The Booming Art Toy Economy

By Audrey Guo

On 11th November （the Double Eleven shopping gala） 2020， Pop Mart achieved a sales amount of RMB 142 million at its flagship store on Tmall， becoming the first member of the “Ten Million Club” from the big toy category. As mystery boxes have gained in popularity， art toys have quickly become an integral part of many young peoples lives in China， boosting the market to grow at an unusual rate.

Recently， the Tmall Innovation Center issued the Art Toy Industry Trends White Paper （later referred to as the White Paper）， indicating that the art toy market in China is currently still in a period of growth and has great potential and opportunities in the future. According to data from Frost & Sullivan， as category penetration improves， the retail market size of art toys in China may increase from approximately RMB 20.7 billion in 2019 to more than RMB 70 billion in 2024， displaying a compound annual growth rate much higher than the global average.

Over 60% of art toy buyers prefer mystery boxes

What is an art toy？ It is a type of toy with a distinctive design and popular elements， or licensed toys derived from movies， animations， cartoons or game characters， and taking the forms of dolls， plush toys， model cars， and construction toys.

According to survey data from iiMedia Research， more than half of art toy buyers are aged 19 to 30. In the first quarter of 2021， the bestselling art toys were mystery boxes， followed by garage kits and models， which accounted for 62.95%， 52.33% and 52.07%， respectively.

The art toy market is still dominated by young people. According to iiMedia Research， by the middle of 2019， the spending on garage kits by those born post-95 increased by 189.7% year-onyear， while that on fashion shoes increased by 59.0% year-on-year. In 2020， nearly 4 out of 10 mystery boxes were bought by people born post-95 （38.4%， to be exact）. From the perspective of the main channels of sale for art toys， 62.4% of Gen Z consumers chose to buy art toys through e-commerce channels， 51.0% from offline stores， and nearly 30% from unmanned vending machines and exhibitions.

According to the data related to the art toy industry released by the iiMedia data center， in the first quarter of 2021， 46.46% of consumers bought mystery boxes for the creativity of their styling and design. 70.8% of consumers were satisfied with the mystery boxes they bought. This was reflected in the statistical data of the white paper which stated that the sales volume of the art toy mystery boxes were at the top of the sub-category of model toys， with annual sales increasing by 35% year-onyear， exceeding the average growth rate （22%） of the sub-category， and making it the number one growth engine for the model toy sub-category， the sales of which have continued to increase relatively rapidly.

In addition， according to iiMedia Research， 61.2% of garage kit buyers in China in this first quarter cared about postures the most. The statistics showed that more than 60% of the respondents made their decisions to buy due to the posture and action， and more than half focused on the clothing designs. Both male and female buyers were attracted by good-looking faces. Analysts from iiMedia Research believe that， as its natural to pursue beauty， the facial attractiveness of garage kits are of great importance. Therefore， when launching new products， businesses have to take these factors into consideration， including the facial attractiveness and the difference between target groups， such as male and female buyers.

In the first quarter of 2021， 64.6% of male buyers in China purchased models for collection purposes. The statistics indicated that more than 60% of male consumers bought models for collections and commemorative purposes， while nearly 6 out of 10 female respondents wanted models because of collections or simply because they liked the models. Moreover， nearly half of female consumers bought models as gifts， which is a ratio higher than that seen for men， but the proportion of male consumers buying models in second-hand transactions was significantly higher than that for females.

Analysts from iiMedia Research believed the reason for this was that the collection value of models has become increasingly prominent， and many buyers gained emotional satisfaction from keeping these collections while gaining premium income from selling such valuepreserving and valueincreasing assets in the secondary market.

The statistics also indicated that more than 40% of buyers would consider price to be an important factor when buying models， followed by the genuineness （37.7%） and the online reputation（35.7%）. In addition， appreciation space， brand reputation， size， and sales services also have an influence.

The number of registered enterprises in the art toy industry keeps rising

It has recently been discovered that， by 2020， the art toy industry in China accounted for 19.17% of the global market， up from 11.18% in 2017， and it is expected that China will gradually develop into one of the core markets for the global art toy industry.

The amazing growth rate of the art toy industry has attracted Internet companies such as Youku， Tencent， and Bilibili to launch art toy products and programs with art toy elements， while more than 10 firms， such as Sequoia Capital and VentureLab， are also accelerating their deployment in this industry.

Meanwhile， the mystery box market remains firm， and consumer demand is still relatively strong. Mystery box companies are able to accelerate expansion， open more stores and develop more products. According to data from Tianyancha， for the fifth successive year， the number of registered art toys related businesses（companies of all statuses） has been growing quickly year-on-year. By 2017， the number of art toy companies in China exceeded 100 for the first time. By 2019， this number had increased by 230. As of November 30th， 2020， there are more than 260 newly registered art toy enterprises.

