Understanding Consumer Behaviors of Gen-eration Z under China's Blind Box Economy - Case company: POP MART - Theseus
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Understanding Consumer Behaviors of Gen- eration Z under China’s Blind Box Economy Case company: POP MART LAB University of Applied Sciences Bachelor of Business Administration Degree Program in International Business Spring 2022 Jiahui Gao Run Chen
Abstract
Author(s) Publication type Published
Jiahui Gao Thesis, UAS 2022
Run Chen Number of pages
39
Title of Publication
Understanding Consumer Behaviors of Generation Z under China’s Blind Box
Economy
Case company: POP MART
Degree and field of study
Bachelor of Business Administration in International Business
Abstract
Generation Z, born between the late 1990s and the early 2010s, is a young genera-
tion in China. With the development of society and technology, they are familiar with
the Internet and are willing to accept newborn things such as the blind box. The blind
box is the toy box that consumers do not know the specific product advanced with
random attributes. The thesis aims to provide the understanding of the blind box
economy of Chinese Generation Z to readers. The case company POP MART as the
leader of pop toy companies is also introduced in the thesis. The final goal is to find
out why the blind box is popular among Generation Z in China.
The primary sources were gathered by interviews. The authors made 10 questions to
interview Chinese Generation Z. The secondary sources were collected from pub-
lished books, e-books, and online sources. In this thesis, the deep understanding of
consumer behavior, characteristics that affect consumer behavior (social, personal,
psychological, and cultural factors), hunger marketing strategy, the purchase perfor-
mance was mentioned. To better explain the topic of the thesis, the introduction of
both Chinese Generation Z and the blind box economy in China is also included.
Based on the findings, the blind box meets the need of Generation Z, which are find-
ing new products and following the trends. For the future, the development of blind
boxes as a new industry is unlimited.
Keywords
Blind box economy, Generation Z, China, POP MART, consumer behavior, hunger
marketing, purchasing power
Contents
1 Introduction................................................................................................................... 1
1.1 Research background............................................................................................ 1
1.2 Thesis Objectives, Research Questions and Limitations....................................... 2
1.3 Theoretical Framework .......................................................................................... 3
1.4 Research Methodology and Data Collection ......................................................... 3
1.5 Thesis Structure ..................................................................................................... 5
2 Generation Z as Consumers ........................................................................................ 7
2.1 Generation Z and other age group ........................................................................ 7
2.2 Generation Z characteristics in China .................................................................... 8
2.3 Consumer behavior ............................................................................................. 10
2.4 What affect consumer behavior of Generation Z in China ................................... 11
3 Blind Box Economy .................................................................................................... 13
3.1 Trendy market ...................................................................................................... 13
3.2 Development of blind box .................................................................................... 15
3.2.1 Blind box in China ......................................................................................... 15
3.2.2 Forms of blind box ........................................................................................ 16
3.3 Purchasing performances .................................................................................... 17
3.4 Hunger marketing strategy .................................................................................. 19
3.4.1 Application in blind box marketing ................................................................ 20
3.5 Chinese Generation Z as the main purchasing power......................................... 20
3.5.1 Data illustration ............................................................................................. 20
3.5.2 Consumer preference and purchasing motivation ........................................ 21
4 Case company: POP MART....................................................................................... 23
4.1 Background information ....................................................................................... 23
4.2 Company history .................................................................................................. 23
4.3 Company business .............................................................................................. 23
4.3.1 Artists development ...................................................................................... 24
4.3.2 IP operation................................................................................................... 24
4.3.3 Consumer access ......................................................................................... 25
4.3.4 Pop toy culture promotion ............................................................................. 25
4.4 SWOT Analysis .................................................................................................... 25
4.5 Marketing strategy ............................................................................................... 26
5 Empirical research and data analysis......................................................................... 28
5.1 Data collection ..................................................................................................... 28
5.1.1 Target group ................................................................................................. 28
5.2 Data analysis ....................................................................................................... 28
5.2.1 Overview ....................................................................................................... 28
5.2.2 In-depth analysis ........................................................................................... 30
6 Conclusions ................................................................................................................ 32
6.1 Answers for Research Questions ........................................................................ 32
6.2 Validity and Reliability .......................................................................................... 33
6.3 Suggestion for Future Research .......................................................................... 33
7 Summary .................................................................................................................... 35
References ........................................................................................................................ 36
Appendices
Appendix 1. Interview questions
1 1 Introduction 1.1 Research background According to the economic reformation, the opening, and the optimized economic structure, China has experienced a period of rapid development in the past few years. Whether it is economic level, social situation, or people's lives have undergone earth-shaking changes, especially during the 1990s to the first decade of the 21st century. The consumption level of Chinese has increased. However, under the influence of China's family planning policy, a family can only have one child. The family size largely decreased, and they only need to take care of one child perfectly. At the same time, family economic conditions were relatively rich. (Yang 2021.) The appearance and application of computers, increasing the impact of information on so- ciety as a whole. Global digitalization is influencing and accelerating the development of human society. People are living in the information age. The Internet, mobile phones, and other technological products were born in this age. (Kravchenko et al 2019.) Especially in recent years, the development of the Internet has brought significant changes to people's lives, with the rise of online shopping, live streaming, social networks, etc. Generation Z, born between the late 1990s and the early 2010s, was influenced most by digitalization. The Gen Z group is familiar with modern technology, so they are interested in online shopping. Accounting for higher than 40% global trading volume, China is the largest e-commerce market around the world (Woetzel 2018). Compared with other customer groups, Generation Z has different consumption habits, consumption choices, and con- sumption patterns and form their unique consumption taste and consumption characteris- tics. Therefore, consumption for Gen Z is not only the satisfaction of their needs but also the pursuit of a way of life. Generation Z will impulse consumption and may exceed their budget. (Zhou J et al 2020.) Nowadays, like an enormous customer group, the consumption potential of Gen Z is unlimited. They have become the main force of the consumer market. At present, the blind box, which is randomly packaged toys in boxes, is popular in China especially for Generation Z (MobTech 2020). The blind box attracts consumers with its cute appearance and uncertainty of consumption. Meanwhile, POP MART attracts a huge amount of consumers and is the most famous pop toys corporation. There are different series and IPs (Intellectual Property) of blind boxes designed by artists. For instance, Molly and Pucky are attractive IPs of POP MART (POP MART 2020).
