WEBVTT - How Pop Mart Became a Bright Spot for China’s Economy

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Okay, so let's see we're down on beat you now

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<v Speaker 2>of K eleven. I think it's right around the corner.

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<v Speaker 2>On a recent Wednesday afternoon, I headed to a mall

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<v Speaker 2>in downtown Hong Kong to drop by one of the

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<v Speaker 2>hottest shops in town. Oh good, there it is PopMart.

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<v Speaker 2>PopMart is a toy store. It sells figurines, stuffed animals,

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<v Speaker 2>and plush dolls. It was packed with shoppers who were

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<v Speaker 2>there to buy one thing, a mystery box with a

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<v Speaker 2>surprise toy in it, also known as a blind box toy.

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<v Speaker 2>And as I was looking around the store, I saw

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<v Speaker 2>a woman standing by a display shaking a box with

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<v Speaker 2>one hand. I saw you shaking a box. What's that

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<v Speaker 2>all about?

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<v Speaker 1>It's about the feeling. For example, this one. I want

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<v Speaker 1>to get this one right.

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<v Speaker 2>Chasel Torres is visiting Hong Kong from a cow. She's

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<v Speaker 2>shaking the box to try to figure out which character

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<v Speaker 2>is inside. By the sound of it.

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<v Speaker 1>Oh guys, this one is small, right, so mostly when

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<v Speaker 1>you shake it it's like shakeable. And then if you

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<v Speaker 1>get those big one, it's like they won't shake that munch.

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<v Speaker 2>Chas Ol told me her fifteen year old daughter first

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<v Speaker 2>started collecting PopMart dolls last year and now she's the

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<v Speaker 2>one who's gotten addicted to blind box toys. Exactly what

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<v Speaker 2>chase Ol weighs the blind boxes in her hand, and

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<v Speaker 2>after shaking several of them, she settles on one.

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<v Speaker 1>Oh no, I actually got this one A ready got repeat,

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<v Speaker 1>So sounds like you're gonna have to get another one

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<v Speaker 1>not today.

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<v Speaker 2>Popmart's blind box toys, including its most famous one, the

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<v Speaker 2>Labuboo doll, have become a global phenomenon in the last

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<v Speaker 2>few years. In the US and Australia, fans line up

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<v Speaker 2>for hours, times in the middle of the night for

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<v Speaker 2>new releases. But even some of Popmart's biggest fans might

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<v Speaker 2>not be aware that the brand is from China. Bloomberg

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<v Speaker 2>Opinion columnist Shuley Wren says that could work to the

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<v Speaker 2>company's advantage Popmarked.

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<v Speaker 3>If you just look at the name, you wouldn't know

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<v Speaker 3>it's Chinese. La Buopoo looks nothing Chinese at all, So

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<v Speaker 3>I think for Chinese companies to be more successful overseas,

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<v Speaker 3>they cannot be to Chinese.

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<v Speaker 2>And even though China has been the target of a

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<v Speaker 2>rising tide of US tariffs. Since Trump's first term in

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<v Speaker 2>twenty eighteen, PopMart has become hugely popular both with consumers

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<v Speaker 2>and investors.

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<v Speaker 3>In twenty twenty four, its sales more than doubled. And

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<v Speaker 3>if you look at this stock, they went public in

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<v Speaker 3>late twenty twenty and it has been up two hundred

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<v Speaker 3>and fifty percent. This stock is up more than forty

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<v Speaker 3>percent this year. Despite Trump's trade wars, the demand for

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<v Speaker 3>its dolls are very inelastic. It's recession proof and terror proof.

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<v Speaker 2>Tariff proof that will be the test. Welcome to the

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<v Speaker 2>Big Take Asia from Bloomberg News. I'm Wanha. Every week

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<v Speaker 2>we take you inside some of the world's biggest and

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<v Speaker 2>most powerful economies and the markets, tycoons and businesses that

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<v Speaker 2>drive this ever shifting region. Today in the show, the

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<v Speaker 2>praise for China's blind box toys, can figurines and plushies

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<v Speaker 2>stokenough demand for Popmart's products to outlast the trade war,

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<v Speaker 2>And what can other Chinese companies learn from its success

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<v Speaker 2>as a country braces for escalating tariffs. PopMart was founded

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<v Speaker 2>in twenty ten as a variety store. Today, it sells

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<v Speaker 2>toys and figurines in about a dozen collections, but the

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<v Speaker 2>top seller is the Lebubu doll. Created in twenty fifteen.

