This week’s podcast is about Pop Mart and its ability to tap into really interesting consumer behaviors.

• Fan and enthusiast behavior
• Collecting behavior
• Gambling and rewards behavior

You can listen to this podcast here, which has the slides and graphics mentioned. Also available at iTunes and Google Podcasts.

Here is the link to the TechMoat Consulting.

Here is the link to our management sessions with the latest consumer-facing innovations by China’s digital leaders (here).

Here is the link to the Tech Tour.

Correction: In the podcast, I talked about Jake Paul being a Pokemon fan. I meant Logan Paul.

Here’s my summary of Pop Mart in one graphic.

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Related articles:

• Fans, Collectors and Gamblers: The Engine of Pop Mart (1 of 4) (Tech Strategy)
• Pop Mart and My Checklist for Fan and Enthusiast Behavior (2 of 4) (Tech Strategy)
• When Microsoft’s Bundles Are Good vs. Bad for Customers and Markets (Tech Strategy)
• Microsoft’s 3 Big Upgrades to its 2 Platform Business Models (2 of 2) (Tech Strategy – Daily Article)

From the Concept Library, concepts for this article are:

• B2C Customer View: Fans and Fandom
• B2C Customer View: Gambling and Rewards Behavior
• B2C Customer View: Collector Behavior

From the Company Library, companies for this article are:

• Pop Mart

———-transcription below

Jeffrey Towson: [00:00:00] Welcome, welcome everybody. My name is Jeff Towson and this is the Tech Strategy Podcast from TechMoat Consulting. And the topic for today, fans, collectors, and gamblers. The consumer engine of Pop Mart. So, this is about kind of an interesting, simple company Pop Mart, which is a retailer in a pop toys company.

You know, think, think toys like Hello Kitty and Beanie Babies and Iron Man, things like that. It’s doing very well in terms of growth and margins. And what struck me as interesting about this was. It’s a really interesting consumer engine in the sense that it’s got some very interesting sort of, let’s call it, lessons about getting consumers to engage.

And I put them into three buckets, which are fans, collectors, and gamblers. And there’s a lot of sort of fertile ground there for digital companies. So anyways, I’m going to take this apart. I’ll give you my checklist for basically how I think [00:01:00] about this stuff. And this is going to tee up the podcast for next week, which will be about Bilibili.

And then probably Kuaishou and Ruhnn Holdings. These are all digital creatures that are very good on the consumer side. So, this sort of lays the groundwork for that. And anyways, that’ll be the topic for today. Pretty cool company, actually. Standard disclaimer, nothing in this podcast or my writing or website is investment advice.

The numbers and information from any and any guests may be incorrect. The views and opinions expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment, legal, or tax advice. Do your own research. And actually, I forgot one little housekeeping thing. We are doing something new.

Relatively new, which we actually have done a lot of these, but we’ve never talked about it. We’re going to start doing sessions with management teams around the world, mostly online, to basically go through latest updates. and lessons in consumer facing [00:02:00] innovation from really the China leaders who are unbelievably good at this stuff.

You know, there’s a reason TikTok, Shein, and Temu all sort of shocked the world with their adoption. Well, that all comes out of China. There’s a lot sort of happening on the ground in the realm of what we’ll call consumer facing innovation. And as we’re going to do sort of the latest updates for companies.

We’ll do those with online sessions and it’ll be a team meeting, team discussions. We’ve actually been doing this for several years with kind of a lot of company. But if you’re interested in that go over to TechMoat Consulting. com and you can find it under the executive training. All the information’s there, the approach, price, things like that.

Anyways, that’s going to be something we’re going to be doing a lot more of going forward. Okay. With that, let’s get into the topic. Now, we don’t really have any new concepts for today, but we’ll I mean kind of the big area is frameworks, detailed ways of taking apart fandom, collector behavior, and gambling behavior.

They’re all [00:03:00] sort of, they overlap a decent amount but. You know, the net net of this will be specific checklists, especially for those of you who are investors for sort of taking these apart and rating them, which is what I do. So that’s, all of those are sort of concepts and you can find those under the concept library.

Just look up collectors, fans, and gamblers, basically. Okay. So let me get into the basics of Pop Mart quickly. I’m not going to go through the company too much. But I think the history is valuable because they really are sort of, Let’s say, let’s say a one trick pony, but they’ve been doing the same thing from literally the day the company was founded, which was basically in a, I think, pretty much a dorm room by college student Wang Ning.

So, I assume dorm room in 2010 began selling toys. And it turns out the toys that got traction were toys based on popular Japanese character called Sunny [00:04:00] Angels. So, these are basically pop toys, which are what’s the difference between a regular toy, a soccer ball, you know, a toy truck, things like that, and a pop toy.

Well, a pop toy is basically a toy for, that’s sort of been infused with popular culture or a popular trend. So, there’s obviously a close connection between pop toys and entertainment. You know, anything you see in movies and TV shows often gets made into toys and merchandise and things like that. But it doesn’t have to start from, you know, movies and TV.

It can come out of gaming, video games. And it can kind of come out of, you know, things like Pokémon and Hello Kitty. Okay, those are pop toys, but they’re not really associated with entertainment, at least not at the beginning. They, they began as toys or trading cards, things like that. So, when you start to infuse toys with popular culture, a couple of things happen, number one, your [00:05:00] margins go way up.

One of the reasons Pop Mart got my attention is because of their gross profits, you know, the margin on the products 60%, 65%. Now you don’t see 65 percent gross profits in soccer balls. So, when you go from traditional toys to them, you get bigger gross margins. You get much higher buying frequency.