2 Figure 1. popular IPs of POP MART (POP MART 2021.) The image above shows popular IPs of POP MART. The research object of this thesis is the Generation Z group in China. This thesis will pri- marily study Chinese Generation Z when they purchase by analyzing their characteristics and customer behaviors. Then the blind box economy will be introduced. In addition, POP MART as the case company will be analyzed. The result of the thesis will demonstrate a conclusive analysis of Chinese Generation Z's consumption of the blind box. 1.2 Thesis Objectives, Research Questions and Limitations The objective of the thesis is to provide a deep review of Chinese Generation Z consumers in blind box economy and figure out the reasons behind. The scope of this thesis will be narrowed by using the Chinese Generation Z population as the main target group. The thesis will primarily focus on the following research questions that will be discussed throughout, and it is believed that these questions can better illustrate and understand how the blind box industry is developing among Chinese Generation Z. The main research question is defined as: Why is the blind box from POP MART so popular among Chinese Generation Z? Accordingly, to achieve the main research question, some sub-questions are developed as: What are the distinctive characteristics of blind boxes? Will people who buy blind boxes also buy regular open toys?
3 The limitations in research are usually defined as the restrictions and constraints in com- posing the study methodology, which may affect the application or interpretation of the re- search findings (Price & Mornan 2004, 66-67). It is not necessarily a drawback and it is normal to have some limitations in every study (Dudovikiy 2018). In this research, limitation arises first and foremost from the scope of the target group. The cultural differences between countries and regions can be considerable and lead to different awareness, perceptions, etc. As a result, the consumer behavior of Gen Z is not uniform across the world, which makes it difficult to explain in detail in a single thesis. Still, the blind box economy is not prevalent in every part of the world. Therefore, the authors will study primarily on the Chinese Gen Z Group. However, as China is a large country with many cities, ethnicities, cultures and the largest population, there might also exist significant dif- ferences. Some cities, for example, poverty areas have little knowledge of blind boxes or poor economic conditions. As a result of that, the research directions and conclusions in- tend to be a general overview of the Chinese Gen Z Group and it is not applicable for meas- uring each Chinese Gen Z. 1.3 Theoretical Framework This thesis aims to define the consumer behaviors of Chinese Generation Z in the blind box industry. To identify this, firstly, understanding Generation Z and their consumer behavior is necessary. The theoretical framework covers both chapter 2 and chapter 3. In chapter 2, Theory will be used to illustrate the factors affecting the consumer behavior of Chinese Generation Z from four different aspects. Also, the thesis explains the blind box to an in- depth level in chapter 3. Hunger marketing strategy is used to identify the behind strategies of blind box economy. 1.4 Research Methodology and Data Collection This subchapter will illustrate the research methodology and data collection methods, which are necessary steps to better define the thesis direction and obtain results. Stated by Trochim, the Professor at Cornell University, that the inductive and deductive approaches are two broad tools of reasoning, and they are often applied in academic re- search and scientific exploration. The process of deductive reasoning is often conducted from a more general view to the more specific, and it is also informally being called a "top- down" approach. (Trochim 2006.) Generally, deductive reasoning starts with an academic or scientific theory in the field of interest and then uses data to test the implications (Saylor
4 Academy 2012). The figure below shows the process of deductive reasoning. In this thesis, deductive reasoning is used as the research approach. Figure 2. Deductive Approach (Saylor Academy 2012.) On the contrary, inductive reasoning works reversely in the sequence. It is informally called a "bottom-up" approach, which means that observations and data will be detected first, and hypothesis and conclusion will be explored based on the findings, resulting in a scientific or sociological theory. It works from the more specific to the more general. (Trochim 2006.) The figure below illustrates how the inductive approach is normally conducted. Figure 3. Inductive Approach (Saylor Academy 2012.) Additionally, research methodology is the next essential step and it can be explained as the actual "how" of any study. In other words, to achieve the research objectives and desired outcomes, it is crucial to design a study systematically. In research, qualitative, quantitative and mixed-methods are frequently used methodologies. Qualitative research focuses on "words" or textual collection and analysis (Jassen & Warren 2020). Researchers study nat- urally and try to understand or explain phenomena from people's sense of them (Denzil & Lincoln 1994, 2). On the other hand, quantitative research looks deeply into the numerical data measuring and testing process. It could be used to test the relationship between two variables or make hypotheses. (Jassen & Warren 2020). The mixed methodology, namely,
5 is the combination of the two research methodologies, aiming to obtain the best of both (Jassen & Warren 2020). The qualitative research approach is chosen for this thesis as it looks into the investigation on Chinese Generation Z, and specifically on the blind box in- dustry. To understand data collection, the first thing would be to understand data. Data can be simply defined as a variety of information formatted in a particular way. Data collection is a systematic approach that gathers and measures information from a variety of sources and analyses based on accurate data, for the sake of answering research questions, evaluating the situation and outcomes and forecasting future trends, etc. (Simplilearn 2021). There is not just a single method of data collection, it is applicable in lots of ways. The commonly used data collection methods can be seen in the experiment, survey, interview, observation, etc, in which people are known as first-hand data collection, and also secondary data col- lection which can be found and used in previous research datasets. (Bhandari 2021.) In this thesis, both primary and secondary sources are applied, which makes the thesis more supportive with evidence in the form of data. The primary sources came from inter- views. The authors made a bunch of questions related to the research objectives. The focus interviewees are Chinese Generation Z. What's more, to get a fuller picture of previous data and make further analysis, secondary sources are also used. Sources are collected through research on official statistics and reports from authorized institutions. 1.5 Thesis Structure To better understand the thesis, this subchapter will cover the main structures of this thesis, as Figure 3 shows.