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<v Speaker 2>Le Bubu is a small, toothy, fierce looking creature that

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<v Speaker 2>looks like a cross between an l and a rabbit.

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<v Speaker 2>It's so popular that PopMart now sells more than three

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<v Speaker 2>hundred variations of the character, and they're often sold out

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<v Speaker 2>in stores everywhere from Manila to New York. And Key

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<v Speaker 2>to the frenzy is the surprise customers get when they

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<v Speaker 2>open the blind boxes.

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<v Speaker 3>Something's something good, something juicy, something wonderful, cool and open up.

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<v Speaker 2>There are tons of these unboxing videos on social media.

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<v Speaker 1>I got my first Labooboo. It costs dollars. It's so

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<v Speaker 1>fuggy that I guess it makes the K cute.

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<v Speaker 2>Popmart's success with La Boo Boo is largely thanks to

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<v Speaker 2>Black Pink's Lisa, the lead rapper of the popular K

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<v Speaker 2>pop band. After she shared her collection on Instagram last year,

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<v Speaker 2>fans rushed out to buy the figures. Lisa also gushed

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<v Speaker 2>about the dolls in a Vanity Fair interview in November.

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<v Speaker 1>So when this guy has a tail, they call Simobo.

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<v Speaker 1>If she doesn't have tell, we call her La Boo.

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<v Speaker 3>Boo Lisa admitted online that she was obsessed with the

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<v Speaker 3>Labuo Boo. She says she didn't get what the big

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<v Speaker 3>deal was, but once she had one, she wanted a

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<v Speaker 3>second one.

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<v Speaker 1>I spent all my money. I go PopMart everywhere. If

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<v Speaker 1>I fly to New York, I go to Miami, I

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<v Speaker 1>try to find PopMart there, Paris, you know, everywhere.

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<v Speaker 2>The blind boxes can cost from fifteen dollars each to

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<v Speaker 2>more than two hundred and fifty dollars for limited editions.

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<v Speaker 2>And while selling merchandise with surprise toys is nothing new,

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<v Speaker 2>think about the mystery toys and kinder chocolates or cracker jacks.

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<v Speaker 2>Popcorn Truly says it's been essential to Popmark's explosive growth.

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<v Speaker 3>This blind box thing. Basically it's their biggest marketing wing.

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<v Speaker 3>I think everyone likes to open Christmas gifts right like

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<v Speaker 3>you don't know what's inside, and that this kind of

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<v Speaker 3>surprise factor that adds a little bit thrilled.

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<v Speaker 2>La booboo. Blind boxes or old and limited quantities online

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<v Speaker 2>and they sell out fast, meaning people have to go

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<v Speaker 2>into stores or buy them from vending machines. This hard

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<v Speaker 2>to find element creates a sense of exclusivity that drives

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<v Speaker 2>the hype.

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<v Speaker 3>If you go to a Chinese store, you cannot get

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<v Speaker 3>Labubu because of scalpers. The more common ones you can

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<v Speaker 3>get them online from scalpers at perhaps twenty percent premium,

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<v Speaker 3>but some of them, the more limited edition ones, they

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<v Speaker 3>are very very hard to find.

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<v Speaker 2>This mania for La Buobu and other Popmarke blind box

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<v Speaker 2>toys has translated into colossal success for the company. It's

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<v Speaker 2>sales revenue hit nearly two billion dollars in twenty twenty four,

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<v Speaker 2>more than double from the year before. The company went

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<v Speaker 2>public on the Hong Kong Stock Exchange in late twenty

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<v Speaker 2>twenty and since has become one of the best performing stocks.

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<v Speaker 3>If you look at this stock that has been up

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<v Speaker 3>two hundred and fifty percent, this stock has really become

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<v Speaker 3>an investor Darling. It's trading at over fifty time times earnings,

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<v Speaker 3>and by comparison, Disney is trading at only seventeen times.

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<v Speaker 3>Hello Kitty Sanrio is trading at about forty times. It's

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<v Speaker 3>tremendous success. And it's found that he owns almost half

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<v Speaker 3>of the company and this company is worth twenty three

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<v Speaker 3>billion dollars. So go figure.

