Text/Chen Gen
Using the sales model of "blind box", Bubble Mart turned ordinary toys into gold and became famous.
From 2017 to 2019, the net profit of Bubble Mart reached 1.56 million yuan, 99.52 million yuan and 451 million yuan respectively, achieving explosive growth. Based on 2019 data alone, the net profit margin reached 26.8%. Gross margin also improved significantly, from 47.6% in 2017 to 64.8% in 2019, comparable to a printing press. Finally, as the "first stock in the blind box", on December 11, 2020, Bubble Mart was listed on the Hong Kong Stock Exchange.
However, the post-IPO Bubble Mart doesn't seem to be going well. In fact, Bubble Mart's stock price has fallen all the way after reaching the peak of 100 billion, and has now fallen below the issue price, and the market value has evaporated by HK$97.6 billion. This is already the 11th consecutive month that Bubble Mart has fallen. At present, Bubble Mart, which focuses on the "blind box economy", is encountering more and more doubts, and even if it is trying to transform, it seems that there is no way forward.
Bubble Mart is "turning off"
With the rapid growth of revenue from 2017 to 2019, Bubble Mart has become the largest and fastest growing tide play brand in China. Therefore, on December 11, 2020, as the "first stock in the blind box", Bubble Mart was listed on the Hong Kong Stock Exchange.
However, since its listing, Bubble Mart's stock price has fallen all the way after reaching the peak of 100 billion. On January 28, the eve of the Spring Festival, Bubble Mart's share price fell all the way to the closing price of HK$37.70, not only falling below the issue price of HK$38.5, but also setting a record low. Combined with the all-time highs of the company's share price created in the first half of 2021, the total market value of Bubble Mart has evaporated by about HK$97.6 billion.
Today, although Bubble Mart's operating performance is still performing well, Bubble Mart's total revenue in the third quarter of 2021 soared by 75%-80% year-on-year, in addition to operating income, the number of retail stores in Bubble Mart during the reporting period, as well as the number of Bubble Mart box machines, have achieved significant year-on-year growth. But in fact, the stock price of bubble Mart, the "first stock in the blind box", has experienced 11 months of continuous decline.
Along with the continuous decline of Bubble Mart, there are also a large number of consumer complaints and increasingly stringent regulations. According to Sina's consumer service platform - Black Cat Complaint official website search for the keyword "bubble mart" can get 7420 results. There were as many as 6892 complaints about Bubble Mart, and consumer satisfaction with Bubble Mart on the Black Cat Complaint Platform was only three stars. As for the content of consumer complaints, most of them are the quality problems of Bubble Mart products, the official false publicity of Bubble Mart, and the non-delivery of Bubble Mart and no refund.
In addition, what makes Bubble Mart controversial is also the "DIMOO Joint Blind Box Package" event jointly launched with KFC at the beginning of the year: Bubble Mart and KFC jointly launched a 99 yuan Dimo Blind Box Package, according to the clerk, the probability of hidden money is 1:72, and a KFC store only has 36 package quotas, that is, every two stores can produce a hidden money.
Therefore, in order to draw hidden money, some netizens directly purchased 106 packages for a one-time spending 10,494 yuan, and some people played an advertisement for "receiving KFC to eat services" in the second-hand trading platform. Soon, on January 12, the "China Consumer Association named KFC Bubble Mart" on the hot search, the China Consumer Association pointed out that KFC to sell instant food products in limited blind boxes is to stimulate consumption by means of "hunger marketing", resulting in consumers in order to obtain limited blind boxes and over-purchase caused by unnecessary food waste.
Subsequently, the Shanghai Municipal Bureau of Market Supervision issued the "Shanghai Blind Box Business Activity Compliance Guidelines" on the 14th, giving 20 compliance suggestions and drawing a red line for blind boxes. As soon as the regulatory policy broke out, the company's stock price fell continuously, even if Goldman Sachs issued a research report on January 27 saying that its target price was set at HK$81, and many institutions maintained a buy rating on Bubble Mart, which did not stop it from falling below the issue price.
In fact, in essence, the reason why Bubble Mart can get the love and attention of consumers is that it adopts the sales model of "blind box", allowing consumers to buy toys packaged in opaque boxes. Only after buying and opening the box can consumers see what toy they have in hand, thus adding a surprise element to the product.