6 Figure 4. Thesis Structure The first part is the Introduction, which will demonstrate the background, objectives, re- search questions, methodology used and theoretical and data support, giving the audiences a clear understanding of key concepts. Secondly, for the theoretical part, this thesis will discuss first Chinese Generation Z as consumers in a more general view. The following part will focus on the blind box economy, including the history of development, blind box econ- omy development in China and consumer behaviors. Theory and statistical information are used to give strong support. In the fourth chapter, POP MART will be particularly analyzed as the case company, as it is currently the giant of China’s blind box industry. The fifth chapter will be doing the empirical research by collecting the results from the interviews and will analyze the data in detail. The conclusion is the sixth chapter, which will give an overall conclusive statement and suggestions for future developments. Lastly, the summary chap- ter will, of course, present the summarized key information throughout each part of the the- sis to give the readers a quick and comprehensive idea of what the thesis is about.
7 2 Generation Z as Consumers 2.1 Generation Z and other age group Grouping individuals by age makes it easier to see trends and common features. Especially for a business, it helps corporations to find target consumers quickly and to design particular advertisements for target consumers. (Angelo 2021.) According to the age groups, there are 5 generations defined from 1928 to 2012, which are Silent (born 1928-1945), Boomers (born 1946-1964), Generation X (born 1965-1980), Millennials (born 1981-1996), and Gen- eration Z (born 1997-2012) (Michael 2019). There are different characteristics between dif- ferent generations. Figure 5. The proportion of different generations of the total population in China (MobTech 2020.) The figure above shows the proportion of different generations of the total population in China. In China, Generation X is mainly composed of working people and they believe that work is the most glorious. The people are simple in character and love their country under the lead- ership of the Communist Party of China. In the days when technology was not advanced, it
8 was rare for people to communicate online, mainly by phone and letter. Millennials at pre- sent need a work-family balance. Compared with Generation X, Millennials are familiar with the Internet and mobile devices. The main population of Generation Z is mainly students. They grew up with smartphones under the widespread application of the Internet. They prefer to stay at home in their leisure time and a lifestyle that is free and flexible. (MobTech 2020.) 2.2 Generation Z characteristics in China Generation Z in China, born between the late 1990s and the early 2010s, grew up with different backgrounds compared with other generations. During this period, the Chinese economy, as well as technology, got huge development. Mobile devices and the Internet are in common in daily life. Therefore, people of Generation Z are familiar with using them. In addition, they prefer to use social media, including WeChat, Weibo, QQ, TikTok, BliBli, and other platforms, as a tool to make friends and shop online. The problem of food and clothing has been solved so that Generation Z has better material conditions. There are new and wonderful products or services produced. Also, due to excessive population growth, China has instituted family planning policies to reduce population growth. Therefore, most of the people in Generation Z are only children and the whole family's attention will be on them. At present, some of Generation Z have already started working in society but most of them are still students. (MobTech 2020.) Figure 6. Income of generation Z (chozan 2021.)
9 The figure above shows the major income of generation Z. As consumers, they do not have enough ability to make money on their own, but they have huge potential for consumption. At first, with the development of technology, Generation Z is familiar with how to use mobile devices. Therefore, social media becomes popular so that generation Z spends an average of 2 hours 43 minutes a day on it. When they consume goods, they prefer to purchase them online. (daxue consulting 2019.) Online shopping has convenience to people's lives, they can purchase what they want without leaving home. Compared to shopping in offline stores it costs less. Consumers want to compare and contrast products conveniently by price, comment, and function so that they can choose the most cost-effective one. (Boice 2021.) Secondly, as consumers, Generation Z is willing to pay for diversified interests. For instance, part of Generation Z in China is willing to pay for famous stars. According to MobTech, 65.6% of the population of Generation Z are students. Even though they do not have enough money to spend, they still would pay for products related to the star such as albums, mag- azines, clothes. In addition, they have been taught the concept of wellness by their parents at a very young age, and they do not only care about the taste of food but also have a high awareness and demand for healthy food. (Mobtech 2021.) Therefore, taking care of well- ness is a characteristic of Generation Z. Thirdly, Generation Z prefers to purchase products or services that exceed the ability to pay by installment payment and payment platform pay for it and expect to be repaid later.