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<v Speaker 2>PopMart may be a toy store, but its main customers

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<v Speaker 2>are young adults between fifteen to thirty five. That's according

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<v Speaker 2>to a market research firm. This group of grown ups

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<v Speaker 2>are sometimes referred to as kiddolts, adults who enjoy doing

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<v Speaker 2>or buying things usually intended for children. Truly, says, PopMart

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<v Speaker 2>is making a lot of money by tapping into this

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<v Speaker 2>kidd old market because that sector of the population is

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<v Speaker 2>struggling in China right now.

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<v Speaker 3>The Chinese economy is not doing very well right like

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<v Speaker 3>young people of this generation, unemployment rate is very high.

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<v Speaker 3>A lot of young educated people, they don't see that

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<v Speaker 3>how they can climb the MIDI class leader like their

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<v Speaker 3>parents did. And I think La Bubu gives them a

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<v Speaker 3>sense of a mental serenity or comfort, you know, like

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<v Speaker 3>the so called lipstick effect in the economic session, or

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<v Speaker 3>if you are having a bad time, women will go

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<v Speaker 3>out to buy lipstick. It's fifteen twenty US dollars and

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<v Speaker 3>then you put on lipstick and you just feel a

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<v Speaker 3>little bit better. Right, But these days, instead of lipstick,

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<v Speaker 3>I think the young men and the women they like

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<v Speaker 3>to go for those fluffy toys.

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<v Speaker 2>That accounts for the demand in China, but overseas Popmart's

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<v Speaker 2>appeal is now facing some big headwinds.

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<v Speaker 3>Now, the White House says, tariffs on Chinea are now,

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<v Speaker 3>get this, one hundred and forty five percent.

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<v Speaker 2>The President acknowledging the Trump administration has imposed hefty tariffs

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<v Speaker 2>on all Chinese goods going to the US, where the

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<v Speaker 2>company wants to expand. Can PopMart strategy survive the trade

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<v Speaker 2>war and can other Chinese brands successfully It's secret sauce

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<v Speaker 2>that's after the break. Popmart's blind box strategy has helped

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<v Speaker 2>it succeed well beyond China. City Group analysts said in

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<v Speaker 2>December they expect Popmart's global revenue to account for half

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<v Speaker 2>of total sales this year as a company looks to

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<v Speaker 2>expand to North America and Europe. As of December, the

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<v Speaker 2>company had one hundred and thirty physical stores outside China,

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<v Speaker 2>and despite the US and China being caught in an

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<v Speaker 2>increasingly escalating trade war Bloomberg Opinions Truly Wren expects that

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<v Speaker 2>PopMart Toys will be able to ride out the tariffs

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<v Speaker 2>for now.

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<v Speaker 3>When we talk about tariffs, we say, oh, Americans are

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<v Speaker 3>not going to buy goods from Timo or Seeing because

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<v Speaker 3>they're just going to be one hundred percent more expensive, right,

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<v Speaker 3>But with Labubu demand, it's just that in elastic right now,

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<v Speaker 3>people are willing to spend more some of buying from

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<v Speaker 3>skull right. Even if you wanted to pay more, you

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<v Speaker 3>cannot have it. It's more about supply. That's why people

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<v Speaker 3>think PopMart at its current stage is teriff proof.

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<v Speaker 2>Earlier this month, PopMart shares did see some volatility, following

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<v Speaker 2>as much as twenty percent in Hong Kong. That's after

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<v Speaker 2>Trump's tariff whiplash caused financial markets to go on a

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<v Speaker 2>roller coaster ride. For now, the stock is adding gains

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<v Speaker 2>again and truly says other companies are already trying to

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<v Speaker 2>replicate parts of Popmart's formula for success when they're expanding abroad.

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<v Speaker 3>Chinese companies all want to go overseas. Overseas profit margins

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<v Speaker 3>are just much higher compared to China, and there is

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<v Speaker 3>no price wars in big markets like the US and

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<v Speaker 3>the European Union and the infact, you start to see

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<v Speaker 3>this brand called Miniso, the Chinese version of muchI, if

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<v Speaker 3>I may use that analogy, and they are also selling toys,

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<v Speaker 3>cheap lipstick, houseware, etc. Right, and that they are trying

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<v Speaker 3>to to do what popmar is doing going overseas, and

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<v Speaker 3>they are also starting to use this so called blind

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<v Speaker 3>box strategy to jazz things up.

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<v Speaker 2>And they're being another key aspect of PopMart strategy.

