The once-booming hobby consumption sector is now resembling a fortress: those outside want to get in, while those inside are contemplating transformation. On one side, Pop Mart's stock fell for three consecutive days, losing 30% of its value after its performance merely met but did not exceed expectations. MINISO Group saw its net profit halved. Tong Shifu, once called the "Pop Mart for middle-aged adults" and the "company in the collectible toy space most resembling Xiaomi," saw its stock plunge nearly 50% on its first day of trading in Hong Kong, laying bare a fact the broader entertainment industry has long avoided despite waving the banner of IP: intellectual property is nobody's savior.
On the other side, the entertainment industry continues to place high hopes on IP-driven businesses. Beyond the previously reported wave of investments in the collectible toy sector in 2025, Alibaba has further signaled its intention to increase its presence in the industry. In March, Alibaba's offline collectible toy store chain, "LUCKY LOOP," quietly opened locations in Shanghai and Beijing.
The core issue behind Pop Mart's stock volatility is confusion over its valuation positioning. The success of LABUBU cannot be wholly attributed to consumer recognition and emotional connection with the IP; it leans more towards fast fashion. While fast fashion was once key to the collectible toy industry's success, it has now become a constraint on narrative transformation. High growth rates, high marketing spend, and a fast pace have become entrenched business models, while consumers face limitless IP choices against their limited spending power in a world saturated with intellectual property. The only long-term solution to this short-term dilemma is a shift from impulsive consumption to emotional consumption.
Why the pivot to emotional consumption is necessary: A year ago, it was suggested that the rapidly growing and changing hobby consumption industry had put on unstoppable "red dancing shoes." From a capital market perspective, once growth indicators show pressure, the new consumption narrative loses appeal. From a brand perspective, if the pace of hit product releases stalls, a brand risks being quickly forgotten. It's surprising that within just a year, the capital narrative for new consumption has already begun to waver. This is certainly not good news for the many collectible toy companies queuing for IPOs.
What has happened in the hobby consumption sector? Analyzing the annual reports of three Hong Kong-listed companies (Pop Mart, MINISO Group, and Buluke), the core problem emerging in the industry is not the pace of creating hits, but the sustainability of those hits. For Pop Mart, creating hit products is not difficult. In 2025, Pop Mart had 17 artist-driven IPs generating over 100 million yuan in revenue, an increase of four from 2024. The SKULLPANDA IP, one of the key focuses for the year, showed exceptionally strong growth, achieving revenue of 2.06 billion yuan. However, what truly worries investors is the 2026 revenue guidance of "not less than 20%." This indicates the collectible toy industry is approaching a bottleneck, with the explosive growth phase from zero to one coming to an end.
MINISO Group, which saw a high-single-digit percentage decline in same-store GMV in the Chinese market in 2024, finally returned to positive growth with a mid-single-digit increase in 2025. Overseas, North America performed notably well, with mid-single-digit same-store GMV growth and a 34% increase in overseas market sales. Its sub-brand, TOP TOY, saw quarterly revenue double year-over-year, with full-year growth exceeding 90%. However, after excluding share-based compensation expenses, MINISO's total operating expenses increased by over 40% year-over-year. Selling expenses constituted the largest portion, and the increase nearly completely offset the additional gross profit. The licensing fee expense, a frequently analyzed metric, grew by 44.6%. Consequently, excluding other factors, MINISO's adjusted net profit grew by only 6.5%, a clear case of increased revenue without a corresponding increase in profit. TOP TOY updated its prospectus on March 31st and remains in the process of listing on the Hong Kong Exchange. It can be inferred that 2026 will be a year of increased investment to seek growth for both TOP TOY and MINISO, with the business model of high marketing spend for high revenue continuing unabated.
In contrast to MINISO, Buluke achieved increased profitability without significant revenue growth in 2025. While it returned to profitability, revenue growth plummeted from a previous high of 150% to 30%. Buluke, striving to reduce its reliance on the Ultraman IP, secured several well-known IPs in 2025, including Toy Story and Zootopia. However, its core problem lies in the lack of ability to transform hit IPs into hit products.