People, this is where you start to get into fan behavior. And there’s other things, but you know, people buy these far more frequently than regular toys. And the other thing that’s kind of interesting is most of the purchasing is not coming from kids. It’s not eight-year-olds and ten year olds. I mean, that is there, but it’s a lot of people who are 15 to 35, what they call kidults, which are like kids who are adults who kind of buy like kids.

So, it’s a different bucket. It’s kind of a niche thing. Historically, it’s been big in Japan, South Korea parts of mainland China. It’s sort of [00:06:00] come from there. And Pop Mart, you know, being founded in 2010, you know, they really rode that wave to begin with. They started with Japanese characters. They started adding more characters.

Usually, you have to license these. It’s very hard to create one of these from scratch that’s going to be popular because it’s a bit of a cultural phenomenon. So, you, you deal with artists who have gotten some degree of success making these characters and then you go to them and you make toys and you license.

So, it’s a bit unpredictable. But it starts out there. 2015 Pop Mart gets their first really big character that’s theirs, which was a character called Molly, which is just cute, you know, sort of anime, like Japanese character. You make, you can make multiple types of toys by these, you can make ball and socket joints, but the ones everyone pays attention to are the bubble heads where, you know, they’re, they’re 20, 30, 40 centimeters.

They got big heads. They’re [00:07:00] cute. You put them on the shelf. Well, Molly was very, very popular and that became their proprietary IP. Then they picked up two more, Dimoo and Skull Panda, and that was the vast majority of their revenue for a long time. Now, since then, they’ve, they’ve scaled up to 90. I think they’re probably up to a hundred IPs at this point.

Some of them are deals they might do with Hello Kitty to put out toys under their, you know, character IP. But they don’t own it. Some might be exclusive. Some might be non-exclusive, but in house proprietary IT IP, even as late as 2022, 50 percent of their revenue was still, you know, Molly, D Mu, and Skull Panda.

So it’s very much a hits driven business. And because of that, Pop Mart expanded from a retailer to a retailer plus sort of an IP business. So. a lot more like Disney as [00:08:00] opposed to just a retailer. Now, Disney works the other direction. They create the characters themselves, they create the IP, they put them in movies and entertainment and TVs, and then later on they will put them as merchandise in stores.

This is kind of going the other direction. Start with retail, move up into IP. Anyway, so that’s kind of the basics. It’s, it’s a pretty simple business to understand. Sort of the last point to think about when you see this company. is growth. Okay, so the margins are good. You see a lot of consumer behavior that’s very interesting.

Frequency of purchase. The other thing you see is growth. 2020 their revenue was about 2. 5 renminbi, so that’s 300 to 400 million dollars per year. That went up to 6. 3 billion by 2023. I’m sorry, 2022 was 2. 5, 2023 was 6. 3. So more than doubled. And if you go back five years [00:09:00] before that, it was only, you know, a couple hundred million renminbi.

So this thing has been a growth story forever, like at least 20 percent a year forever. And they got very big in China. They opened a lot of stores retail outlets. You can, you know, see these. But now if you go into places like Thailand or Southeast Asia, you will see Pop Mart stores in the shopping malls.

They’re opening in San Francisco. They’re opening in the West. So they were kind of a China, Northern Asian story, which was, we have some characters, we’re opening lots of stores, and then they also do these things called roboshops, which are really just vending machines, you know, fancy vending machines.

And now they’re expanding internationally. And that’s kind of the story so far. So, in my mind, they’re 50 percent a retailer, omni channel, apps, physical stores, roboshops, and then And then they’re 50 percent an IP company, a little bit like [00:10:00] Disney, where they mostly acquire them because it’s very hard to predict the hits.

And now they’ve started to sort of do deals with established ones like Hello Kitty, because they have their retail and consumer access. So, sort of 50 percent an omni channel retailer, 50 percent an IP developer. They’re starting to build a theme parks and things like that. So, they’re, they’re trying to become a lot more like Disney.

Okay, that’s the basics. Repeat purchases are interesting. Frequent purchases are interesting. The fact that the consumers are much more engaged than typical toy consumers. So, the engine of all of this is the consumer behavior. Now, there’s one other aspect of this I didn’t mention. Let me, let me, there’s a lot of stuff not to like about this.

Number one, these are 100 percent discretionary products. Nobody needs pop toys. So, this is an [00:11:00] entertainment sort of phenomenon. You’ve got to convince people to buy. That’s a lot harder than selling stuff people need. It’s a very much a hits driven business. The IP value depends on the characters. The IP, well, that’s hard to predict and they can decline quite quickly.

You know, things that were popular like Beanie Babies became very popular and then they disappeared. Okay, that can happen. So, there’s some stuff that’s uninteresting, challenging. Now there’s one big piece of this puzzle I haven’t mentioned. And depending on your analysis, you might think this is the whole story and everything I just said, doesn’t matter very much.

So, they didn’t pioneer, but they dramatically popularized blind boxes. I’ve actually talked about blind boxes a year or two ago on a podcast. This is an Asia thing. I don’t think we see this in the West very much, but blind boxes are [00:12:00] basically. You go up to a vending machine or you go up to a store and let’s say it’s the Molly character.

And the Molly character says we have a new series of designs for Molly. There’s let’s say 11 of them. 12 different new designs in a series of Molly. But they’re all covered. The boxes are blind. You can’t see what design you’re getting in each box. So, you have to sort of choose a box and then you open it and see which one you get.

