Pop Mart International's two core logistics bases, Nanjing Cang and Dongguan Cang, were "out of touch" with stores and robot vending machines all over the country.

Like an old-school craftsman, Pop Mart International believes in the experience and vision accumulated over the past ten years, and revels in exhibitions, stores, and designer friendships, which they have taken for a decade, but is cautious about big data's algorithm, flexible supply chain and other new things. This is what the person said of Pop Mart International.

01. The lagging Toy Empire

Whether on Douyin or on the streets of Shanghai, all the trend elements that are emerging right now are hard to see in Pop Mart International's products launched this year.

Because at least six months in advance, Pop Mart International has set the design ideas for each IP for the coming year. "We will do the IP planning for the next year six months in advance, including how many series each IP will launch, and even what the expected sales of the series will be. "said Side.

The sense of lag is more obvious in Pop Mart International's production link. Until now, Pop Mart International still uses the "cyclical MTO mode" (Make To Order, order-oriented production) Pop Mart International will, according to his own market forecast, place a unified production order with the contract factory within a sales cycle, and the contract factory will produce with it.

Pop Mart International's contract factory is mainly based in Guangdong Province. Within Pop Mart International, different IP will match different production resources and schedules. Due to the complex process and anti-counterfeiting design of the head IP, orders need to be issued two quarters in advance. For an ordinary IP, Pop Mart International needs to place an order with the contract factory at least three months in advance before the contract manufacturer can arrange production.

The second-hand trading craze brought about by the blind box model has made Pop Mart International's production process more tedious. As a large number of imitation Pop Mart International blind boxes appeared on the market from 2017 to 2018, Pop Mart International greatly raised the "anti-counterfeiting threshold" from the aspects of design, materials, production technology and so on.

Cao Qiang, the owner of a Chao play foundry in Yiwu, says the blind box model slows down the pace from design to production. "the foundry has to sign a variety of confidentiality agreements with the blind box. After a design, the trial production and quotation process of the foundry also consumes a lot of time. In order to raise the threshold for imitation, many details will be communicated and revised repeatedly. "

The hot tide of the game market, further let this "lag" highlight. As some of China's top fashion play contract manufacturers have to complete orders from overseas, the domestic craze has caused these factories to have "order spillover" around 2019. "you need to book a schedule for your family to do this one and a half months." the next two months have been scheduled for someone else. "

The shutdown of production and production caused by the epidemic has made production even more scarce. So that since 2020, Pop Mart International is like a "slow giant who is physically overweight". Even if he sees market opportunities, it is difficult to adjust production capacity in time.

In the third and fourth quarters of 2020, the epidemic situation in some areas became stable, and the tide play market gradually warmed up. Pop Mart International discovered the market opportunity, but at this time the production orders for the third and fourth quarters had been arranged as early as the second quarter of this year, so that Pop Mart International had a large area of "out of stock" both online and offline.

The delay in production not only made Pop Mart International miss the opportunity, but also Pop Mart International was also slow in "breaking up." Pop Mart International is not a sales-oriented company, and it is difficult for their production and marketing model to cut off the depressed SKU in time. Wang Bin, a researcher in the new consumption field, compared Yuanqi Forest with Pop Mart International. Yuanqi Forest, which also uses the OEM model, has established a high-speed supply chain response mechanism. if it is found that the sales of a product are not good, Yuanqi Forest can be completely adjusted in only one quarter, while Pop Mart International's adjustment cycle is nearly a year.

The complex logistics chain further slows down Pop Mart International. Pop Mart International's express parcels use a uniformly designed package. This not only prolongs the packing time, but also increases the distribution difficulty of logistics companies.

Zheng Ming was one of the logistics partners that Pop Mart International visited that year, but his company did not cooperate with Pop Mart International in the end. Due to the existence of the blind box mechanism, the specially designed express box should ensure that there are no squeeze marks as far as possible, and the secrecy of the logistics link has also become the key to the blind box play. "it's essentially a matter of giving toys, but the blind box mode makes everything complicated and slow. "

People familiar with Wang Ning said that in 2020, Wang Ning and other senior executives of Pop Mart International began to study the issue of "supply chain management flexibility", while several investors who had spoken to Wang Ning said that Wang Ning was interested in how to improve the sensitivity of the supply chain to the market.