10 Figure 7. Generation Z payment methods after over expenditure (MobTech 2021.) The above shows that 27.8% of the population of Generation Z prefers to use the Huabei or Baitiao platform to pay after over expenditure. Huabei was designed by the ant group in China. As a virtual credit card, it allows consumers to pay for products by this and repay later. (Pandaily 2021.) 2.3 Consumer behavior During the development of consumer behavior theory, there are traditional and modern con- sumer behavior theories. The traditional consumer behavior shows that the behavior is mechanistic. One of the principles explains that consumers will purchase more products or services as they increased income. Another principle illustrates that consumers will bulk buy when the supply decreases. Therefore, the traditional consumer behavior theory is based on economic regulations. When consumers purchase products or services, they need to make a decision. Consumer behavior is about how consumers make decisions during this process to meet their needs (Kotler & Armstrong 2017, 158). Compared with the traditional theory, the modern consumer behavior theory believes that people are un- predictable. (Bangladesh Open University 2021.)
11 2.4 What affect consumer behavior of Generation Z in China According to the figure, 4 characteristics affect consumer behavior including cultural, social, personal, and psychological (Kotler & Armstrong 2017, 159) Figure 8. Characteristics affecting consumer behavior (Kotler & Armstrong 2017, 159.) Cultural factors include culture, subculture, and social class. During growing up, people learn the basic sense of value, perspectives of things, actions usually from their families and other significant institutions. There are different cultures from different groups and so- cieties. For instance, Generation Z takes care of wellness due to their parents always doing this (MobTech 2021). Based on the common life situations and experiences there are groups of shared value systems and subcultures formed. For Generation Z in China, some of them are interested in traditional Chinese clothes. They prefer to wear traditional Chinese clothes to travel around cities in Chinese style and take pictures. Social classes are fairly perpetual and structured segments of society whose members share a similar sense of value, actions, and interests. It is determined by occupation, income, education, and wealth instead of a certain factor. (Kotler & Armstrong 2017, 162.) Social factors include group and social networks, family, roles, and status also influence consumer behavior. When generation Z decides the purchase, there are reference groups to affect them. The reference group helps them to contact new lifestyles and actions and
12 influence their perspectives. Also, online social networks help consumers to communicate and exchange information. In China, there are WeChat, Weibo, Red book, and Taobao widely used by Generation Z. Before purchasing products, they would like to search related comments on social media so that they can determine if it is a good product. For a family, every member influences each other’s consumption. People usually choose products suit- able for their roles and status. (Kotler & Armstrong 2017, 162-166.) Personal factors, which are age and life-cycle stage, occupation, economic situation, life- style, and personality and self-concept, also influence consumer behaviors. The goods and services consumers buy are influenced by their occupation. Over the whole life cycle, the taste of purchasing products will change. Different stages of the life cycle will have different target markets. As mentioned before, most of the population of Gen Z in China are students so they would like to purchase products new and fresh (MobTech 2021). Motivation guides consumers to find satisfaction. For Chinese generation Z, they used to achieve agreement of identity by common consumption preference. They are living a fast- paced life so they prefer to enjoy life at present.
13 3 Blind Box Economy 3.1 Trendy market Trendy market, also known as the fashionable market, is initially referring to the fashion brands of clothing and accessories, etc. The trendy market has been expanding along with the proliferation of fashionable brands and cultures. Just like what is popular changes every year, the trend market is also frequently updated and iterated. (Alimama 2020.) Alimama brought a detailed look at the trendy market. The below figure shows the annual perfor- mances in 2019 compared to 2018. The GMV (Gross Domestic Volume) volume had a shocking increase of 224%. In addition, the consumer performance also has greatly en- hanced to a different extent, showing a rising purchasing power.
14 Figure 9. Trendy market analysis (Alimama 2020.) As a booming industry, the blind box is part of the trendy market. Many people see blind boxes as a symbol of fashion attributes, and brands are appearing in the blind box market at a fast speed. This comes with a diversity of designs. Many blind boxes are designed to fit the hipster aesthetic. As a result, people are willing to pay for these designer toys. Some even pay higher prices for it.
15 3.2 Development of blind box Blind boxes have been introduced and popularized in the market only in recent years. The blind box concept first originated in Japan in the 1980s with the "Fukubukuro", which means "lucky bag" or "fortune bag" in Japanese (Yu 2019). It is a marketing strategy made by businesses that goods are wrapped randomly in one bag with a lower price than usual. The lucky bag can be a great way to clean up a store's stagnant products because often mer- chants will put unsold products together with hot products in the bag (Yu 2019). This also catches people's interest to buy unknown products and is therefore widely used in the mar- ket. It often appears when there is a festival or promotion. The "lucky bag" is the form of the early blind box. As time goes by, Gashapon has emerged as a new form of blind boxes. Also, from Japan, Gashapon is a coin-operated vending machine toy dispenser. The toys in the vending ma- chine are generally wrapped in plastic shells, and people cannot see the contents inside. It was very popular in Japan and grew rapidly as a result. So far, it has not only appeared in the form of vending machines, but also in online games where people can play Gashapon online. (Lin 2021.) In Forrest Gump, "Life is like a box of chocolates. You never know what you are going to get", and the same applies to the blind box (Yu 2019). A blind box is first known for describ- ing a type of toy. In most cases, there is a given set of toy collections, and toys are wrapped in sealed boxes so that people can pick from the unknown. The general logic and distribu- tion of the current blind box and Gashapon are actually similar (Lin 2021). However, the blind box does not need to be sold like the Gashapon which uses the vending machine; it can be purchased in online stores as well as in brick-and-mortar stores. 3.2.1 Blind box in China As mentioned earlier, the blind box culture originated in Japan and has become prevalent in China and other countries. In China, the history of blind box development can be divided into three stages. In the 1990s, the prototype of the blind box may have appeared as a cartoon card in a snack bag. Many snack foods would design a series of cartoon characters or stories and make these into cards and place them in the snack. It caused a "card collect- ing" wave at that time. This can be seen as an early practice of blind box economy, though the cartoon card is a form of accessory that appears in various merchandising. Since then, during the period 2006-2015, the development has entered a period of accumulation, with the establishment of many blind box brands, such as POP MART, 1983 and IP Station.