And they also have them in vending machines where, you know, you can go up to certain vending machines that are all blind boxes for anything. You can get any type of toy for a hundred Rem and B, but it’s all boxes where you can’t see what you’re getting until you open it. Now, these are blind boxes that are specific to sets of characters.

And the way they usually do it is they will release 10, 12 blind boxes for a character, [00:13:00] let’s say Molly, in a series. 11 of them they will show you and then there will be one secret one. A hidden treasure, let’s call it. That’s number 12. So, if you want to get the first 11, you can probably buy 11 different boxes and you’ll get most of them because they’re equally distributed.

But you might have to buy 20 or 30 to get all 11. But to get the secret one, you know, they might have only one secret one. That’s like Willy Wonka’s ticket. There might be only one secret one for every 70 regular ones. So, you might have to buy a huge amount of them to get that one. Now, if you look at the revenue breakdown for Pop Mart in 2019, 84 percent of all their revenue was from blind boxes.

The average selling price for a blind box, 40, 50, 60 Rem and B. So, you know, eight, nine, 10 going up to 15, something [00:14:00] like that. And what they do is they release new series all the time. Now, so do you think this is a pop toy company or is this mostly a blind box company?

One of the reasons this comes up is because the government of China in particular has started to say, look, these blind boxes look a lot like gambling behavior. We see people buying a box, ripping it open, very excited. cause when it’s blind it’s a lot more exciting. There’s a much greater thrill to the purchase step.

There’s a lot of anticipation. Did I win? And when they don’t win, they turn immediately around and buy two more. So, you see gambling behavior that has got the Chinese government worried. I’ll give you a story which was famous. This is in 2022. 2022 KFC in China, which is Yum China did sort of a co-branding deal with Pop Mart and they began selling a family chicken [00:15:00] meal.

At the KFCs and when you bought the family meal. So family is, you know, that’s a lot of chicken. That’s for several people. When you bought the family meal, you got a blind box from Pop Mart and it had their character, Dimoo. And they had, basically you could get one of seven characters. So, six characters were quite frequent, but then the seventh character was a hidden secret character that was very rare.

And the reports are that. For every 72 regular characters, they made one secret one. I don’t know if that’s true. That’s what the press says. Okay, so people would, you know, they’d want to complete the whole set. I want to get all six. I want to get all seven. That’s collector behavior. They were fans of DMOO because they were a fan of this particular IP.

That’s fan behavior. But they also really wanted to get the secret one so they would buy a lot. That’s kind of gambling behavior. So, you see these three behaviors. [00:16:00] All sort of mixed together in this co-branding project. Now this got in the press because the family meal costs about 15. You get one blind box.

If you wanted to get all the characters, you pretty much had to buy about a hundred meals. To get all of them, that was statistically what, at least in media reports, that’s what it says. So, in order to get all of the characters, Chinese netizens being endlessly clever consumers. started things called help eating services online where you could partner up with other people so that you could buy more meals and get help eating all the food.

So, people would put in money, they’d get a discounted meal. So, they had like help drinking service, help eating service, so people could get their toys. And that’s kind of why it got the press. The Chinese government came out and said some stuff about blind boxes, which was concerning. So anyways, that’s kind of a simple summary of Pop Mart, [00:17:00] but it raises a question, when do you ever see such powerful consumer behavior?

Something is very strange going on here. And can we sort of crystallize that? And then can we start to say, can we do digital tool versions of these? And the answer is yes. In fact, we see a lot of these behaviors showing up, usually under the guise of gamification. But it’s much more interesting than that.

So, I think once you get the frameworks, then you can start to see how these are being put into digital companies like Bilibili like Ruhnn Holdings and like these others. And you can start to see the moving pieces of what’s going on. So that’s why I thought this was a good company to break down.

Alright, that said, let me, I’ll break down the, the three frameworks and for those of you who are subscribers, I’m sending you four articles basically breaking this down in great detail. I’ve already sent you two, there’s a third one tonight, there’ll be a fourth one, and then we’ll move on to Bilibili.

But I think the [00:18:00] frameworks are quite helpful. I’ve been thinking about this for a long time. It took me a while. I’ve been watching like gambling behavior and auctions, and I think I’ve got a decent framework for how to take this apart now. So anyways, you’ve got four articles on Pop Mart, consumer behavior, these three categories.

Okay. So, let’s start with fan behavior, and these overlap a bit, but fan behavior is easy to understand. It’s definitely a decent part of what’s going on at Pop Mart and pop toys in general as opposed to traditional toys. I generally segment this into three buckets. So casual fans, what we’ll call dedicated fans, or enthusiasts, and then super fans.

So, I put them into three buckets of types. So, if you look at a company like Pop Mart, I might say what percentage of this is casual fans? What percentage is dedicated fans? Are we, do we have super fans? And in certain categories, you’re going to see a lot more [00:19:00] superfans, like movies and entertainment and Pokémon have superfans as a significant percentage.

Okay, so you break it into groups and then I break it into what is the drivers of the fan behavior. What is the psychology that’s being levered in here? And I have a list. Okay, so let me go through fan behavior first, fan types, and then I’ll go into the framework. We don’t see a lot of this stuff in tradition.

Now, if we look at the first group, casual fans. Okay they’re casual fans. We’re all casual fans. We all have certain movies that we like, and when the new one comes out, we go see it. There are certain musicians that we listen to, and this is, you know, this is about enjoyment and fun, and You know, is it loyal?