In the performance call, Side also expressed a similar view: "We and our supply chain team and factories have made a lot of efforts to manage the supply chain flexibly, hoping to achieve the relative rapid response of the supply chain." "

But this is not done overnight, and even Pop Mart International's characteristics may worsen supply chain weakness right now. Within Pop Mart International, according to the production quality, production capacity and trust of the contract factory, Bubble Matt will distinguish it, and the head IP matching high-quality big factory has become the usual mode of Pop Mart International.

"We will gather platform resources to valuable IP based on IP operating performance. "said Wang Ning.

This kind of "bet head IP" play, to Pop Mart International's supply chain to increase the hidden danger. In 2020, the two largest sales of Bubble Matt IP Molly and PUCKY blind boxes both showed a decline in sales, with Molly sales down 99.1 million yuan and PUCKY sales down 15.3 million yuan year-on-year.

"lagging supply chain response, and betting on the head of the IP game, increased the uncertainty of Pop Mart International, Pop Mart International itself has become a blind box. Jack, an investor and trendy analyst, said that when he communicated with people related to Pop Mart International in 2020, he asked them what they thought of Pop Mart International's response to the "lag" of the market, but the other side smiled after a period of silence and then talked about "designers and IP barriers".

02. Design of delay

When new consumer brands are keen to discuss Bilibili Inc., Xiao Hongshu and Douyin, Pop Mart International's high-frequency word is "exhibition".

Every year in April and September, Popomat holds two fashion fairs in Beijing and Shanghai respectively. Before launching, they will send invitations to well-known fashion designers around the world and bear part of the designer's expenses.

The exhibition twice a year is actually Pop Mart International's strategy.

In an interview with 36Kr Holdings in 2019, Wang Ning explained the "wonderful use" of this arrangement: "every year at the trendy toy fairs in Beijing and Shanghai, more than half of the artists come from all over the world, and they come to China once in April and September. We have filled up their schedule. They are too busy to do a limited edition design for the exhibition. "

A Bing, the head of the design department of one of the top 10 fashion play companies in China, believes that the "exhibition" can be regarded as one of the key moves of Pop Mart International's entire business model. "popular play, either based on the fire IP, or based on well-known designers, Pop Mart International used the exhibition to gain a first-mover advantage in designer resources. "

When famous designers from all over the world enter the exhibition, Pop Mart International will secretly send people to "keep an eye on" every designer. Throughout the exhibition, the passenger flow, interaction heat and transaction volume in front of each designer's booth will be recorded by a special person.

Also holding the exhibition at the scene, there are designers who have been contracted by Pop Mart International, they will bring new or concept products to the scene, and like other designers, "booth popularity" will be recorded in detail.

The data from the exhibition will be quickly collected to Pop Mart International headquarters. This has even become the key index to determine Pop Mart International's IP design style and output planning in the coming year. According to a person who once worked for Pop Mart International, if a new product that was originally favored by the headquarters is unpopular at the exhibition, the headquarters will lower its sales expectations and change the planned matching capacity.

The exhibition has also become a key move for Pop Mart International to seize designer resources. The designers who are the most popular at the exhibition will be included in the list of key docking, and Pop Mart International will have special personnel to communicate with them. A designer, who spoke on condition of anonymity, was favored by Pop Mart International at the 2019 exhibition. She said that Pop Mart International's people warmly invited her to have an in-depth chat. In the course of the exchange, Bubble Matt focused on the power of the platform: the PDC team (POP Design Center), which has nearly 100 people, provides round-the-clock design support, matches the world's top fashion play foundry, and covers online and offline full-product sales channels.

In small-scale communication activities, Wang Ning once described the "choice" logic formed around the exhibition: the exhibition gathered the core user group of the fashion play circle, and the choice of these users at the exhibition was accurate data after "removing noise". This means more accurate market forecasts.

According to statistics, in the past four years, more than 300 designers have been invited to such an exhibition, and more than 20 head designers have worked with Pop Mart International in this way.