16 From 2016 to today, blind box development is experiencing an outbreak and China has developed an increasingly matured culture of designer toys. (MobTech 2020.) In recent years, more and more people are getting in touch with blind boxes. In China, the main target market for blind boxes is the toy category. In each toy collection, there will be a hidden style with an extremely low probability of being drawn. Mostly, people get an ordinary style. A blind box normally sells for 60 CNY on average. Although this price is acceptable, it is precisely the point that blind box marketing seizes on. One blind box is not that expen- sive, yet once people are interested in a particular collection or brand of blind boxes, many cannot stop. In this way, lots of people will greatly increase their spending on blind boxes. At the root of this, blind boxes have captured the curiosity of consumers, thus creating a huge market. People may not be buying blind boxes for the toys inside but are paying for their interest and curiosity. 3.2.2 Forms of blind box The competition in the market is strong. Businesses are all trying to think outside the box to successfully stand out. Blind box marketing is being vigorously pursued by the market, not only toys, but other industries are also inspired by the form of the blind box. Under the COVID-19 pandemic, the tourism industry has suffered great obstacles. The ris- ing trend of travel blind boxes has brought a turnaround. Travel blind box means buying a flight ticket for an unknown destination that is randomly assigned. It is sold at a very low price, 98 CNY (around 12€) per flight. The emergence of the Travel Blind Box has greatly attracted people's interests and benefited airline companies. This marketing campaign was released and gained attention very much on the Internet. Data shows that on April 3, 2021, this blind box campaign attracted more than 10 million users on Tiktok. (daxueconsulting 2021.) A new form of the blind box has recently emerged. Xiaomi, one of the leading Chinese mobile and digital brands, recently launched an "unknown suitcase". The concept of a blind box is used here. Customers can find other unknown things in the box, such as a mobile phone. One of the purposes of using the blind box idea is to better promote their new suit- case. (Chen 2020.) Lots of industries are seeking opportunities in blind box marketing. However, it was recently proved that it is not suitable for all businesses. An example would be a pet blind box, mean- ing that ordering unknown sorts of pets. However, it was later discovered that the business was guilty of pet abuse and virus transmission, which seriously endangered the health of
17 the pets and even caused death. The result was a very undesirable outcome. (BBC 2021.) Therefore, blind boxes should not blindly be applied to all companies, and all marketing and sales behaviors should be carried out according to their circumstances. 3.3 Purchasing performances Here the thesis introduces previous purchasing performances in China, including data illus- tration and consumer profile analysis. The sources of data are secondary, which is mostly from online official institutes such as MobTech Institute, a leading global data intelligence technology platform. It has released a 2020 Blind Box Economy Insights Report. The report would greatly help the thesis develop. According to the Development Status and Market Research Analysis Report of 2020 China blind box Industry done by iiMedia (a Chinese data analysis platform), 77% of Chinese netizens are more or less familiar with blind boxes (iiMedia 2021). This means that on av- erage, 7-8 out of every 10 people on the Internet in China have some knowledge of blind boxes. In addition, of those Chinese netizens who are familiar with the blind box, the per- centage of buyers reached 75% (iiMedia 2021). Figure 10. Chinese netizens' awareness status of the blind box in 2020 (iiMedia 2021.) On Weibo, one of the largest social media platforms in China, there were 270 million reads and nearly 290,000 discussions regarding blind boxes (Chi 2021). This is a shocking statis- tic that indicates blind box is being increasingly frequently discussed by the public and it is no longer a very unfamiliar concept. From MobTech, the blind box consumer big data shows
18 that the majority of blind box consumers are young women from big cities, with females accounting for 62.6%. In terms of age group, 18-24 years old people are the most frequent buyers of blind boxes, accounting for 37.6%. (MobTech 2020.) These young people belong exactly to the Generation Z group. Figure 11. Age distribution of blind box consumers (MobTech 2020.) As to the geographical distribution, Shanghai, Beijing and Tianjin are the cities with the highest TGI (Target Group Index) for blind box consumers. The below figure also found that offline (including brick-and-mortar stores and vending machines) becomes the main chan- nel of blind box sales. This is especially seen in the age group of 35 years and above, up to 92.7%. The reason is that, firstly, consumers can have fun unpacking the boxes in the first instance. Secondly, they are inadvertently attracted by the blind boxes when shopping, and thus impulsively make purchases. (MobTech 2020.) From another perspective, it can be seen that young people are more proficient in using online tools (such as applications and online shopping), while more aged people prefer to shop in brick-and-mortar stores.