Do we see repeat behavior? That’s kind of what we want to look at. That’s the difference between someone who maybe is a casual fan of a certain TV show. They will watch [00:20:00] all the episodes, but they’re not going to be the casual fan of a soccer ball, right? Dedicated fans and enthusiasts. This is where we’re going to look at a much more regular purchasing behavior.

For a specific character, for a specific genre of film. This is a dedicated fan of horror films. They, he sees all of them. And what we’re going to look at is two metrics. Frequency of purchase and sort of loyalty. People who are loyal to Pokémon have been loyal for decades. I pretty much see every Marvel film that came out up until they phase four when they kind of went down the tubes.

You know, you can see this over decades. Businesses really like this because you’re going to see more frequency, you’re going to see loyalty, and you’re generally going to start to see engagement. You don’t see a lot of engagement in casual fans. These are the people that might go to the convention.

They might join an online [00:21:00] club. They might get into a discussion group online. They might go to opening night. So, you’re going to get a lot more engagement and data from this group, even though most of your sales might be coming from casual fans. Your data and engagement is going to come from dedicated fans, your enthusiasts.

And then you can say, okay, extreme fans, Now, these are the people that would sleep on the sidewalk for two weeks before the Star Wars movies came out to be first in line at the theater in 1991. You know, this is the group that goes to the conventions every year. They fly in. They might wear a costume if it’s a Comic Con thing.

If it’s, you know, you can see this in non-cultural entertainment things. You can see this in like Harley Davidson motorcycles. They have dedicated fans. They all go to the meetups and ride together. So, you can see it in, you know, other forms. Okay. So those are sort of three groups. I find that’s a helpful approach.

[00:22:00] The other question I think about is how much of this fandom behavior is hits driven versus not hits driven. Harley Davidson, they don’t really need hit motorcycles to keep their, their consumers, you know, they, they have new motorcycles every year, but it’s not hits driven. The loyalty in the fandom is to.

The genre to the company and we can see that in other, you know, other things like sports, you know People are fans of the NBA and they’ve been fans for decades and it doesn’t matter if team a is up this year or team B sports tends to have a very sort of stable type of fandom Entertainment tends to be much more hits driven when we go into say movies music, and characters like Pop Toys.

So, okay, that’s kind of the first pass analysis. Now we move into, what is the, what is [00:23:00] driving this behavior? Can we look at specific psychology? And I basically have a checklist, and I’ll read it to you, but it’s also in the show notes. For casual fans, I look at three things. Fun, pleasure. This is number one.

People enjoy this stuff, it makes them happy, they like going to the movies, fine. Fun, pleasure. Number two, it can be a form of self-expression. It can be a form of individuality. That this is, you know, they buy certain types of art and hang it on their walls. That’s really sort of like self-expression and identity.

They ride their Harley Davidson motorcycle and they have the jacket with the big Harley Davidson patch on it. Certain types of books people put on their shelves. Now maybe that identity is just for themselves. I identify with these types of books. I identify with this person. I, you know, Charlie Munger is a hero.

But they can also be self-expression. They put [00:24:00] them where people can see it. So, you can see a lot of self-identity, I’m sorry, identification, individuality, and self-expression. That’s definitely a fandom thing. And then the third one is you can sort of see an emotional connection. This tends to be the deepest driver.

You feel a connection to the artist. You feel a connection to a famous person, Abraham Lincoln, a historical figure, someone who’s really impacted your thinking in life. People say Charlie Munger, Warren Buffett. You can feel an emotional connection to a person, to an event. This was an event that was a big deal when I was young.

I went to this concert when I was young. I’ve always remembered it. So, I have the t shirt on my wall or in my cupboard. I could be part of their history. My family is from Ireland. So, I go to the historical sites of Ireland and I, you know, I take photographs and I have historical documents because my family’s from there.

It could be nostalgia, [00:25:00] a family history, national history. So, there’s a lot that can create an emotional connection and by buying merchandise. You’re really sort of creating a connection. You’re owning part of it. You can touch it. You can put it on your wall. You can, you know, see it on your shelf. So, it’s, it’s about creating a closer connection to something where there’s nostalgia or memory or emotional, something you admire.

Is there an emotional connection to Pokémon cards? No, it’s fun. It’s maybe a little bit of self-expression, but there’s not a deep emotional connection. Is there a deep emotional connection to a character at Pop Mart? Dimoo? Molly? No, probably not. It’s, it’s a lot more about just fun. I like them. Why do you like them?

I don’t know. They’re cute. The characters are cute. I’ve been buying [00:26:00] them for a while. It’s a hobby for me. I like to buy them. It’s fun. Not an emotional connection. Probably not a big self-expression. It’s probably not a big part of my identity. As we move into dedicated fans. I’ll just go through these a little quicker because I don’t want to talk about all of them.

Dedicated fans, the big difference, the additional thing is often there’s a social connection. That you start to associate and connect with other people who have a similar interest. Let’s go to the convention. You know, for my favorite character. Let’s go to the Harley Davidson meetup and meet other people who like to ride Harleys.

And we are going to ride together. Trading cards. Baseball trading cards. People trade them. It’s an activity. The trading is a game. It’s social by nature. You can look at immersion in a world. Gaming is a lot of this. You know, when people, dedicated fans of gaming, like World of Warcraft, a lot of it’s about immersing yourself in that world and [00:27:00] almost disappearing an escape.

You know, they sit and they play that game all day long at the, you know, local video center and they kind of escape into it. You can appreciate the craftsmanship. This artist is amazing. Look at the technique they use. It can be a source of inspiration when I listen to this music or I read an article by Ben Franklin, I get inspired.

