The opening of Funko's first Asian store in China is undoubtedly a signal: the speed and depth of international fashion play/toy brands entering China are increasing.
The author | Zhang Luxi
American fashion play brand Funko is about to open Asia's first flagship store (covering an area of more than 1,000 square meters) in Shenzhen.
Shenzhen Zhongzhou Commercial Management Company disclosed the above information on its public account in December last year, according to Zhongzhou Commercial Management Company, Funko's store is located in C Future City, Zhongzhou Bay, Shenzhen, with an area of more than 1,000 square meters. "New Sound Pro" was also confirmed by its staff at funko's Chaoyang Joy City pop-up store in Beijing.
Funko, known for its square-headed dolls, is currently the most licensed IP art toy and collectibles brand. Funko's full-year sales exceeded $500 million in 2020, and its sales grew further in 2021, reaching $425 million in the first two quarters.
In the context of domestic tide play brands are trying to expand overseas (Funko is considered to be Bubble Mart's biggest competitor overseas), Funko has increased its size in the Chinese market, representing a new trend, and overseas tide play brands are also salivating over the Chinese market.
The three keys to square-headed charm
Funko was founded in 1998 as a nostalgic shaking doll company. In 2010, at the San Diego International Comic-Con, Funko debuted the POP series of adhesive collectible dolls, which was a great success, and was not only loved by the public in the United States, but also loved by celebrities.
At present, Funko has thousands of IP licenses from world-renowned companies such as Marvel, DC, Disney, Pixar, Universal Pictures, DreamWorks, Shueisha, etc., spanning anime, film and television, sports, games, music, stars and other fields (Star Wars, Marvel, Naruto, Pokémon, Harry Potter, NBA, Ghost Blade, Original God, Squid Games, etc.), covering tens of thousands of characters, and launching more than 20,000 kinds of IP dolls.
In 2017, Funko was listed on the NASDAQ, and as of February 21, 2022, Funko's market capitalization was $876 million. For comparison, Bubble Mart's sales revenue for the first half of 2021 was 1.776 billion yuan (about US$280 million) and as of February 21, 2022, the market value was HK$56 billion (about US$7.18 billion).
Funko can achieve the current results, in addition to a strong IP library, there are three key points.
First, its product design is stylish and unique. Julian Montoya, Vice President of International Toys at Warner Bros. Global Consumer Products, has said that Funko's design appeals to fans of all ages and retailers of all genres.
Second, the price of derivatives is relatively low. The best seller on the February 17, 2022 sales chart was a Star Wars "Mandalorian" derivative for $15. Search for the "Star Wars Handmade" keyword on amazon shopping platform, and the lowest price is also "Funko Pop!" series.
Third, Funko continues to build a user community, with both offline regular gatherings and online interactions. Overseas users using Funko merchandise to share their recently watched movies and favorite characters (with these dolls) has become a popular expression. On the Little Red Book, users often post their collection walls.
Image from Little Red Book user "Sixty-Six" "Little Fart Pig"
Incubate original IP and focus on the development of Evergreen IP
Funko's model of relying on non-owned IP is also challenging: ip costs are gradually rising as the IP library continues to expand. In terms of the cost of IP copyright in terms of sales, in 2020, Funko's royalty rate is 16.09% (copyright cost of $105 million), while Hasbro's is 10.43%.
Funko has been trying to incubate its own IP.
In 2019, Funko announced its original IP "Wetmore Forest", launching a set of "Wetmore Forest" children's books for children aged 8 to 12. In December 2020, Funko launched Snapsies again. Funko also works with external companies to incubate IP. In September 2019, Funko and Warner jointly announced that they would produce an animated film based on Funko square-headed dolls.
In addition to incubating original IP, Funko has proposed since 2019 to focus its development on evergreen IP that is not affected by time, has a long-term sale and has a stable consumer base.