19 Figure 12. Comparison of purchase channels for blind box consumers of different ages (MobTech 2020.) According to the 2020 Cross-border Export Market Consumption Trend Report released by CBN Data, the year-on-year growth rate of overseas blind box online consumption in 2020 reached over 400% (CBNData 2020). This reflects a significant growth and shows that the blind box is developing worldwide. These staggering statistics are proof of the rapid growth of the blind box economy in China. The biggest attraction of blind boxes can be simply understood as an uncertain consumption that could also contain unknown surprises. 3.4 Hunger marketing strategy Hunger marketing is a marketing tool that has frequently been used in recent years, and it is applied to many industries and businesses. Essentially, it is based on the utility theory (also named Theory of Consumer Behavior) which is used in Economics to explain the behavior of individuals. Hunger marketing refers to an intentional reduction of production by commodity suppliers to control supply and demand, making it look like an “oversupply” phe- nomenon (Wu & Lai 2019). It is also a psychological concept that consumers will get satis- faction from the purchasing actions because their interests are largely increased when goods are limited. This is because, normally, consumers will experience a psychological
20 decision-making process, which may take uncertain periods. Hunger marketing seizes pre- cisely this to "counterattack", with this illusion of short supply. Usually, consumer willingness is largely increased, resulting in product price inflation. (Lo 2021.) In modern society with advanced social networks, hunger marketing strategy is ubiquitous. For example, sneakers limited release and popular brand IP limited-edition are all forms of hunger marketing. This approach is often effective for business profitability, as sometimes the price goes up exponentially, or even becomes a collector's item. 3.4.1 Application in blind box marketing The blind box economy is actually making great use of hunger marketing. Since some of the collections are very popular as well as the probability of getting the hidden collection is extremely low, many people do not hesitate to pay exponential prices for them. In addition, some brands like POP MART often release limited-edition dolls that are sold in quantities much smaller than the demand. Therefore, people even need to set an alarm clock to grab it. This has also led to the development of a secondary market. A perfect example of hunger marketing is seen in Idle Fish, a trading platform belonging to Alibaba. It has also become a gathering place for blind box trading. In 2019, approximately 300,000 blind box players successfully traded on Idle Fish throughout the year. What's more, the monthly release volume of blind box posts increased by 320%. Among them, one of the most sought-after blind boxes from POP MART grew 39 times in price, with an original price of 59 CNY selling for 2,350 CNY. (Alibaba 2019.) 3.5 Chinese Generation Z as the main purchasing power The Chinese Generation Z group is the main driving force of blind box buyers. This chapter will include some data illustrations, buying behaviors and motivations of Generation Z con- sumers. 3.5.1 Data illustration According to Tmall's official statistics in 2019, the Tmall “11.11” Promotion day turnover increased by 368% compared to the same period last year. The majority of buyers are post- 95s (referring to people born after 1995). Also, from the Tmall 2019 post-95s shopaholic list, blind boxes ranked No.1 among the "five most expensive hobbies among post-95s". Statis- tics show that nearly 200,000 consumers spend 20,000 CNY a year for blind boxes, and the strongest consumers spend up to a million a year. (Tmall 2019.) Some consumers are
21 immersed in the world of blind boxes. As mentioned earlier, the blind box brings a very strong psychological attraction to people and captures it tightly. This is exactly what appeals to China's Generation Z who allows for self-expression and a sense of enjoyment with a strong tendency to pay for hobbies that drive emotional satisfaction (Chi 2021). 3.5.2 Consumer preference and purchasing motivation MobTech Institute has researched Generation Z's blind box favorite brand in the year 2021. POP MART occupies the first place with absolute dominance, accounting for 86.5%. In other words, POP MART has almost monopolized the majority of consumers in the market. For this reason, this thesis will later focus on analyzing POP MART as the case company. Figure 13. Generation Z’s favorite blind box brands (MobTech 2021.)
22 Figure 14. The purchase motivation of Generation Z blind boxes consumers (MobTech In- stitute 2021.) Also, the figure below shows several motivations of Generation Z when buying blind boxes. The major motive is to seek surprises when unboxing. They wish for the styles they want with strong expectations, and their moods fluctuate.
23 4 Case company: POP MART This chapter introduces the case company POP MART. It helps to better understand the development history and marketing situation of the top company of Chinese pop toys. 4.1 Background information POP MART, which was established in 2010 by Ning Wang, is a leading trendy cultural en- tertainment company in China. The vision of POP MART is to build a world-leading trendy cultural entertainment company. At present, POP MART has built a comprehensive opera- tion platform covering the whole industry chain of pop toys with the mission of the brand to light up passion and bring joy. The brand centered on five fields: global designer finding, IP operation, consumer access, promotion of pop toy culture, and investment and integration of related industries. POP MART has exceeded 250 offline stores and 1,687 robot shops until September 30, 2021. They have covered 103 cities around China and 23 overseas countries and regions, including South Korea, the United States, Japan, the United Kingdom, Canada, and Singapore. The global location of stores is gradually developing and expand- ing. At the same time, the brand independently developed the domestic most professional trendy toys social platform named PAQU, so that the trendy enthusiasts have their trendy gathering place. (POPMART 2021.) 4.2 Company history In November 2010, POP MART was officially established. The first store was opened in Occidental Gateway Shopping Centre in Beijing. In January 2015, the brand launched a new lifestyle concept store in Wangfujing APM shopping center in Beijing. In April 2016, POP MART contracted designer Kenny Wang. In July of the same year, he designed the first molly constellation series blind box launched. In December 2017, the Beijing Toy show was held by POP MART. After half a year, another Toy show was held in Shanghai, which is the largest trendy toy show around Asia. In November 2019, POP MART won first place in the Tmall toy category with sales of 82.52 million on the day of "Double Eleven". On December 11, 2020, POP MART was listed on the Hong Kong Stock Exchange. (POP- MART 2021.) 4.3 Company business With the development of the business landscape, POP MART has built a complete industry chain covering artists, factory supply chain, retail channels, and international pop toy shows