Through the exhibition, Pop Mart International excavates designers and tests the popularity of products. The designer resources and intelligence from the exhibition were quickly put into the operation system of Pop Mart International's business. Pop Mart International's goal is clear: to find the next explosive fashion designer.

But reality poured cold water on Pop Mart International.

In the past four years, Popomat had only four IP with annual sales of more than 100m yuan, and in 2020, sales of two of these four IP declined.

"it is sometimes dangerous to rely heavily on the designer's personal experience and to trust too much in the designer's judgment of the trend. Because you are finally going to sell the product to C-end. A Bing revealed that the designer's personal status and word-of-mouth have a great impact on the product. There was a trend card that was delisted because of a personal scandal involving designers.

Wang Ning once described the mode of cooperation between Pop Mart International and designers in a public interview. Pop Mart International through fashion shows, design competitions and other ways, after digging to the designer, the design and development of the entire product will be carried out around the designer. Generally speaking, each IP will launch 3-5 series in a year, and the sales cycle of each series is 12-18 months (limited edition is not this cycle).

With 6 to 8 months to go before the end of the year, Pop Mart International usually starts to discuss design ideas for the coming year with the head designer. At this time, Pop Mart International will share some market research data and forecast analysis with designers. Since then, designers will enter the sketch design process, generally have at least 2 months of design time, according to people familiar with Pop Mart International, for the head IP designers, Pop Mart International gave a greater degree of freedom.

"in the group of fashion designers, many people are not sensitive to money and are obsessed with design. In an early interview, Wang Ning described the designer qualities she came into contact with.

As far as I know, Pop Mart International has a limited say on the design of head IP products, and even if the company finds a trend, it is difficult to persuade head designers to join their works. A designer who resigned from Pop Mart International, who spoke on condition of anonymity, said that one of the important tasks of the PDC department within Pop Mart International is to provide design support.

Big-name designers will give some sketches on which the key design elements have been marked out. But this is often the design in which the sense of art exceeds the sense of product, and there is a big gap between the design that can be carried out, so our 3D department and industrial department need to turn these designs into product drawings, but the weight of the head designer is great. Even if you suggest designers to adopt a fashion trend, people may not necessarily listen to it, and the key design elements rarely change. "

The tedious design process has also delayed the "listing" time. It is understood that a head IP product from the design draft to production will take as soon as 6 months, and some blockbuster products even take 8 to 10 months to fully put into production. The sales and logistics links after output further slow down the pace. This means that it has been nearly a year since Pop Mart International's employees provided detailed analysis and advice on the market to designers.

"in the fashion circle, there are two design modes, one is the way Bubble Matt bet on the designer, which depends on the designer's vision, to put it bluntly, you have to be confident enough to lead the market trend. The other is to respect the market, observe the trend of the market, or choose the successful IP that the market already has, and produce the corresponding products. "

A number of people in the fashion game industry boil it down to a top-down model and a bottom-up game. And Pop Mart International obviously wants to be from top to bottom. In a public interview, Wang Ning and Si de said many times that Pop Mart International could "lead the trend."

However, the decline in sales of core IP Molly and PUCKY in 2020 and the slowdown in overall revenue growth have made many people question this model. Can IP really maintain its vitality without the blessing of content and relying solely on the eyes of designers?

"IP without content is not tenable. Without content, there will be no attraction. Investor Qian Yixiang believes that the trendy play market itself is a "blind box" market, and you never know where the next hot IP will appear.

From a worldwide point of view, both Walt Disney Company and Wandai "do" the IP image through a rich content line. Every year, Walt Disney Company and Wandai will launch new fashion games, and the design engines that promote these trends are not only cooperative designers, but also matching film and television animation works.

MINISO Group, who entered the blind box market, did not choose Pop Mart International's top-down model. Sun Yuanwen, founder of MINISO Group's Chao play brand TOP TOY, once said that Pop Mart International is like IOS, while TOP TOY wants to be Android. "it is our selection logic that we choose the products that consumers need, rather than the products we like. "

03. Lagging blind box

Blind box play is slowing everything down.

As on platforms such as salted fish, the price of rare dolls is even 50 times higher than the original price of the blind box, how not to open the blind box to find out the rare style has become a prominent study of the blind box circle.