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<v Speaker 3>I think for Chinese companies to be more successful overseas,

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<v Speaker 3>they cannot be two Chinese popmarked. If you just look

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<v Speaker 3>at the name, you wouldn't know it's Chinese. Labooo looks

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<v Speaker 3>nothing Chinese at all. Actually the artist was born in

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<v Speaker 3>Hong Kong. He grew up and spent a big chunk

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<v Speaker 3>over his time in the Netherlands and he got the

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<v Speaker 3>inspiration reading about Nordic fairy tales. That's why Labou Boo

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<v Speaker 3>doesn't look quite Chinese. You know. She looks like where

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<v Speaker 3>the wild things are. She has a boyfriend called Taikoko,

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<v Speaker 3>and she has buddies. They all look a little bit

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<v Speaker 3>Nordic and international, and I think that's quite important. Like

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<v Speaker 3>of course all the Chinese companies, they want to create

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<v Speaker 3>new markets overseas. Miniso has done very well as well.

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<v Speaker 3>Minis doesn't look Chinese at all.

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<v Speaker 2>In fact, most people think it's Japanese exactly.

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<v Speaker 3>Certain brands like shell Me for instance, there electual Vehicles

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<v Speaker 3>U seven looks like a Porsche.

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<v Speaker 2>Just as importantly, PopMart is challenging the idea that China

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<v Speaker 2>is just a place where cheap, knockoff goods are made.

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<v Speaker 3>President Donald Trump keeps on railing against China, saying China

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<v Speaker 3>is flooding cheap goods and products into the US. But

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<v Speaker 3>that's not necessarily true. I think some of the mailing

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<v Speaker 3>China products are getting quite cool, right because Palmer is

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<v Speaker 3>coming up with new intellectual properties like La Bubu. Right

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<v Speaker 3>in order to earn customer loyalty, they have to make

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<v Speaker 3>quality goods that are fairly inexpensive, but they also have

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<v Speaker 3>to tease and come up with new innovations. It's not

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<v Speaker 3>so different from like Japan in the nineteen nineties. Right

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<v Speaker 3>back then, Japan's asset bubble already went bust, and the

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<v Speaker 3>Japanese companies are coming up with pretty interesting innovations. Uniclo

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<v Speaker 3>came up then, right, and then there was muchI, And

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<v Speaker 3>then suddenly the world says, oh wow, Japanese design is

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<v Speaker 3>great and the people around the world love them. And

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<v Speaker 3>I think that's what China wants to be like. They

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<v Speaker 3>want to be seen as a place where interesting designs

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<v Speaker 3>can also come.

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<v Speaker 2>From whether demand for Labubu can continue to survive economic

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<v Speaker 2>challenges in China and the trade war with the US

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<v Speaker 2>remains to be seen. Blind box toys tend to be

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<v Speaker 2>passing fads and PopMart aspires the hook consumers beyond La

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<v Speaker 2>Buoboo dolls.

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<v Speaker 3>Right now, Palmer is at early stage, so at this

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<v Speaker 3>point it feels like it's a fad and perhaps investors

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<v Speaker 3>are as betting that the Palmer can grow for another

0:13:43.960 --> 0:13:46.760
<v Speaker 3>say five ten years. Right now, Palmer is doing great

0:13:46.880 --> 0:13:49.680
<v Speaker 3>right the stock prices up. But going forward they have

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<v Speaker 3>their challenges. The key challenge is how to keep its

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<v Speaker 3>toys hip, how to have influencers still wear them and

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<v Speaker 3>showcase them on Instagram. That means that they have to

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<v Speaker 3>keep hung, innovating and the coming up with new intellectual

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<v Speaker 3>properties to keep young people on the hook.

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<v Speaker 2>This is the Big Take Asia from Bloomberg News.

0:14:14.840 --> 0:14:15.400
<v Speaker 3>I'm wan Ha.

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<v Speaker 2>This episode was produced by Noomi Um and Young Young.

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<v Speaker 2>It was edited by Grace Jennings, ed Tquist, Patty Hirsch and

0:14:22.920 --> 0:14:25.960
<v Speaker 2>Dong Lu. It was fact checked by Eddie Dun and

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<v Speaker 2>mixed and sound designed by Taka Yasuzawa. Our senior producer

0:14:30.000 --> 0:14:33.760
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<v Speaker 2>deputy executive producer is Julia Weaver. Our executive producer is

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<v Speaker 2>Nicole Beamster Bower. Sage Bauman is Bloomberg's head of podcasts.

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<v Speaker 3>H