The most noteworthy development, however, is Pop Mart's next move: the small household appliances business. As the industry leader, Pop Mart is taking its first step from zero to one in the lifestyle sector, just as the growth from its core collectible toy business is nearing its floor. This shift represents an upgrade from impulsive consumption to emotional consumption—a logical change from short-term to long-term, and from one-off purchases to sustainable engagement. This trend is not unique to Pop Mart. During its earnings call, MINISO's founder, Ye Guofu, mentioned the need to "transition from a traffic-based business to a fan-based business." The repeated emphasis on the success and importance of the collaboration with Jennie, along with the focus on social media "check-ins" and user-generated content, indirectly confirms MINISO's future strategy: moving towards premiumization, higher value, and stronger emotional connection. Buluke is seeking to escape the "elementary school student economy" by tapping into adult emotional consumption. At its 2026 Global Partners Conference, it noted that adult product lines accounted for 16.7% of its business in 2025, up from 11.4% in 2024, and it plans to continue promoting this segment.
The potential market for emotional consumption in China: The sheer size of the potential market for emotional consumption in China becomes evident by looking at the sales figures of Hello Kitty's parent company, Sanrio, in China. In the first nine months of 2025, Sanrio generated 1.15 billion yuan in revenue in China, with an operating profit of 440 million yuan. Including royalty fees paid to the headquarters, the contribution from China reached 720 million yuan, accounting for over 60% of total earnings.
Sanrio's data suggests China's emotional consumption potential stems from two factors: high tolerance for IP-driven premiums and room for transformation in IP consumption structure. Analyzing Sanrio's profitability by region reveals that, while its partnership with Alibaba's Alifish in China uses a revenue-sharing model, the contributed profit margin is not inferior to other overseas regions. From an operating profit margin perspective, developed countries typically have relatively higher margins. China's margin ranks among the highest, even surpassing that of Japan. This indicates domestic consumers have a high tolerance for IP recognition and the corresponding price premiums, suggesting underlying willingness to pay persists.
Furthermore, Sanrio explicitly stated in its February earnings presentation: "Categorically, thanks to the expansion of the潮流玩具 market, the proportion of toys and apparel categories is relatively high in the Chinese market. However, we believe there is still room for growth in our Chinese business if we can make progress across multiple categories, as seen in the Japanese market." Comparing the sales of the latest series of peripherals for miHoYo's game Honkai: Star Rail, "The Time the God is Absent During the Full Moon," traditional "merch" like enamel pins, acrylic stands, figurines, and postcards comprised 30 out of 54 items, accounting for half. Of the total sales exceeding 40 million yuan, traditional merch contributed about 55%, while two apparel sets (10 products total) contributed 13%. Appliances and lifestyle products contributed only 3%.
In other words, whether viewed from the perspective of emerging domestic IP brands or established international IP companies, the potential for "practical merch" product lines in China's IP consumption appears much broader than the currently saturated traditional collectible toy market. Reviewing Pop Mart's multi-category strategy, from the aesthetic experiment of the first "Emotional Integration Life Space" store for the Xiao Ye IP in 2025 to the recruitment for home appliance business roles starting in June, Pop Mart's ambition to break beyond collectible toys and upgrade into lifestyle has never ceased. As the first step in building its "lifestyle" brand, Pop Mart's small appliances are speculated to focus on "display value" and "companionship." "Display value" means product highlights will center on design and quality, not disruptive technology or function. "Companionship" suggests product categories will focus on common life scenarios. Considering Pop Mart's existing audience, its appliances will likely be positioned around "artistic living" or "quality living," targeting scenarios like the workstation, living space, and light travel. This would differentiate Pop Mart's product line from MINISO's strength in textiles and apparel and Disney's dominance in stationery and toys. For Pop Mart's potential consumers, IP is a symbol, a spiritual totem. While this allows for higher price premiums, it also requires more marketing buzz and KOL influence.
The challenges of succeeding in emotional consumption: While "emotional consumption" seems attractive, truly achieving it—without repeatedly depleting consumer emotion and spending power—presents three key challenges for IP brands.