And then, you know, a deeper form of emotional connection can happen. You know, it can start to shape your beliefs. You could put a certain degree of religious behavior in here that people like my, you know, my family has Christians. I’m not but fairly serious Christians. My girlfriend is a very devout Christian.

There is a deep emotional aspect to going to church. She comes back, she looks forward to it all, all day before church. And when she comes back, she’s in a wonderful mood. [00:28:00] And I always ask, you know, how was church? Because I think it’s really interesting. And you know, she says, oh, I feel, I feel great. I’m like, you know, did you cry?

She’s like, yeah, I cried a couple times. No, it’s a deeply emotional experience. Now. I wouldn’t call that fan behavior. I think it’s more than that, but you could characterize that as a more powerful version of something. So anyways, that’s kind of a decent framework for thinking about fandom, and I’ll put that checklist in there.

So, when I run down Pop Mart, you know, what do I see? Do I see a deep emotional connection? No. When I look at the fandom behavior happening on Pop Mart with D. Moo and Molly and these characters, I see a lot of fun and pleasure. Casual fans. I see a little degree of self-expression and individuality. These are just the characters they decided to identify.

These are my three. Or I’m just a Molly fan. I like Molly. I get everything Molly does. Maybe there’s a little expression of the craftsmanship when you see the new designs. Ooh, this is a [00:29:00] really cool new design. I like that one. But I think it’s mostly just fun and a hobby and I think it’s a lot of casual fandom.

Maybe a little bit of dedicated fans who are buying all of them. I, I, I would rank these and I, I generally put a number on fandom. I basically run my list. What is the specific fan psychology that this product is tapping into? What are the drivers? And I’ve just given you a list. How powerful is it overall?

Fandom. On a 1 to 10 ranking, I put, I put Pop Toys at a 3, 4 or 5. I don’t think it’s overwhelming. And then how long will it last? Is this going to last 20 years? No, probably not. Beanie Babies didn’t last very long. Pokémon did, but that was a pretty rare exception. So, I don’t think this is like, it’s nothing that’s going to last 50 years like baseball or 100 years.

So, the duration is relatively short to medium term. The power of the fandom, 3 to 5 out of 10. [00:30:00] And the drivers are mostly pleasure, a little bit of identity. That’s kind of my working diagnosis for fandom in this scenario. And I think overall, the pop march story of the three drivers, the three types of consumer behavior I’ve identified, I think fandom is probably the weakest of the three.

That’s a decent framework for fandom, and the checklist is in the show notes. Okay, let’s move on to collector behavior. And This is a lot bigger of a topic. It’s more complicated. It’s, it’s a bit strange. Like, I don’t, I don’t really think I understand it. I understand fan behavior because I like certain things, but there does seem to be something in human psychology that we like to collect things.

There’s something about that that is satisfying or interesting or fun. Now the, the mild versions of this, we see them all the time. If you go on to Amazon [00:31:00] Prime and you own a movie, it will offer you, hey, would you like to complete your set? Right? You know, if you have one John Wick movie or two John Wick movies, they’ll say special price to complete your set.

Get all four, which I have. And there’s, so there’s a psychology of sort of what we call complete the set. Completeness. Is somehow satisfying beyond the fact that I like the movies and I do actually want them. There’s something I understand that’s satisfying about owning them all and completing the set.

No, the most You know, the most direct form of collector as a sales pitch is Pokémon. You know, the, the slogan of Pokémon is got to catch them all. It’s literally telling you to catch them all, collect the whole set. So, we can see mild versions of this. We can see companies leaning into this. We can see very extreme behaviors in this area.

You can, you can [00:32:00] see people’s houses. Where they have entire rooms just filled from the floor to the ceiling with baseball cards. Like, and it’s like, how long have you been collecting baseball cards or comic books or soccer balls or toy trucks or documents or photo and it’s like, oh, 30 years, 35 years.

It’s like, you see this very extreme behavior in terms of collecting stuff. And you know, people who do this, they’ll have a hundred boxes of comic books filling their garage and their attic. And it’s like, how long have you been collecting comic books? Since I was 10, you know, and they will describe this as their life’s work.

So, we see really stark examples of collector behavior. Now it’s true. They like the comic books. But this is something more than I’m just a fan of the comic book. This is a really interesting collector behavior. [00:33:00] And in the middle, we see something where I would call it just collecting for fun. That people start collecting stuff almost as just a hobby, as something to do.

And it’s, it’s kind of tempting. Oh, I’m going to start collecting baseballs. The, the Rush guitarist, Geddy Lee, the lead singer, Geddy Lee. He became a collector late in life where he was, you know, a rich guy and I think he was looking for something to do. And so, he started collecting baseballs, signed baseballs, and he collected hundreds and hundreds of them and filled rooms of his house with baseballs and, and made special cases for the most valuable.

And he just became a collector, I think almost as a hobby. And then I, I don’t know if he got bored with that. And then he started collecting bass guitars, because he plays guitars and he collected a whole bunch of those. And then he wrote a book about bass. So, it’s almost like collecting as a behavior is just a hobby and a source of fun.

Just the collecting behavior [00:34:00] itself. And then we also see something in collecting, which is, you know, investment and or speculation where people are just trying to get, make, make money. NFTs, you know, when they did the crypto apes, they released most of these NFTs as sort of a collection. There’s only 10, 000 crypto apes, NFTs, and they’re all unique and everyone wanted to buy one.

