Chinese toymaker Pop Mart saw its share doubled and market capitalization more than USD10 billion on its Hong Kong debut. This blind box toy seller's business idea, combined with the elements of collecting, sensation seeking, and a bit of "gambling," excites young Chinese who are willing to spend a sizable sum of money on toys. Now the company has set foot in online stores, vending machines across the country, as well as their 136 direct brick-and-mortar shops.

In 2010, the then-college student Wang Ning and his schoolmates wanted to start a retail business. So they ended up open a lifestyle store inside Beijing EC Mall, an ordinary shopping mall near Zhongguancun, and named it Pop Mart. At that initial stage, the company struggled to manage the supply chain and customer service, finding it difficult to break even.

To maintain profitability, Pop Mart pulled various product lines and decided to offer only toys in 2014. The Japanese gashapon vending machines inspired Wang Ning to take the bold move of selling toys in blind boxes.

Gashapon are capsule toys housed in small plastic balls and dispensed by vending machines. The gashapon figurines are mostly licensed and based on popular Japanese manga, anime, or video games. Some critics link this toy to the sneaker culture - both are fun, addictive, and sometimes extremely rare and expensive in circulation.

Unlike sneakers, gashapon toys also share the fun of uncertainty because there's no guarantee as to what item will be inside the capsule. So Wang began approaching artists to develop toy characters for his company. Eventually, he found Hong Kong-based artist Kenny Wong who already designed a doll called a Molly. Molly is a cute little girl with distinctive pouting lips and big lake blue eyes.

Popmart released the first series of Molly named Molly Zodiac in August 2016. The 200 pre-sale tickets for the product had sold out in only 4 seconds on Popmart's Tmall online store. Since then, Pop Mart's sales began to skyrocket, reaching total revenue of CNY158 million in 2017, then more than doubled it to CNY514 million in 2018, and doubled its revenue again CNY1.68 billion in 2019.

The growth of the company's net profit was also astonishing. The net profit was only CNY1.6 million in 2017, but it reached CNY451 million in 2019, which increased more than 200 times in only two years.

Now, dozens of artists design different toy lines for Pop Mart, and each artist gets a cut of the sales from their designs. The Molly series is still the largest revenue contributor to the company, which accounted for 27% of total sales in 2019.

By the end of the first half of 2020, the company holds 93 characters under the brand, comprising 12 proprietaries, 25 exclusively licensed, and 56 non-exclusively licensed.

Despite its success and growth momentum, some people believe that Pop Mart's value is too overestimated by the market, and it will return to the normal once the hype fades.

Pop Mart's biggest challenge will be keeping up the fashion. To update its toy series, the company plans to launch over a hundred new toys next year, and it has negotiated with Disney and other partners for the possibilities of selling merchandise and other popular characters.

In the long term, another challenge will be the sustainability of its business model. Some scholars and experts have voiced concerns over the gambling-alike mechanism of Pop Mart's blind boxes. Pop Mart is hard to maintain customer loyalty and keep revenue growth once customers get tired of its trick.

Popmart's toy released in series, customers have a sense of which series they are buying, but they don't know the exact figures they get until they open the blind box. This vague sense mixed with the gambling element surprises customers, especially for customers who make purchases irrationally.

Some of them have become lucrative collectibles, and it is not rare to see a customer who can spend over CNY30,000 to collect a whole series of toys. However, unlike sneakers collecting, blind boxes have a nature of gambling. To get rare toys or the desired toys, buyers often pay much more than what they expected.