Over the past few years, numerous Chinese DTC brands have emerged and quickly become leaders in their product categories. After achieving massive success within China, we are now seeing many of them start expanding internationally including Perfect Diary parent company Yatsen Holding, collectible toy maker POP MART, and lingerie brand NEIWAI, among others.
Yet establishing themselves outside of China may be easier said than done, especially for these young brands whose key advantages against Western brands in China include their deep understanding of Chinese consumers and their innovative use of Chinese marketing and sales channels – advantages they don’t necessarily have when going abroad.
To find out more, I interviewed representatives from several of these brands. In this series of articles, we’ll explore these brands’ decisions to move into international markets, the results they have seen so far, and how they’ve had to adapt their business strategies.
Introducing POP MART
First up in our series is an interview with Justin Moon, Vice President of POP MART who is leading the company’s overseas division.
POP MART a fast-growing Beijing-based collectible toy company founded in 2010. The company took off in 2016 after it began working with artists to develop its own IPs, such as its most recognizable IP Molly, and introduced the concept of the blind box.
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Buying a blind box is similar to opening a pack of baseball cards and not knowing which cards you’ll get. POP MART customers purchase a toy from a series but they don’t know which specific toy they got until they open the box, creating suspense and excitement. Rare toys can resell for more than 40X their original price.
POP MART raised $676 million in an initial public offering in Hong Kong last December, giving the company a valuation of $7 billion ahead of the trading debut. According to a recent annual report, the brand sold over 50 million toys in 2020, bringing in a total annual revenue of $382 million USD, demonstrating 49.3% growth YoY.
POP MART’s overseas business officially launched at the end of 2018 and since then the brand has become active in more than 20 countries and regions globally, opening stores and ‘robo shops’ (essentially fancy vending machines) in Korea, Singapore, Japan, and most recently Canada. In addition to several offline stores, the brand also sells online through its official website, as well as through third-party platforms such as Amazon AMZN , and AliExpress.
Forbes: Why did you choose to expand internationally?
Justin Moon, Vice President of POP MART: The first reason POP MART decided to expand internationally was influenced by our success in the Chinese market. We felt we could use the capabilities of our internal market to develop a solid foothold in the overseas market.
The second reason is to find and combine resources or business models overseas that are not available in the local market that can strengthen our competitive edge in the local market.
The third reason is our belief that there’s a huge potential for artists’ development overseas and demand for art toys from consumers around the world. These reasons, in combination with POP MART’s business model, could create a large-scale business abroad.
POP MART is now in more than 20 countries and regions. How did you decide which ones to enter first and how to expand from there?
JM: The first important step in establishing strategies for overseas business is setting the target market. Since POP MART products combine cultural and artistic elements, we can’t target all overseas regions using the same approach. Culture, values, and perceptions of art vary in every corner of the world. In this context, it is necessary to build a strategic plan to expand our reach.
Starting with markets that have proven successful, we can expand to other countries or regions, using prior successes as stepping stones. As a result of thorough research, we have established a strategy to expand into the North American and European markets based on the proven success of our business in Asia and Southeast Asia.
Our Business Development team selected our primary target countries and regions based on income levels and consumer behavior. As of 2020, about 80% of the POP MART overseas sales were from Asia and Southeast Asia. Additionally, we had a large proportion of Asian, especially Chinese consumers, in North America and Europe with strong cultural connections to Asia. This demographic counted as the majority of our consumer base in western countries.
Through our active social media platforms and marketing efforts, we have seen an important increase in Western customers, and sales outside of Asia and Southeast Asia are expected to comprise more than 40% of our overseas sales by 2021.
The second step in our strategy was the evolution from an asset-light model to an asset-heavy model. Large-scale investments are accompanied by great risks. In the early days of our overseas business, POP MART quickly expanded its scale through a B2B model by establishing cooperation with strategic partners and networking through many channels in the local markets. After reviewing the sales performance, we quickly added a B2C model.
Why is localization important for POP MART?
JM: What many companies overlook when doing business overseas is localization. We think the localization of a brand should include localization of management methods, manpower, and products. Even in multifaceted circumstances, such as those brought about by the global pandemic, POP MART opened new stores in Korea, Singapore, and Canada, which could only be achieved through localized organizations and manpower.
How are international consumers’ shopping behaviors and product preferences different?
JM: Different geographical regions have distinct shopping behaviors. For example, we have learned that people from North America and Europe prefer to know which figure they will receive, so most of them buy whole sets (to avoid uncertainty) or limited-edition figures. Through that method, they can guarantee they will receive a specific figure.
In contrast, our customers in Southeast Asia (SEA) prefer the chance aspect of buying blind boxes. Like Chinese consumers, many of them even look forward to trying their luck as an exciting part of the experience.
Character-wise, Korean customers prefer Pucky, Disney, and Sanrio, our Japanese customers love Yuki and Instinctoy. However, our fans in SEA are very similar to China in terms of character preferences, as they prefer Dimoo, Skullpanda, and Disney Characters.
How did you have to adjust your marketing strategy?
JM: In terms of communication, we have several social media platforms run by local teams that create content related to each specific audience. Additionally, we are developing more exclusive product editions for specific countries/regions to connect more with the local audiences. In the future, we will adapt our product portfolio in each country/region to better fit the preference of each target consumer.
Has there been anything surprising or unexpected during international expansion?
JM: All our experiences overseas have been very positive. The reception from customers worldwide towards our products has been warmer than we expected, and for that, we are very grateful.
For example, on our 10th Anniversary, we had a special edition series that sold out in less than 10 minutes on all our overseas platforms. The same has happened with other limited editions for different countries and regions. Our customers are learning more about our company and becoming loyal fans of the brand.
What are your future plans/goals for international markets?
JM: Many companies often measure the success of their overseas businesses by the growth in sales or sales figures. However, we think there are more important factors in doing business overseas than simply increasing the sales volume. For example, finding new growth opportunities in overseas markets, promoting the development of the local industries related to art and pop toys, and contributing to local communities by boosting local employment are also important missions for our brand.
POP MART’s dream is to become a leading global pop culture and entertainment company. To realize this long-term vision, we seek to make meaningful developments globally and bring all our customers around the world joy.