According to iiMedia Research， the art toy market in China reached RMB 29.48 billion in 2020， and is expected to reach RMB 38.43 billion in 2021， displaying a growth rate of 30.4%. At present， the art toy market in China is still dominated by foreign brands such as Lego， Bandai， and Disney who have more IPs， but Chinese brands like Pop Mart are still developing rapidly.

Established in 2010， Pop Mart is mainly involves in four sectors： artist development， IP incubation and operation， consumer reach， and popular culture promotion and cultivation. On December 11th， 2020， Pop Mart， was officially listed on the Hong Kong stock market， becoming the first publicly listed mystery box enterprise. Pop Mart is currently one of the largest and fastestgrowing art toy companies in China.

By launching the Top Toy brand last year， MINISO also entered the art toy market， and is developing their stake fast. In a period spanning just over five months from last December， Top Toy established a nationwide sales network of 23 stores， covering Shanghai， Guangzhou， Shenzhen， Chongqing， Xian， Tianjin， Lanzhou， Chengdu and other first- and second-tier cities.

In addition， the art toy storage products are also becoming popular. In 2020， the number of Tmall art toy storage consumers increased by 100 times from that in 2019. Currently， there are more than 440，000 mystery box users who are active on Taobaos platform for used products. In November 2020， the second-hand mystery box market exceeded RMB 120 million， marking a year-on-year increase of more than 70%. The value of second-hand mystery box transactions through Xianyu in one year is now close to the annual sales income of Pop Mart on Tmall. The secondhand mystery boxes on Xianyu carry a relatively high premium， especially those including hidden models and hot-selling models which are resold at prices even dozens of times higher than the original price due to the scarcity of the objects.

The art toy market in China is still in the early stages and has grown rapidly in recent years. The statistics indicated that the art toy market in China in 2020 reached nearly RMB 30 billion， but the growth rate slowed down to 44.0% due to the COVID-19 pandemic. Meanwhile， it is expected that the market will reach RMB 38.43 billion in 2021， while the growth rate will continue to decline. iiMedia Research analysts believe that， due to the exciting surprises and in order to meet social and emotional demand， art toys in China will continue to become more popular， continually boosting the market in China.

Only players with IPs can last long-term

The statistics indicate that the art toy market in China took a share of 19.74% of the global market in 2020， up from 11.18% in 2017， and is estimated to reach 23.03% by 2023. According to analysts from iiMedia Research， with the gradual development of the cultural industry and improving consumption ability， strong and upgraded consumer demands for cultural and entertainment products， and the rapidly growing industry for licensed peripheral products of IPs such as films and television programs， animations， and games， the art toy market in China is expected to develop into one of the largest consumption markets in the world.

As industry sources have pointed out， the art toy industry has high requirements for IP development and operation capabilities， content resources， channel operations， and brand cultivation， meaning a higher entry barrier.

New companies in the art toy market require IPs to attract customers， and IPs can help develop high quality art toys. In addition， IPs are an important factor for attracting consumers， and are also key for consumer stickiness. According to the Ring Consumption Report for Generation Z by CBNData， art toys with IPs are winning a higher market share and gaining stronger momentum， while the sales of mystery boxes without IPs are declining rapidly. Pop Mart emphasized that “IPs are at the core of the business”. As of June 2020， Pop Mart was operating 93 IPs， including 12 self-owned IPs， 25 exclusive IPs and 56 non-exclusive IPs. In 2020， Pop Mart signed with more than 120 IPs.

Despite this， Pop Mart is still actively expanding its mystery box business， as this accounts for 80% of their revenue， such as by launching the Popmart Land project. Moreover， in recent years， Pop Mart has focused on offline retail stores， in order to improve the profitability of offline stores， and has opened more stores to further strengthen the brand promotion. In addition， Pop Mart stores have also adopted unmanned vending machines to expand their reach， while open offline exhibition stores also featuring robots.

In the future， as the market players increase and demand segmentation continues， how should the art toy mystery box market innovate？ The white paper showed that， with the continuous expansion in this category and further refined demands， the art toy market requires continuous innovation. Right now， cute girly and animal themed art toys are the most popular， and the sale volume of cute girly toys increased by 116% year-onyear in 2020.

Secondly， the mid-market will become an important growth point for the art toy industry. At present， the entry-level market has the highest growth rate （as high as over 90% in 2020）， namely， the market for products with a unit price ranging from RMB 0 to 138， followed by the high-end market （over 40% in 2020）， with a unit price of above RMB 651. The growth for the mid-market （for products priced between RMB 138 and 651 per unit） was not obvious in 2020， and it is quite likely to become an important growth point in the future.

Thirdly， the market also requires innovation in the category of mystery boxes， especially in IP marketing and products that are closer to consumers， such as products for beauty and skin care， pets， and infants， as well as gift boxes for different scenarios and 3C products.

Finally， art toy mystery boxes should also be innovated in modes too， especially through online box drawing machines， brand zone games， limited chances to draw lots and interactive live broadcasts， in order to enrich the online experiences and create a standard paradigm for mystery box interactive experiences.