On the one hand, they enrich the product line and monetize the same IP through different product forms. In May 2017, Funko acquired fashion accessories company Loungefly and subsequently launched a collection of backpack accessories from the same brand. In February 2019, it acquired award-winning board game development studio Forest-Pruzan Creative to form Funko Games.
The results of this attempt were clear. From 2018 to 2020, the sales of Loungefly brand products and the growth of sales of table games, accessories and plush drove the abundance of Funko's revenue component: the proportion of sales of humanoid dolls fell from 81.6% to 77.2%, and the proportion of other types of products rose from 18.4% to 22.8%. Sales related to Evergreen IP also steadily rose from 45% of the company's business in 2017 to 66% in 2020.
On the other hand, they are constantly expanding sales channels, including the construction of DTC channels, third-party e-commerce channels and the expansion of the global market, so that the reach of goods is wider.
The U.S. remains Funko's most important market for now, with sales in the U.S. market reaching $491 million, or 70.85 percent, in the first three quarters of 2021. It was followed by the European market, with $151 million, accounting for 21.74%. Then there are the so-called other markets, $0.51 billion, accounting for 7.41%.
In order to seek further growth, Funko has also increased its focus on other markets, especially asian markets, in addition to continuing to exert efforts in Europe and the United States. In February 2019, Funko selected Bandai as its exclusive distributor in Japan. The goal is to expand the POP! Vinyl is hand-handled in the Japanese market. The rapid growth of China's tide play market in recent years has also attracted the attention of Funko, whose general agent in China is The Dongguan-based trading company Yingzhouzi.
Accelerate infiltration into China
In an article by the China Toys and Baby Association in early 2021, Wang Hongliang, COO of Yingzhouzi, talked about Funko's main strategy in China.
According to reports, Yingzhouzi has been operating China's funko senior fan base, through research in Douban, Weibo, Dewu APP and other Z generation gathering places, capture the Chinese fan group's own "trend points", choose the most suitable products to enter the Chinese market.
Funko's success in Europe is largely based on its strategy of offering exclusive limited edition products across all channels. In order to support the sale of dealers' products and stimulate fans to buy, Funko also sets an exclusive hidden model in the limited model, known as the chase model, which is further rare, and dealers can use it to formulate marketing strategies, marketing activities, and promote brand and product promotion.
Wang Hongliang introduced that in the Chinese market, Funko will also adopt this channel cooperation method from 2021 to create product differentiation. In the Chinese market, well-known toy retailers such as Toys R Us, Hamrez, Bubble Mart, and Cool Tide Play are funko's partners.
"We have reached a strategic partnership with Cool Tide Play, and during the Spring Festival in 2021, Cool Tide Play has launched Funko's exclusive Limited Edition product in China, the DC Royal Heroes Series, in stores across the country." Wang Hongliang mentioned in an interview with CLE China Licensing Exhibition.
In addition, Funko also carries out brand promotion and publicity through various forms such as Meichen exhibitions, pop-up stores, toys and fashion play exhibitions, as well as joint brand partners to carry out marketing activities.
Funko will focus on the POP Asia series of products to develop products for the Chinese market. In addition to cooperating with Guochao IP and pushing China's limited models, it will also cooperate with China's top film and television entertainment stars to launch Chinese star series products.
The opening of Asia's first flagship store in Shenzhen undoubtedly released a signal: while Bubble Mart and other Chinese trendy play companies are fighting hard and wanting to enter overseas (Bubble Mart has opened direct stores in Seoul, Singapore and other places), overseas brands such as Funko are also increasing their investment in the Chinese market.
More notably, in addition to Funko, other international trend play/toy brands are also accelerating their entry into the Chinese market. Only the tide play brands to be introduced by C Future City in Shenzhen Zhongzhou Bay include Secret Base, the originator of Japanese soft rubber toys, and Toy Tokyo, an American trend store. The Japanese toy giant Bandai Namco has also reached cooperation with a number of domestic IP, such as "Full-time Master" and "Legend of the Paladin Sword".