Therefore, with the characteristics of the "blind box", Bubble Mart will turn ordinary toys into gold, while reusing a cost-effective distribution network, combining high-margin online and vending machine sales networks with high-cost traditional brick-and-mortar stores, and through social media tools, making its gimmicky latest toys become a hot topic in the online community, in order to promote the trading of such goods and also bring attention to upcoming new products.
However, at that time, although Bubble Mart achieved success through the "blind box" business model, it could not ignore the unsustainability of this business model and profit model. At present, the risks of Bubble Mart are emerging, and whether it can create a new growth story for capital is not yet known.
The "blind box" economy is not sustainable
The combination of Bubble Mart's low cost compared to its peers and the high price tag for its collectible toys has resulted in an extremely enviable profit margin.
In the first half of 2021, Bubble Mart's gross profit margin reached a staggering 63.4%, more than double the 27.4% of domestic fashion retail competitor Mingchuang Premium. The equally popular US retail giant Target reported a gross profit margin similar to that of Minchuang Premium, at 28%, while Bubble Mart's gross profit margin was also much higher than that of global toy giant Mattel's 47.8%. Investors have given Bubble Mart a historical price-to-earnings ratio of up to 74 times, which is also much higher than the 58 times of Minchuang Premium, 18 times of Target and 9 times of Mattel.
But as mentioned earlier, this business model of Pomart, as well as its profit model, is not sustainable. As far as the business model of Bubble Mart itself is concerned, the business model of Bubble Mart is essentially a business model based on the psychology of human gambling, which means that Bubble Mart's business model is fundamentally in conflict with the current laws in our country, after all, our country strictly prohibits gambling.
It's just that Bubble Mart is very good at rubbing the edge ball, that is, in the way of blind box sales, these gambling behaviors are transformed into behaviors based on commodity sales. This model has not been recognized under the current legal framework and has always been in a gray area, that is, it is difficult for Bubble Mart to obtain real legal recognition. However, it faces the possibility of being regulated at any time, defined as a business model that does not conform to existing legal norms,
Public information shows that the probability of various hidden models in the bubble mart blind box is 1/720 at the most extreme. This means that if a consumer buys 720 blind boxes for 50 yuan and finally gets the style of the heart, it will cost 36,000 yuan. In the long run, with the gradual rise of the blind box tide in this market, it is inevitable to establish a clear lottery rate and consumption ceiling rules.
As in Article 11 of the Guidelines issued by the Shanghai Municipal Bureau of Market Supervision on January 14, blind box operators are encouraged to establish a guarantee mechanism to guide rational consumption and avoid excessive speculation in the secondary market by setting the upper limit and the upper limit of the number of withdrawals. At the same time, blind box operators are encouraged to take the initiative to publicize relevant standards, making it clear that when the same consumer extracts the same series of blind box goods, if its payment reaches a certain amount or a certain number of extractions, provide a reasonable way for consumers to obtain hidden goods or a complete set of products.
However, furthermore, if it is in line with the values of "rational consumption" and the blind box lottery rate is clearly indicated, it will inevitably lead to an increase in the winning rate of hidden models, thereby reducing the number of repurchases by consumers, and the market will inevitably lower the revenue growth expectations of Bubble Mart with "blind box" as the core growth engine. It can be seen that in today's continuous improvement of supervision, Bubble Mart will face supervision at any time, and the gray area in which it is located is very fragile and very easy to be regulated by policies.
At the same time, as far as the business model of Bubble Mart itself is concerned, its recognition by the market is mainly based on two reasons: one is the gambling psychology that is potential for human nature; the other is the curiosity psychology that human nature has potential, and driven by these two psychologies, it can get the attention of the public in the short term. But it is the curiosity in human nature that drives it, and after trying and experiencing it, this passionate consumption based on curiosity will soon be tired. And when a new business model emerges that meets these two requirements, it will soon replace Bubble Mart.
In fact, at present, from the financial report of Bubble Mart, we can see the crisis, although the recent profit and performance are in high growth, but behind its data has been hidden crisis, that is, the growth of effective members has appeared bottlenecks, and the contribution of profits is basically from the current members. As of June 30, 2021, the total number of registered members increased to 11.415 million, an increase of 4.015 million in the last six months, but compared with the 58% member repurchase rate in 2019, the current membership repurchase rate is 49%, which is significantly lower.