The first is competition. This includes competition among IPs. Taking Sanrio as an example, both the company and its investors have shown strong interest and ambition for the Chinese market. They stated: "While ensuring the current level of profitability, we will promote strategic initiatives focusing on future expansion of higher-margin licensing business." Additionally, Sanrio's strategy for China includes increasing directly-operated and franchised stores (expanding to 100 stores) and developing new character IPs tailored for target customers. The other aspect is product similarity and the threat of counterfeits. Even with LABUBU's deeply ingrained image, knock-offs in various garish colors are still commonly seen in small street shops. For peripherals like water bottles, multiple brands simultaneously sell "officially licensed Sanrio bottles," but not all possess reliable authorization proof. Moreover, cups with identical pricing, styles, and claims of being "official Hello Kitty collaborations" repeatedly appear across different Tmall flagship stores, undoubtedly increasing the difficulty for average consumers to distinguish authenticity. Among Tmall flagships, aside from Beast's standout pricing (299 yuan per unit) and sales (over 100,000 units sold), most other brands are positioned below 100 yuan, with MINISO priced at 79.9 yuan and achieving sales over 10,000 units.
Another challenge is consumers' baseline demand for "value for money." Even though domestic consumers exhibit a world-leading tolerance for IP premiums in emotional consumption, this does not mean they will unconditionally accept arbitrary pricing and quality control risks from brands. On the contrary, a lack of perceived value can drive consumers to seek "dupes" or "wait for group buys," thus returning to the first threat of competition. This year, the top domestic otome game "Love and Deep Space" faced controversy when it launched a character perfume as a birthday peripheral priced higher than Hermès. Similarly, Yuewen Goods launched a "The King's Avatar" portable fragrance spray around the same time, priced at 158 yuan for just 10ml, reaching a new level of "luxury." Although it was quickly taken down for adjustment, it exposed the backlash from pricing missteps. In the small appliance sector Pop Mart is entering, the importance of safety and after-sales service is self-evident. Reportedly, Pop Mart will partner with Xinbao Electrical Appliances, adopting an OEM model. If Pop Mart follows the predicted path of a quality or premium route, it must deliver both design and quality to maintain high margins. Xinbao, a leading OEM, derived 85% of its 2024 revenue from contract manufacturing, with a gross margin of approximately 19% for that segment. Relatively speaking, Xinbao has experience advantages in kitchen appliances, which account for 85% of its small appliance revenue. According to its website, Xinbao manufactures for internationally renowned brands like Philips and Bosch; in kitchen appliances, Starbucks and De'Longhi are also key clients. Domestically, JD.com's Jingzao, NetEase's Yanxuan, and Xiaomi have all had numerous products manufactured by Xinbao.
Finally, the true difficulty of emotional consumption returns to the IP itself. The threshold for an IP to succeed in emotional consumption is far higher than in impulsive consumption, which relies on momentary hype and impulse. The key to successful IP operation, whether for film/TV, games, characters, or even celebrities, lies in consumer emotional investment and identity formation. The former is the foundation for an IP to become an IP, determining whether consumers pay for the IP itself. The latter determines whether consumers pay for merchandise derived from the IP; it is the fundamental logic of IP commercialization. Past experience shows that sufficiently high internal sunk costs for consumers are highly correlated with externally observed long-term loyalty ("being a long-term fan"). Sunk costs include both money and invested emotion and time. Compared to games, character images, or even celebrities, film/TV IPs are weakest in this aspect. Once the broadcast or screening period ends, very few works sustain ongoing attention and discussion. The series development often mentioned for long-form drama markets remains in early or experimental stages. If the entertainment industry aims for a mutually beneficial relationship between IP and content, targeting mature international IP operators like Sanrio and Disney, using collaborations to build consumer awareness is merely the first step towards achieving emotional consumption. If the market remains stuck at this step, brands will inevitably face consumers with increasingly difficult-to-mobilize emotions and tightening wallets. What domestic IPs truly need to consider is not how to generate hype or create hits, but how to build long-tail value and lasting companionship.
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