Now, Maybe, did they buy the whole set? Nope. It wasn’t complete the set. It was, it was clearly financial speculative behavior. They wanted to make money. So, there’s a value associated with these things that can be, now maybe it’s an investment. I have a signed letter by Abraham Lincoln. Now, that could be an investment you hold.

Or it could be, look, everybody’s buying Beanie Babies this year. Let’s buy some and we’ll sell them. You know, just a hot market. Let’s jump in and try and make some money. So, there’s a lot going on within collector behavior that’s [00:35:00] interesting. And you know, my sort of first conclusion is you can collect literally anything.

There are collections that make total sense to me. Like here’s JFK presidency. I can understand why that would be valuable and historical and collected. Let’s collect shot glasses. Let’s connect, let’s collect pens. Just any pens? Yeah. Let’s, I have a shot glass from every country in the world. And they’re all on the bar.

Why would you collect that? You know, I, we can collect coins and okay. You can collect almost anything and some of them are inherently valuable. You can see like they’re either value from, let’s say they have a significance in history or something, or they’re emotionally valuable. I love this soccer team.

I’ve followed him all my life. Or you can just see, look, I don’t know why you’re collecting shot glasses. Doesn’t seem to have any financial value. [00:36:00] Doesn’t seem to have any emotional value. You’re just collecting them as something to do. And you can collect almost anything. So there seems to be a human impulse, a psychological need to collect.

There seems to be a hobby aspect, there seems to be a financial aspect. You know, it’s weird. And you can start to ask, okay, what’s the difference between a room full of collectible items and a garage full of junk? And it’s like, oh, I’m not totally sure. Let’s go see what you have in your garage. But the truth is your garage full of stuff could be complete junk that’s worthless in every way, shape and form.

Or it could be valuable, right? What’s the difference between someone who’s a collector and someone who’s just a hoarder? If you fill your condo up with random stuff, are you a collector or are you just kind of a hoarder? So, there’s a wide spectrum in this category that’s kind of interesting. [00:37:00] Okay, let me give you my basic framework.

Those of you who are subscribers, I’m sending this out basically tonight. We can definitely break this into a couple categories. Hobbies and games. Look, you’re collecting stuff that has no inherent meaning. It has no inherent financial value. It has no inherent emotional value. It’s just a hobby or a game.

So, you’re collecting shot glasses, you’re collecting matchbooks, toy trucks, trading cards. A lot of trading cards are in this category. I mean, that’s, that’s kind of by definition of a trading card is we collect them and we trade them. It’s a game to collect and to trade. So, it’s kind of like, all right, hobbies and games memorabilia.

Now memorabilia as a category of collectibles is interesting. There’s a show on Netflix right now called The King of Collectibles, or the, the King of Collectors. And it’s basically about golden, [00:38:00] which is a, a business in where it is in Colorado. They basically run auctions online where they sell sports memorabilia, entertainment memorabilia, anything that’s a collectible that would be categorized as memorabilia.

And usually, memorabilia is an item that has an association with a person, a celebrity, or an association with an event, maybe a moment in time, a period of history, a famous game. And they have sentimental or emotional value. There’s value there beyond just it’s a game to collect stuff. They might have a collection to your memories, to moments of time, to people in history.

So, you know, a company like Golden, they would sell like a jersey that Babe Ruth wore. And for collectors of baseball memorabilia, that could be very valuable. And this gets into a lot of fandom like behavior. Suddenly you have a closer connection. Why does [00:39:00] a, you know, why does that person want the Babe Ruth jersey?

Because touching it and having it, it’s a type of physical connection that gets you closer to something that you, you have an emotional relationship with. Like, I love baseball. I love Babe Ruth. To hold his jersey is special to me. That physical touch is important or ownership or being able to show it and put it in your house as under an item or maybe selling it later.

So, once you get into memorabilia there’s a lot more going on. A lot of entertainment, a lot of sports, historical documents, famous moments in history, things like that. And then a third bucket we could call it vintage or antique. You know, stuff that’s 20 to 100 years old. Okay. Vintage, older than vintage, a hundred, 200 years old.

That might be furniture, French furniture from the 1850s, antique. Well, there’s more there than I’m just collecting things to [00:40:00] collect them. There’s, there’s something going on. I value that. Maybe, you know, Japanese coins from the 1850s or the 1600s. You know, people, there’s more there than it’s just a hobby to collect an item without any, it’s something about touching history that’s interesting.

So anyways, I put it into those three buckets. Hobbies and Games, Memorabilia, Vintage and Antique. And, you know, okay, so the first question is Pop Mart. Are they selling memorabilia? Not really. Not really. I think they’re mostly in the Hobbies and the Games category. I think it’s closer to connecting, you know, trading cards, Pokémon.

Logan Paul, the famous YouTuber dude, he bought like the world’s most valuable or at least expensive Pokémon card, I think it was a couple of million dollars, two or 3 million, this was on an episode of Golden on Netflix that Golden company, the king of [00:41:00] collectibles. And the, the auctioneer basically wanted to try and get him to sell that on the auction house.

And Logan Paul literally carries this card in a sealed case with golden embroidery as a necklace. It’s literally, he’s walking around with it as a necklace. The world’s most valuable. Pokémon card. Is that about a deep emotional connection? No, I think it’s a game and a hobby that has a tremendous financial aspect to it.

So, I’ve put Pokémon there and I would put Pop Mart. I’d put a lot of their stuff there as well. I would put it on the hobbies and games category. There’s no inherent emotional meaning going on here. Not a lot. There’s fandom, but not a huge amount. Anyways, that’s an example. Okay, let’s get to a checklist for, I’ll finish this up pretty quickly here.