How do you build a new growth story?
At present, the blind box economy is becoming increasingly hot, and the prevalence of blind box culture is actually the use of some consumers' gambling psychology and collection habits.
Based on the business model of gambling psychology and collection psychology of human nature, in essence, if such a business model is to continue, it is necessary to solve two problems: one is how to meet the increasing gambling psychology of participants, since it is gambling, the hearts of such participants will always have higher and higher expectations for gambling; the other is how to meet the value-added value of bubble mart collection, that is to say, how bubble mart through these blind box products to form a collection value-added, transaction value.
In fact, these two problems are also the real dilemmas currently facing Bubble Mart. Of course, it is unrealistic to satisfy the growing gambling mentality of participants, the regulation is there, and it will only get stricter. Then, from the perspective of the value-added value of the bubble mart collection, the most effective way for bubble mart to build a new growth story is to build an IP with strong vitality.
Of course, the construction of IP requires a strong cultural foundation, especially based on the cultural industry IP, as far as the United States is concerned, the real construction of successful and commercialization is Disney, while some other based film and television culture IP has not really formed a strong business ecology, nor built a strong IP stickiness.
On the other hand, Bubble Mart, at present, the vitality of Bubble Mart's head IP is gradually lost. As a popular hit IP, Molly's revenue has declined from 2020, and its revenue share has also dropped from 41.6% in 2018 to 11.5% in June 2021, which has been surpassed by the DIMOO series released in 2020.
From the perspective of the IP revenue structure in the first half of 2021, the influence of bubble mart's top several IPs has become more dispersed, Molly's share has been divided by DIMOO and SKULLPANDA, and the top three IP revenues are more average, no longer Molly's monopoly. But this also confirms the law of the tide play industry, that is, the IP life cycle is short, it is impossible to rely on a single IP to win, and the pressure and risk of revenue growth coexist.
Obviously, it is difficult to maintain revenue growth by relying on the head IP alone, so Bubble Mart should gradually incubate a richer IP matrix and maintain the ability to continue to produce explosive IP. But this does not mean that Bubble Mart has the ability to continue to make explosive models.
At present, there are 93 IPs operated by Bubble Mart, including 12 own IP, 25 exclusive IP and 56 non-exclusive IP. In addition to the above-mentioned Molly and Dimmo, Bubble Mart also has 4 IP revenues exceeding 100 million yuan; of which SKULL PANDA, which ranks third in revenue, was released last year and achieved revenue of 183 million yuan in the first half of the year. However, the above three major IPs are all acquired by Bubble Mart, and there have been many "short-lived" IP in the past, for example, PUCKY, which was once regarded as the second largest IP, has dropped to 6.1% of revenue in 2021.
In terms of price, since 2021, the unit price of many new products of Bubble Mart has risen from the original 59 yuan to 69 yuan, an increase of nearly 20%. Considering that the growth strategy pursued by the price range it has set is to move, and the direct impetus for buying is much of the appreciation space of the secondary market. However, in addition to the appreciation of the second-hand market in the newly launched Molly Dawa in the second half of the year, the hype of the rest of bubble mart products seems to have faded.
Moreover, in addition to the challenges to business model sustainability, Bubble Mart also needs competition in China's trendy toy retail market. From the supply side, the business model of the "blind box" itself is very easy to learn, and the competition threshold is very low. At the same time, it is a highly attractive industry. According to the prospectus of Bubble Mart, its gross profit margin in 2019 was as high as 64.8%, and its adjusted net interest rate was as high as 27.9%, which is bound to lead to full price competition for capital profits. After all, the previous trendy toy players did not vigorously tap the value of the blind box strategy.
According to the observation of Third Bridge High-lining Consulting, the current tide play market according to the volume of each family, in addition to bubble mart belongs to the head player, the country has more than 200 offline stores of cool tide play ranked second, it is reported that its blind box sales have reached hundreds of millions, can account for more than 10% of the entire sales. In addition, the miscellaneous goods club has also opened more than 200 stores at the end of 2019.
Undoubtedly, the new economy is a business model that will appear in every era, because society has been dynamically developing, and human nature is also changing dynamically, so business will change with the dynamic changes of society and human nature. But if there is no real moat of the new economy, in the long river of commercial history dynamics, it will be like a flash in the pan.