How far is Bubble Mart from China Disneyland?

Produced by Radar Finance and | Zhang Kaijing, editor| deep sea

At noon on March 28, the "first share of the blind box" Bubble Mart released its annual report, in 2021, the company achieved revenue of 4.491 billion yuan, an increase of 78.66% year-on-year; net profit attributable to the mother was 855 million yuan, an increase of 63.20% year-on-year. However, the company's stock price instead plunged intraday, and finally closed down 6.06%.

In fact, if you look back at the capital markets of the past year, Bubble Mart has fallen even more. Since February 23, 2021, the company's market value has evaporated by about two-thirds, and the stock price has fallen from a maximum of more than HK$107 to a minimum of only more than HK$27, and even if it has rebounded slightly since then, it has still not exceeded the issue price of HK$38.5 per share.

Why is Bubble Mart, which is growing at a high speed, not favored by the capital market? In the eyes of industry insiders, this is related to the previous company's high performance growth base, new IP did not meet market expectations and other factors, for which Bubble Mart made many attempts, but the effect is difficult to say outstanding.

For example, Bubble Mart has always wanted to get rid of the blind box label, but just two months ago, it was also questioned by over-marketing because of its joint blind box package with KFC; Bubble Mart wanted to reduce its dependence on the old IP, but the new IP was far from growing to the point where it could pick up the beams. In addition, the company's quality control is experiencing a tidal wave of complaints.

Some industry insiders believe that under the current circumstances, Bubble Mart wants to become China's Disney, and needs to work hard in IP, operation, quality control and other aspects, which is far from being achieved overnight.

There are many chaos in blind box products

The success of Bubble Mart was almost pushed up by the blind box.

As early as 2010, Wang Ning, who was only 23 years old, founded Bubble Mart, but the early Bubble Mart was only a collection store selling toys, digital, snacks and other goods, which Wang Ning described as a "trend life small department store".

Although it also received three rounds of financing, in the first five months of 2014-2016, the total net loss of Bubble Mart exceeded 40 million yuan, which was not a door-to-door business until the emergence of Molly and blind boxes.

In a Weibo post called "worth 100 million" by an executive of Bubble Mart, Wang Ning asked netizens, "In addition to liking Sonny Angel, what else do you like to collect?" The Japanese blind box toy, called Sunny Angel, once contributed two-thirds of Bubble Mart's revenue in 2015.

A large number of netizens replied to Molly designed by Hong Kong designer Wang Xinming, so Wang Ning quickly flew to Hong Kong to find Wang Xinming to cooperate. In July 2016, Bubble Mart launched the first "Molly Zodiac" blind box series, and since then the company has turned a profit and embarked on the road of "unicorn".

Drawing cards is cool for a while, and drawing cards all the time is always cool. Consumers who are keen on blind boxes have spent more than four years to carry Bubble Mart into the Hong Kong Stock Exchange, and in the prospectus Bubble Mart has mentioned that in the first half of 2020, blind box revenue accounted for 84.2% of the company's total revenue.

But after the listing at the end of 2020, Bubble Mart began to deliberately clear the relationship with the blind box.

Starting in 2021, Bubble Mart will no longer list the income of the blind box separately in the financial report, and at the performance conference, the company will no longer take the initiative to mention the word "blind box". "Bubble Mart is not a blind box company, it is an IP-based tide play company." When asked and related questions, Wang Ning replied.

In a dialogue with Bao Fan, founder of China Renaissance Capital, Wang Ning also explained: "When we first promoted the tide play culture to the public, the blind box could strengthen the shopping experience very well, use an entertaining way to do retail, let people re-examine the universality of the industry, and verify the success of this game." But we don't think Bubble's results today are just because of the blind box as a carrier. ”

In June 2021, Bubble Mart also launched a high-end tide play product line, that is, the "MEGA Collection Series" known as "Dawa", which is divided into two specifications of 28cm and 70cm, with a price of 4999 yuan. On the second-hand trading platform, "Dawa" was once speculated to more than 100,000 yuan.

In the view of market participants, Bubble Mart is eager to take off the blind box label, on the one hand, it is over-reliant on a certain business is not a healthy business model, the capital market needs a more mature story; on the other hand, it is also related to various chaos in the blind box market, in recent years, pet blind boxes, stationery blind boxes and other cases have emerged in an endless stream, and some merchants have even targeted minors who are not deeply involved in the world, and have therefore been named many times by the regulator.

There are also many chaos in the bubble mart blind box.