24 one by one. It allows designers to focus more on their artwork and promotes the develop- ment of the pop toy industry. Figure 15. POP MART major business focus (POP MART 2020) The figure above, according to the annual report of the POP MART, shows four major busi- ness focuses of this brand. 4.3.1 Artists development To accumulate and discover global artists with business prospects by inviting artists to par- ticipate in trendy toy exhibitions, organizing design competitions, and offering lectures and courses in collaboration with top art schools. The company maintains close relationships with over 350 artists and works with 25 of them through licensing or collaborative arrange- ments. There are signed-up famous hipster designers such as Kenny, Pucky, and Kasing Lung, and have launched many fan-favorite products. (POP MART 2021) 4.3.2 IP operation POP MART creates original and trendy toy products based on IP (Intelligence Property) to enhance IP awareness and commercial value. It explores multiple opportunities to realize IP and further promote IP products. To meet the needs of different consumer groups, the products of IP type and output style are constantly enriched. Both IP operation and products design are the core elements to drive the development of POP MART. There are some IPs widely loved by fans such as Molly, Pucky, and Dimoo. POP MART also cooperates with other brands to attract more consumers. In 2020, the brand launched a Harry Potter and Naruto co-branded collaboration. (POP MART 2020)
25 4.3.3 Consumer access To access consumers and deliver products or services to customers, the company relies on sales channels. The POP MART divides the sales channels into offline and online chan- nels. Therefore, consumers can purchase products of this brand via consumption websites and retail stores. By the end of 2020, there were 187 retail stores and 1351 robot shops in mainland China. The proportion of revenue for both of them is 53%. The South Korean store located in Gangnam-gu, Seoul opened on September 5, 2020, is the first overseas store of the POP MART. It’s a successful brand outing, making the brand more familiar to fans. The brand also cooperates with malls to set up short-term topic flash stores to enhance brand visibility. Consumers can purchase products of POP MART online via Tmall and JD. On WeChat, the brand designed a mini program-POP DRAW. It helps the consumer to have a fun and interesting experience. In addition, (POP MART 2020) In addition, POP MART designs a membership program and offers a wide range of mem- bership benefits. Until the end of 2020, the total number of registered members is 7.4 million people. This program helps the brand to build a close connection with consumers. 4.3.4 Pop toy culture promotion To promote pop toy culture, POP MART held pop toy shows in Beijing and Shanghai. POP MART also gets increased influence on pop toys by holding industry forums. In the PAQU app designed by POP MART, fans who are interested in pop toys can communicate via this app. Fans can share and get the newest information, sell and purchase pop toys, and meet new friends. To better promote the pop toy culture to fans, the brand published "PLAY- GROUND", which is an internal magazine, for privileged members in November 2020. (POP MART 2020) 4.4 SWOT Analysis The SWOT Analysis is used to assess the competitive position of the company and to de- sign and develop strategic plans. It covers the strengths, weaknesses, opportunities, and treats. What is assessed on the SWOT analysis are internal and external factors as well as current and future potential. Differences compared with competitors and experts can be used to explain strengths. What makes a company perform best unsuccessfully are weak- nesses. The external factors can bring competitive advantages for the company referred to as opportunities. Elements that bring bad influence on the company are threats. (Kenton 2021.)
26
Figure 16. The SWOT Analysis of POP MART
The figure above shows the SWOT Analysis of POP MART. For strengths, POP MART has
cooperated with famous designers and owns attractive IPs such as Molly. The amount of
retail stores is huge. As mentioned in the 2020 annual report of POP MART, they do not
have bank borrowings. Compared with other brands, prices of pop toys are higher so that
is the weakness. POP MART has cooperated with world-famous brands. It helps the brand
to attract more consumers. However, due to the false advertisement of the series of SKULL-
PAND stockings, POP MART was fined 200,000 CNY in December 2021. Consumers can
purchase similar products from other pop toy companies at lower prices.
4.5 Marketing strategy
POP MART can be "jump out of the circle" is closely related to its marketing strategy. The
market is relatively saturated with various brands and products, yet POP MART is the lesser
one in China that can be so well known to the public. Four marketing strategies have been
analyzed.
• Precise consumer & price positioning
It has a clear consumer positioning, i.e. the young generation with female-oriented. Their
products are therefore designed in a more feminine style. The price positioning is also in
line with the majority of groups, which is mostly in an affordable price range of 59, 69, 79,
etc.27 • Multiple IP production POP MART has a large number of IP lines designed simultaneously, which have produced many classic IPs over time. By doing this, consumer stickiness increases because many will be fond of particular IPs. Meanwhile, it is constantly launching new IPs and intends to get more loyal consumers. • Multi-channel access As mentioned earlier, POP MART has its official Mini program POP DRAW as well as official stores in e-commerce platforms such as Tmall and JD. In offline, it has opened stores all over China, both Roboshops and brick-and-mortar stores can be found everywhere. • Social media access So far, POP MART has created its official account on Weibo, Bilibili, Tiktok and other com- monly used Chinese social media platforms to build a long-term interactive relationship with its consumers and potential users. It is effective as many people do not actively search for unnecessary information, but if the brand often shows up on social media, it helps to pro- mote more frequent interactions.
