CNBC's Elaine Yu takes a look at Popmart's new sales strategy as the frenzy for Labubu dolls begins to fade in the secondary market.

Shanghai

Popmart's Labubu toys, which saw a surge in resale prices earlier in the year, are now experiencing a significant drop in value as the market cools, particularly in mainland China. The company attributes this decline to a deliberate increase in production to counter scalpers and make the toys more accessible, with monthly output now ten times higher than the previous year. 

Analysts note that while the increased supply has contributed to falling prices, demand is also waning, especially for older editions. Popmart is shifting its strategy to focus on dedicated fans and broader brand experiences, such as theme parks and animated series, rather than relying on hype and scarcity. The company aims to build lasting customer relationships and avoid being a one-hit wonder.

Labubu mania hits a wall, Popmart rethinks strategy

So the labooboo mania as you said reached fever pitch this summer. Back in June the resale prices for for one of the so-called hidden addition for a labooboo was selling for more than 2000 percent above retail prices. That's according to Nomura. But resale prices are falling now by half or even more. It was an overheated market. And analysts say that these falling prices are because a demand is cooling especially in mainland China and for older additions of the labooboos. And there are now signs that scalpers are worried that they can't sell and they're trying to release that inventory now. So there's a lot of tension on pot marks falling shares recently and whether the labooboo frenzy is now fading. But here's the twist. A pot mark told CNBC that a key reason for these falling resale prices is because the company increased production to meet demand especially after complaints about the scalpers and that they're now churning out 30 million plus toys each month. That's 10 times more than last year's production levels. And they said the increased supply is good for the company in the long run. They told us that our products are made for people who really connect with the art and joy they bring. And making this art accessible is key for us. And they also said we don't want our products to be hyped out or resold for profit. This model will eventually crash. But of course analysts say it's not just increased supply but also a demand seeming to cool. Now that's affecting the secondary market. Marty. So it's a it sounds as though you know pop art. Take a look at the secondary market. The scalpers said look we don't like the fact that our products are selling for 2000 percent more. So we'll fight back. One of the ways we'll do that is by wrapping up supply to push down those prices. Yes. Yes. And they've said they're doing that to meet demanding. They still haven't been able to do meet the kind of capacity levels that they want to because of production limits there. The company says. But many will agree with pop art that the hype the crazy premiums just aren't sustainable. And the company has a point in that it doesn't profit directly from the secondary sales. And it makes more sense for more people to buy direct. But they also benefit it handsomely from the hype and the buzz that was generated in the secondary market and the perceived scarcity there. And they previously have let these resale prices run. And an analyst told me that the boo boo second hand market significantly boosted its popularity. But it's not very healthy in the long term because it alienates your real customers. Your long term customers and pop art doesn't want to be a one hit wonder. But let's take a listen at what some of these customers the real sort of passionate customers in Singapore. Check it out. I think the hype is dying. Generally. So it's easier. I don't know. New releases. New releases. Recently I just went to the new pop mart in Thailand. So I think it's a tourist attraction in itself. So it's more than just a place. I think it's just the community. Basically I just I'm just collecting them as because I like them. And then so no intention to actually sell them. So Pop Mart is now pivoting ditching the flippers and focusing on the loyal fans who will not just buy the toy but really go to the theme park watch the upcoming animated series and whatnot. But the real test isn't how long a boo boo stays hot for. It's really whether Pop Mart can strike gold again with another character in the coming years. Marty.

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