In January 2022, the Dimo blind box jointly signed by Bubble Mart and KFC has been on the hot search many times, because the probability of the hidden version of the blind box is 1:72, and players who want to draw must buy a large number of family barrels. Some netizens revealed that they bought 44 co-branded blind boxes in 3 days, or did not draw hidden money, and some netizens said that they directly bought 106 packages for a one-time spend of 10494 yuan.

Behind the crazy consumption behavior is the waste of food. Shortly after the launch of the relevant activities, KFC was criticized by the China Consumer Association by name, and Radar Finance noted that since the day after the China Consumer Association issued the article, the stock price of Bubble Mart fell by more than 18% in three weeks.

In addition, consumer complaints about the Bubble Mart blind box mechanism have also been frequently reported. For example, on March 24, Xiaoxiang Morning News reported that Mr. Hu bought all 37 blind boxes in a bubble mart store and still did not draw hot money, believing that he may have suffered fraud, and finally the store returned the 37 blind boxes purchased by Mr. Hu for refund.

"Molly dependency" is hard to shake off

Cultivating a new IP that can pick up the beam is not an easy task for Bubble Mart.

In the revenue details of Bubble Mart, there have been three long-term ips: its own IP, exclusive IP and non-exclusive IP. It is understood that the own IP is represented by Molly, which means that Bubble Mart owns the intellectual property rights of the developed product; the exclusive IP is represented by Pucky, the intellectual property rights are still in the hands of the artist, Bubble Mart only bought the exclusive license of the product for a period of time, and the non-exclusive IP is that Bubble Mart shares the relevant intellectual property rights with IP suppliers.

In 2020, the proportion of these three revenues to the company's total revenue was 39.0%, 28.3% and 17.7%; in 2021, the data became 57.6%, 17.2%, and 13.8%. From the perspective of specific revenue, all three are growing, but compared with their own IP, the rise of exclusive and non-exclusive IP seems to be somewhat "left behind".

Dolphin Investment Research believes that this is related to the company's relatively limited traffic, the supply of resources to its own IP.

Among its own IP, Bubble Mart's veteran explosive Molly stands out with a revenue of 705 million yuan.

Radar Finance noted that in the prospectus, Bubble Mart had said, "Molly is crucial to our sales performance." There is no guarantee that we can develop or identify IP that can be compared with it as a replacement, or that the sales of new IP toys will be sufficient to compensate for the decrease in sales of Molly's trendy toy products. ”

From 2018 to 2020, Molly's share of total revenue showed a downward trend, from 41.6% to 14.2%, to 11.5% in the first half of 2021, but rebounded to 15.7% by the end of 2021.

The MEGA Collection may be an important reason for Molly's soaring revenue in the second half of the year. According to the financial report, Bubble Mart has attracted more than 8.7 million people to participate in the lottery since June based on the nine 1000% big dolls sold by Molly, achieving a total revenue of 178 million yuan.

In addition to Molly, skullpanda and Dimo's revenue has also increased to varying degrees, of which the former has grown rapidly, accounting for 1.6% of total revenue from 1.6% in 2020 to 13.3% at present, becoming the second largest IP after Molly's Bubble Mart.

In fact, Bubble Mart has done a lot of work to expand the influence of IP, including jointly branding its own IP with major brands, signing artists, participating in the tide play exhibition to tap "potential stocks", investing in "White Snake 2: Green Snake Robbery", "New God List: Nezha Reborn" and so on.

However, Zhou Ximing, an investor in the tide play track, analyzed that although Bubble Mart strives to balance the proportion of revenue of each IP, there are still new and old IP faults.

Among the 7 IPs with revenue of more than 100 million yuan disclosed by Bubble Mart in 2021, except for Xiaodangdou and SKULLPANDA released in 2020, the rest are old IP, and the three largest IPs - Dimoo, Molly, and SKULL PANDA are all acquired.

Some people believe that the difficulty of creating mature IP is attributed to the accidentality and luck of artistic creation, after all, in any creative industry, no one can guarantee that their works will become dark horses or blockbusters. And this also means that Bubble Mart is full of uncertainty on the way to finding the next Molly.

A red flag is that Bubble Mart added 12.18 million new registered members in 2021, but the membership repurchase rate has dropped from 58% in 2019 to 56.5% in 2021.

Chinese Disney is hard to do

"Maybe give us another five years, and when you look back at Bubble Mart, you'll think we're the most Disney-like company in The country."

