Pop Mart International Group, China's largest toy manufacturer selling mystery boxes containing figurines, is being publicly criticized after its debut on the Hong Kong market two weeks ago.
Once exposed for selling repackaged goods at regional outlets, the company was criticized Sunday in an editorial by state-run Xinhua News Agency calling for market regulators to conduct supervision and regulation of the "mystery boxes."
Shares of Pop Mart dropped as much as 16% Monday with 15 billion yuan ($2.3 billion) knocked off its market valuation. Pop Mart told The Beijing News that mystery boxes weren't an immature business model but the company welcomes regulators "cleaning up the industry development."
Consumers don't know which figurines they have bought until they open the box. Figurines can be a branded product from a set or a character created by designers.
With the price of each mystery box ranging from 49 yuan to more than 100 yuan, those who are keen to get their favorite figure or collect all of a specific set, or to score a rare item, might end up spending a lot of money. The probability of getting a rare model is one in 144, according to the company's prospectus.
"Behind the surprise and anticipation," Xinhua News Agency said "the addiction and gambling problems these mystery boxes bring are breeding malformed consumption."
Local news reports said a mainland couple spent 200,000 yuan purchasing boxes and a 60-year-old customer spent 700,000 yuan in a year. On Xianyu, an online flea market, a rare model of a figurine named Molly costs up to 2,350 yuan - 39 times more expensive than its selling price.
As of 2019, Pop Mart saw 58% of its nearly 3.2 million members make repeat purchases, according to the company's prospectus. As speculation has been driving this trend the second hand trading market is also booming, analysts said.
Last week, a customer in the northern China city of Jinan purchased three mystery boxes from Pop Mart but discovered they weren't original. The package had been opened and resealed. Pop Mart later confirmed five employees at the outlet removed items from 11 mystery boxes, resealed them and sold them. They were fired.
Industry insiders said it was likely these employees were cooperating with scalpers in second hand markets that sell rare models at high prices.
"Mystery boxes represent not only an economic phenomenon but also a psychological and life status of the youth," Xinhua News Agency said. "Parents should guide minors to shape healthy consumption views."
To older customers, it may appear a mystery that Pop Mart's figurines have become so popular. But young customers said they gain "instant pleasure" when opening the boxes. Pop Mart figurines are emotionless and offer blank facial expressions - which demonstrates urban youth exhausting and fragmented lives, customers said.
Women make up 75% of Pop Mart customers with 32% of them born after 1995 and 90% have monthly salaries ranging from 8,000 yuan to 20,000 yuan, according to a public statement last year by Guo Xiao, Pop Mart's chief marketing executive.
The company's shares increased by 100.26 % from HK$38.50 to HK$77.10 per share at its initial public offering in Hong Kong Dec. 11.