My checklist for collector behavior on the behalf of [00:42:00] consumers. Basically, it’s four things. That completeness, got to catch them all, complete the set. I think that’s a, the whole set framing they say, I think that’s a type of psychology we see in a lot of stuff online. You know, complete your set, buy them all, things like that.

Don’t miss, you know the other one I think that’s popular, especially in digital stuff, is limited in scarcity. There is a perceived real, there’s a perceived or an actual value based on a limited amount available. You know, there’s only 10, 000 NFTs with crypto apes. Now that, that can create value, perceived or real.

It can also create a psychological value that we view that as exclusivity. Ooh, I’m one of the few people that has a crypto ape. It can mean prestige. It can be a fear of missing out. You better buy it now or you’re not going to get it. I think we see it limited in [00:43:00] scarcity and completeness framing all over the digital world in B2C apps.

I think it’s all over the place. I think we see that in Pop Mart. I think we see, hey, you know, complete the whole set. There’s only 12 of these. There’s 11 of them in this series. You want to get them all. But I also think we see limited and scarcity, which is, hey, within the, you know, within this 12 set, there’s one hidden one and only a couple of people are going to get it.

So, I think they’re tapping into one and two, complete the set and get the scarce and limited one, because there’s, it’s rare, it’s a type of exclusivity. So, I think they’re tapping into both of those. Number three, I think they can get an emotional connection, which we talked about. That’s a lot of memorabilia, sentimental, nostalgia, memories, things like that.

I don’t think that’s a lot of pockmark. And then number four, there’s a desire to make money. I think if I buy this, it’s going to be worth more later. And [00:44:00] that can be a very rational decision. Like, you know, here’s an Abraham Lincoln signed document. That’s a rational decision, or it can be more of, let’s just jump into the hot thing, crypto apes, and try and make some money.

And that tips you into gambling behavior, which is we’ll talk about in the next one. So anyways, those are my three to four, and I, I think basically, Pop Mart is mostly in the fir I think Pop Mart is a very clever version of 1 and 2. The completeness psychology and then limited or scarcity. I think they’re tapping into both of them with their series of blind boxes, you know, 12 being released, 7 being released.

All right let’s get to the last one and I’ll finish up here. So, the last one, which surprise, surprise, I think this is the big gun gambling behavior. Now, blind boxes where you’ve got the set plus the special item, you know, that’s 80 plus percent of their revenue. I think. I think the blind boxes are tapping into gambling behavior.[00:45:00]

Now, I think it amplifies the other two behaviors at the same time. I don’t think it’s totally separate. Why are blind boxes so powerful? You can break the consumer experience into a couple of steps. Pre buying, the buying experience, and post buying owning. Now, for most of Pop Mart, there is not much going on post buying.

This is not a toy you’re playing with. Pop Mart You’re not kicking the soccer ball around, you buy the toy, you put it on your shelf, it sits there. Now some of them have, you can play a little bit, I mean, they have movable joints and stuff, but most of the blind boxes, no, it’s all pre buy and at the moment of buying.

Now I think the gambling behavior does a couple very powerful things on those two steps. Number one it heightens the anticipation. I mean, there’s a lot of uncertainty. Now, which 1:00 AM I gonna get? Ooh, you know, I, I got this one. Am I gonna get it? The opening procedure, the, [00:46:00] you know, this is why you see on YouTube a lot of unboxing videos where people are un, you know, literally put the camera on themselves and they, unbox Shein did this very effectively.

When you order from Shein, you get a big box in the mail, and then people would do, influencers would do videos of the unboxing. There’s a lot of anticipation when you’re opening the box. Now, if you don’t know what you’re gonna get, it’s even higher. You know, there’s an increased uncertainty. Now, blind box, this is pretty common, like people do this with Pokémon cards all the time.

In this episode of the King of Collectibles, the Logan Paul episode, what he was doing was he was buying a set of Pokémon cards, a box of them that was un, that was sealed. From, like, 1995. And this box of cards, now within the box, there might be 20 packages of Pokémon cards. This is normally what you’d buy in the store, but this was [00:47:00] a sealed box.

I mean, I think 20 Pokémon packages, and there’s not that many of these sealed boxes in their original seal from 19, say 97. So, there’s a scarcity aspect to it. No, there’s only so many of these boxes out there. So, people would bid on these boxes in an auction. And you might pay 200, 000 for one sealed Pokémon box of cards.

Then, you know, in this episode, they did an unsealing, an unboxing, where he on camera ripped it open to see what they got. And I mean, I tell you, it was not, you could feel the psychology. You could feel the excitement because this guy had just spent 200 and whatever, 50, 000 for this one box. Did he get the valuable cards?

Did he get the cards he wanted? And as you’re watching him open, I mean, it is, the excitement is palpable. So [00:48:00] there’s, there’s a heightened anticipation. There’s, there’s thrill seeking, which is like gambling, right? You know, I pull the bar, you know, turn over the card. Did I win or did I lose my money? Did I win or did a lot of thrill, a lot of anticipation, a lot of uncertainty.

All of that makes the buying moment, the opening moment far more exciting. One, it’s more fun. Two, you get a big dopamine hit. I mean, this is apart from the fact it’s fun. It’s chemical. You get a big dopamine hit. You know, dopamine is the, the pleasure hormone. It’s the, you know, the reward hormone. You know, when, when you get that thing, it feels unbelievable if you get that rare card.