Like the third uncle of the grave robber circle, the box master is well-known in the capital blind box circle. He found five rare dolls without opening the box in 2019. "weighing and fluoroscopy are both traditional ways of playing, and I have developed 21 new methods myself. But he didn't keep his record in 2020 and only found two rare dolls in the whole year.

The reason behind this is that Pop Mart International and many blind box brands continue to upgrade their protection in order to maintain the blind box model: from design, production, and logistics, each link has added elements that have nothing to do with fashion play.

One designer, who spoke on condition of anonymity, gave an example. She designed a doll in 2020, but according to the original design, the doll will obviously be "light on the left and heavy on the right". "at that time, the team members told me that even in the logistics box, some players could find it with special scales, so I changed the design and the final sales were mediocre. "

The designer still hates it, and she firmly believes that the earliest design will be able to create a popular style. "then I saw that someone else had launched a doll with a similar style, which sold a lot of money. "

"there are many categories of fashion games, and the blind box is just one. Qian fenxiang believes that Pop Mart International is even difficult to be directly called a "trendy play" brand. "to be exact, it should be a blind box brand. "

Zeng Ka, a designer who refused to cooperate with Pop Mart International, said that in the trend circle, some clear designers do not agree with the designers who "cling to Pop Mart International". "what is real trendy play? You have the ability to make a BJD doll (ball joint doll), can also be hot, this is the trend. Take Tmall's sales as an example. As of April 9, the highest monthly sales of BJD dolls at Pop Mart International's flagship store was Molly sushi meow, with only 202units, compared with 5634 Molly blind boxes in the same period.

One of the reasons for Zengka's lack of interest in Pop Mart International is Pop Mart International's emphasis on the "exclusive license" agreement. It is understood that except for 81 third-party IP from Walt Disney Company and other companies, all IP operated by Pop Mart International are designer works that have completed copyright transfer or signed exclusive licensing agreements (and a small number of original IP of PDC departments). Signing an exclusive license agreement means that designers cannot re-license their works to other trendy channels at the same time. Pop Mart International's emphasis on exclusive authorization is also related to blind box play.

"the way of thinking of selling blind boxes is different from that of selling fashion. Yan Min, the boss with 12 years of experience in store operation, cited the difference between hand-operated and blind boxes. "the hand-to-hand office itself differentiates brands through the price range, such as Gaoda products, and the prices of different brands range from 50 yuan to 8000 yuan, and these brands have been licensed. That is, designers can authorize manufacturers of different price layers. And blind box 59 yuan each, the pursuit can only be quantity, and the core driving force for the surge in purchases is the hot speculation in the second-hand market. "

In the fashion circle, once a designer or IP causes a fever, the prices of all categories of goods for that designer will rise in the secondary market. If the designer's non-blind box products appear on the market at this time, some of the hot money will be diverted, which will eventually reduce the sales of blind boxes. In this case, the brand needs to control the "scarcity" of the product, which means "strong binding" to the designer, but this model deters some designers.

Also affected by the blind box are Pop Mart International's stores.

Ma Nan, a veteran fan, was a Pop Mart International user 9 years ago, when Pop Mart International was a trendy toy store not obsessed with blind boxes. "the clerk at that time would enthusiastically discuss new toys with you and even gossip about some designers. I can even ask the shopkeeper to help find some scarce products from other brands, but when you go to the store today, the clerk is always cold and will only memorize a string of blind boxes. According to the financial report, the repurchase rate of Pop Mart International members reached 58% in 2019, while Pop Mart International's member repurchase rate dropped to 46% in 2020.

At present, Pop Mart International needs to find his original mind to play in the tide. Years ago, when asked why he signed up for designers (working with Molly designers for the first time), Wang Ning said that being a separate channel (Pop Mart International's toy store) always felt a little far away from consumers and couldn't really understand what they wanted.

At this moment, Pop Mart International, with the largest number of designers, the most abundant channels and the largest contract factory, whose total market capitalization is still more than HK $83 billion, needs to stand on tiptoe to see the world outside the walls of the blind box and what consumers want in this real world of trendy play.