This is Wang Ning's vision, and for Bubble Mart to only have IP, no content, Wang Ning said that this idea is too absolute. "Just like we can't say Rodin's sculpture, Kusama Yayoi's pumpkin, because it hasn't been made in a movie or a manga, so it has no content. Secondly, after the time of young people is fragmented in large quantities, there is not necessarily so much complete time to understand a new IP with a grand world view, and if you can't grasp the fragmentation time of consumers, your values will be difficult to affect consumers. ”

In the eyes of industry insiders, the gap between Bubble Mart and Disney is not limited to IP, such as in the past year, Bubble Mart has been plagued by supply chain, production capacity and other issues.

In the past month or so, many consumers of Bubble Mart have spoken out on social platforms, accusing themselves of encountering the situation that SKULLPANDA's fifth-generation hidden "Night Guardian" was officially told to "not match the genuine product" after returning to the factory, and asked consumers to provide evidence (provide unboxed videos or send back videos).

Some users speculate that a large number of blind boxes returned to the factory are officially suspected to be fakes, there may be two reasons, one is that the Night City series is produced by two different factories located in Shenzhen and Haifeng, and there are obvious differences in the blind boxes of the two factories; the second is that bubble Mart employees have "internal ghosts" and have swallowed the genuine hidden models before shipment.

But for whatever reason, consumers who have already sent blind boxes back have lost the opportunity to preserve evidence.

It is worth mentioning that the difference between the Night City series produced by shenzhen and HAIFENG factories has become obvious, and the price of the latter in the secondary market is generally higher than that of the former. Earlier, the blind box of the Labubu fruit series released by Bubble Mart in December 2021 also had version differences, so that some consumers suspected that the products they bought were fakes.

In addition, the defect problem of Bubble Mart products has become more and more prominent. Some consumers said that they bought a box of bubble marts, 10 of which were flawed in 12 dolls; and some consumers said that after their blind boxes returned to the factory, the old flaws were gone, but there were more new flaws.

Radar Finance noted that in the black cat complaint platform, the number of complaints about Bubble Mart has reached 7677, and the reasons for complaint mainly focus on quality control, after-sales, and inducing consumption, such as defective products, secondary sales, overlord clauses, etc.

These complaints also occurred in the context of Bubble Mart's improvement of raw materials and supply chain labor costs for the quality of product processes.

According to the financial report, the gross profit margin of Bubble Mart has continued to decline in recent years, from 64.77% in 2019 to 61.43% in 2021, of which the gross profit margin of brand products has decreased from 68.7% in 2020 to 64.7% in 2021. The company's inventory turnover days also increased from 78 days in 2020 to 128 days in 2021.

On the call, Bubble Mart management said raw materials rose 15 percent and factory labor rose 10 percent. In 2022, the company has spent a lot of energy in the supply chain and communicated with the factory, with the goal of controlling the gross profit margin at 61%-63%.

Some blind box players believe that Bubble Mart is fully capable of improving the pre-sales and after-sales service process, but the company has sacrificed a part of the consumer experience in order to save production capacity and continuously improve the speed of replenishment and sales.

A phenomenon worth paying attention to is that blind boxes are often told that there is no spare product after returning to the factory, but online box pumping machines and offline stores have always had whole boxes of replenishment for consumers to continue to draw boxes. In addition, blind box brands such as Ruolai and Looking for Unicorns have done anti-counterfeiting measures such as two-dimensional codes and coding at the bottom of the product, but Bubble Mart has never made anti-counterfeiting marks for blind boxes.

Bubble Mart is indeed experiencing rapid expansion, although the company's management uses the word "restraint" to describe the expansion rate of offline stores, but throughout 2021, Bubble Mart's retail stores have added 108, the largest increase in the past years, and the number of robot stores has increased by 519, only 7 less than in 2020.

Some people believe that if Bubble Mart cannot make improvements in pre-sales and after-sales service, quality control, production capacity, etc., the company may fall into a vicious circle of "frequent pushing of new models - frequent complaints - loss of players - and then pushing new models".

Behind Bubble Mart, companies that replicate the "IP + blind box" style of play are constantly emerging.

In 2019, the top five brands in China's tide play market were Bubble Mart, Dreams, Medicom Toy, 52Toys, and Twelve Buildings Culture, with market share of 8.5%, 7.7%, 3.3%, 1.7%, and 1.6% respectively. Another incomplete statistics show that in 2021, more than 50 tide play brands will obtain financing, including Alibaba, Tencent, JD.com, Sequoia China, etc.

In this context, Bubble Mart wants to become China's Disney, and there is still a long way to go.

Note: This article is the original of Radar Finance (ID: leidacj). Unauthorized reproduction is prohibited.