So, you got chemistry going on. You get more fun. You get increased uncertainty. But what’s more is you get much higher frequency of purchase. So not to ruin the episode for you, but him and his followers [00:49:00] bought a box. The auction head came out, they did the unboxing on camera. He didn’t get the card he want.

It was crushing for him. He was laying on the ground being, Oh my God, Oh my God, right? That’s like when you’re at the casino and you turn over the cards and you lost your money. It’s crushing. What did he immediately do? He bought another 250, 000 on the spot. Open another one. Right? So, that process gets you an immediate repeat purchase and we absolutely see this at Pop Mart.

People go in, they buy the buying box, they want to get the 1 of 7 or 12 that they didn’t get, they open it in the store immediately, they didn’t get it. What do they do? They buy another one. So, the moment of purchase is awesome, but you immediately get anticipation and almost a drive to buy another one.

So pre buying and buying these blind boxes, take it up to a 10 out of 10. [00:50:00] Now, not as much as, you know, losing hundreds of thousands of dollars at the casino, but yeah, that’s, what’s going on here. That is pretty powerful. The other, so you get more fun, you get the dopamine hits, it stimulates, repeat buying.

And you also get what they call Variable Rewards Conditioning, which is a huge concept to understand. Whenever people talk about gamification, what you’re looking at most of the time is Variable Rewards Conditioning. That, okay, if you win or you lose, it’s kind of a set reward or not. When you can get different types of rewards, variable rewards for your behavior, you One, you get the dopamine hits, but two, it’s a very powerful form of conditioning of people’s behavior.

You’ve really got to be on the guard against it in your life. Don’t let people get you engaged in variable rewards [00:51:00] conditioning because it will, you’ll basically create a behavior in yourself. It’s pretty powerful, actually. Slot machines are an unbelievable version of this, where you pull the thing and you get, you know, a different type of rewards.

Maybe you win big, maybe you win small, maybe you lose. And almost the most powerful one is what they call near hits, where you almost won. You got two lemons, but you didn’t get the third. That will stimulate a repeat purchase like you can’t believe. Near hints. Near wins. Super powerful. They asked Charlie Munger once, like if you could ban one thing in life, what would you ban?

And he said, I would ban gambling. And in particular, I would ban near misses because it is really powerful. Anyways, gambling behavior is a whole thing. I think, and now it doesn’t mean it’s illegal or anything bad. I’m just saying it’s a very [00:52:00] powerful part of human psychology, and it tends to be very powerful.

In a small group of people, certain people are far more susceptible to this than others. Just like certain people drink like, I forget, there’s some crazy number about like 10 percent of people drink like 40 percent of all the alcohol in the world. Certain people are more susceptible to certain things.

Now, I think there’s a nice spectrum of behavior, and I wouldn’t call it all gambling. I would call it rewards behavior, and a lot of it’s totally fine, right? But there’s a spectrum where at a certain point it becomes pretty evil. I don’t think blind box is bad. I think it’s a normal type of fun. I think going to, you know, play games at the local casino that aren’t money.

Then, you know, you’re shooting, you’re at the carnival and you’re shooting the gun trying to win. That’s all great. And I think Pop Mart is in that category. It’s just fun, but there’s an element of gambling [00:53:00] and or rewards behavior going on here. And I think that’s why blind boxes are such a big deal. I think that’s the impact it’s having is on the pre buy and the buying moment.

Not the post by ownership or usage. And a lot of gamification and a lot of B2C mobile apps are definitely leaning into this behavior. So, anyways, that’s sort of the third category to think about for today. So, anyways, fandom, fan behavior, collector behavior, and gambling slash, let’s call it rewards behavior, which is a milder, fine version of this.

Anyways, that is it for the content today. I know I went long. I’m trying to keep them shorter, but I think this is a useful framework. You can get my list from the show notes. I’ve just stuck it in. It’s just in my checklist. Whenever I run companies and I see something like this happening, I kind of flag it and I run my checklist, especially I’m, I’m doing this more and [00:54:00] more for B2C mobile apps that are, that are in the business of getting and keeping your attention.

Like Bilibili, like Tik Tok you know, they are in the attention business. So, you see a lot more of this type of behavior or these type of psychologies playing out. That’s why it’s on my short list. Anyways, next week I’ll talk about Bilibili. We’ll talk about Kuaishou. After that, we’ll talk about Ruin Holdings.

All of them are, you know, have sort of versions of this that I think are interesting. Anyways, that is it for the content for today. As for me, it’s been a pretty great week. I’m kind of in a manic mode, although not real maniac, where I’m just churning out content. I’ve gone through 4 to 5 companies in the last 4 to 5 days.

I’ve got literally 11 articles in my queue. That are mostly done and I’m not sending them out because I think there’s a point at which this becomes annoying even to subscribers Like if I send [00:55:00] seven articles in a week, I don’t think people read them. I think it’s like too much So I’m holding myself to three to four this week, but there’s literally like I’ve got 11 in the queue So for me, I think it’s all super interesting, but I accept that that’s not most people.

So yeah, it’s almost like a backlog Which is for me, it’s an awesome week, but yeah, I am, I am cognizant of the fact that yeah, it’s a bit too much. So anyways, there’s four to five companies coming in the next week, but I’ll, I’ll, I’ll space it out. So anyways, that’s been my week, which is great. Anyway, that is it for me for this week and I will talk to you next week.

Bye bye.

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I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

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Note: This content (articles, podcasts, website info) is not investment advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. Investing is risky. Do your own research.