28 5 Empirical research and data analysis This chapter organizes and analyses the results obtained from the interviews. To better understand and validate the above theories and statistical reports, the authors conducted interviews with 10 young people belonging to Generation Z in China. The interview ques- tions are attached in the appendix, which is a total of 10 questions. The content has been translated from Chinese to English. 5.1 Data collection Since the subject matter revolves around Generation Z's views on the blind box economy, each person's perceptions can be very different. Therefore, the authors decided to go with the qualitative approach, which could illustrate from data. The interviews were conducted in December 2021, and the authors conducted random in- terviews on the street and online. Since the questions are all blind box related, it also took some time to select the interviewees. This is because there was a risk of meeting people who had little knowledge of the blind box, in which case they would not be able to answer the questions. In designing the questions, the authors also focused on their preferences for the blind box. In this way, the thesis research questions can be answered through this in- terview. 5.1.1 Target group The target group is the Chinese Generation Z, the young generation who are energetic and have a strong sense of trends. Moreover, the above figures also reflect that the current young crowd is very obsessed with the blind box and they highly value it. Currently, Gener- ation Zs are still students or have initially started working. Most of them have insufficient funding and are financed by their families. However, it was also shown that lots of young people are willing to pay hundreds of thousands of money for blind box toys. For this reason, this interview intends to find out the real attitudes and perceptions of these Generation Zs regarding blind boxes. 5.2 Data analysis 5.2.1 Overview
29 Overall, of the ten interviewees who had been in touch with the blind box, four said they would pay huge attention and spend 5000-10000 CNY on it for each year. Another four said they would pay attention occasionally but would not go crazy on it. Their annual average spending on blind boxes is 500-2000 CNY. Most of them kept the expenses around 1000 CNY. The remaining two showed relatively less interest in blind boxes. They seldom fo- cused on the blind box and felt like they were more rational in controlling the spending on the blind box, around 200-500 CNY. As to the question “How often do you buy blind boxes”, responses are generally matched to their level of interest in blind boxes. For those avid fans, the frequency was extremely high, with around 3 times in a week. The middle group answered on average 2-3 times in a month. The two remaining people said that they may only buy blind boxes every few months or even half a year. The interview also asked about their favorite blind box brands. Unsurprisingly, everyone mentioned POP MART. They believe that POP MART has a large number of collections to choose from and continuously comes out with new products. In addition to having their classic IP characters, they also launch co-branded collections, such as Disney and Marvel series. Some who often purchase blind boxes replied that they also follow other brands, such as 52TOYS, Rolife and other lesser-known brands. When asked about the channels that they typically buy blind boxes, almost all of them men- tioned both online and offline. They felt that they were more willing and familiar with using online Mini programs or online stores. In addition, online stores are faster when it comes to purchasing, as sometimes the stores are crowded and require queuing, and occasionally there are out-of-stock situations. In terms of price, online stores are also more advanta- geous because coupons or promotions are often available, which is relatively rare in brick- and-mortar stores. However, due to the uniqueness of the blind box, many people prefer the sense of excitement of unpacking the box. Therefore, brick-and-mortar stores are con- venient as well, because consumers can open them right after purchasing. There is no need to wait for the online shipping period. The authors were also interested in how they got to know about the blind box. The re- sponses received were diverse, and it could be sorted into a few aspects: the form of the blind box is innovative, which they had never seen before; recommended or attracted on social media posts, usually from influencers and celebrities; recommended by friends; walked into a store while shopping and bought because of curiosity; felt like it was popular and wondered what it was.
30 In addition, the access of blind box information was asked during the interview. To sum up, 6 out of 10 people answered: "on social media". This includes official channels such as the brand's official accounts on different social networks. This includes official channels such as the brand's official accounts on social media. Lots of fans follow to be the first to get the latest information and events. Another channel is through social media platforms, such as Weibo, TikTok and Xiaohongshu. This enables people to interact and chat with others online by sharing posts or videos. For those people concerned relatively less about blind boxes answered that they do not intentionally search online. Generally speaking, the way of getting information is usually when going shopping, they may go around the stores. It gets clearer that Generation Zs are more comfortable using the Internet. 5.2.2 In-depth analysis The authors had chosen several concerning questions to make a deep analysis. For the reason of buying the blind box, the interview received different answers. First of all, the appearance of the blind box toys was mentioned by most people, who thought these toys are pretty and cute. In addition, many see it as a form of fun and entertainment. The sense of expectation takes a significant role in this process, and they were hoping to get unknown surprises. For those who spent more on blind boxes, they view blind boxes as having certain collector values. In most cases, they prefer to buy the whole set rather than just one or a few in a series. The results obtained from the interviews are generally similar to theoretical research. Another question asked about their views toward blind boxes and open toys. The initial purpose was to examine whether people are buying for the toy itself or for the form of the blind box. Consequently, 8 of 10 interviewees answered with "for the blind box." Some an- swered that they would not buy blind boxes if they were sold as open toys. There are two reasons for this. Firstly, the price of a blind box is higher than that of a normal toy, and it is not worth spending the same price for an open small toy. On the other hand, if the toy is taken out of the box, it is not attractive enough. The toy market is in great saturation with various styles available, and the toys in the blind box may not be able to stand out. Of these, one interviewee replied distinctively. She is interested in ACGN (Animation, Comic, Game and Novel). She started to buy GK (Garage Kit) and BJD (Ball-Jointed Doll) for a long time. For the blind box, at first, she bought the toy for itself, but later got obsessed with the form of the blind box. Even though it might not be her favorite series, she still bought it for the pleasure of unboxing it.
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