Leadership reshuffle in the Asia-Pacific region, centralized procurement
The long-awaited third-quarter report from Pop Mart has finally revealed the extent of its performance decline following last year's global boom.
On October 27, Pop Mart disclosed its unaudited operating data for the third quarter, with overall revenue down 45%–50% year over year.
Among these, the Chinese market declined by 25%–30%, the Asia-Pacific region by 65%–70%, the Americas by 70%–75%, and Europe and other regions by 50%–55%.
Domestic online and offline channels have also shown a marked divergence: offline revenue declined by 5%–10% year over year, while online revenue fell by 45%–50%.
Although the market had widely anticipated that Pop Mart would post a decline in revenue on the exceptionally high base of the same period last year, the actual results were still weaker than the forecasts revised downward by some institutions.
Compared with the decline in revenue, management places greater emphasis on the signs of stabilization already evident across the business.
At the company's earnings call that day, Pop Mart's Chief Operating Officer Si De stated that after a sustained decline since the beginning of the year, its overseas business has largely stabilized in most countries and regions by the third quarter, and is expected to post quarter-over-quarter growth in the fourth quarter during the traditional peak sales season. Meanwhile, the Chinese market is still projected to achieve year-on-year positive growth for the full year.
However, there is still a gap between sales stabilizing and returning to growth.
Last year, LABUBU's global popularity helped Pop Mart rapidly attract overseas consumers, with a surge in demand concentrated online.
At this earnings call, enhancing store-level operational efficiency, driving sustained member spending, and improving global merchandise and inventory management were recurring topics of discussion among the management team.
LABUBU catapulted Pop Mart into overnight fame; its future growth will depend on how many repeat customers it can retain.
The Two Sides of Growth Expectations
Pop Mart's management expects positive full-year growth in the Chinese market, and the actual hurdle to clear is not particularly high.
In 2025, Pop Mart's revenue in the Chinese market is expected to reach RMB 20.852 billion. In the first half of this year, the Chinese market has already generated RMB 12.201 billion in revenue, a year-on-year increase of 47.3%, laying a strong foundation for full-year growth.
Based on this estimate, even if the Chinese market posts a year-on-year decline of approximately 31% in the second half of this year, it could still achieve positive growth for the full year.
From the perspective of specific operating metrics, Pop Mart's domestic consumer base continues to demonstrate a certain degree of resilience.
Management disclosed that in the third quarter, foot traffic at the company's brick-and-mortar stores in China continued to grow year over year, with new customers posting double-digit year-on-year growth and their absolute numbers rising compared to the second quarter.
As of the third quarter, repeat‑purchase rates among mainland China members remained broadly flat year over year, while annual retention improved. Looking solely at the third quarter, the number of returning customers engaging across multiple IPs continued to post strong double-digit growth.
These figures contrast sharply with the near‑halving of online revenue. While the surge in online bulk purchases driven by popular IPs has clearly subsided, consumers who have already established loyalty to the brand continue to maintain a steady level of purchasing activity.
The situation in overseas markets is even more complex.
The third quarter of 2025 was the highest-revenue quarter in Pop Mart's history, with strong sales growth driven by concentrated purchases of LABUBU, particularly in the Americas and the Asia-Pacific region.
During the same period this year, the company faced an exceptionally high base for comparison, as well as sustained downward pressure on online traffic.
Sider stated that it was not until the third quarter that traffic in most overseas countries and regions had largely stabilized. Compared with brick-and-mortar stores, the recovery of online channels remains sluggish.
He explained that when overseas sales surged last year, the offline network had not yet been fully established, resulting in a heavy concentration of sales online. Today, the company is focusing more on acquiring new customers and building its membership base through brick-and-mortar stores, then gradually guiding consumers to online channels—meaning that a full recovery on the online front may take longer.
From an optimistic perspective, if overseas sales have already bottomed out in the third quarter, the fourth-quarter peak season, new‑product launches, and improved store operations could help drive a quarter‑over‑quarter rebound in revenue. As last year's exceptionally high sales base gradually fades, the year‑over‑year growth pressure next year may also ease.
However, another possibility is that some of last year's blockbuster demand in overseas markets was highly one-off in nature. Even if traffic stabilizes, the new baseline for everyday sales could still be significantly lower than last year's level.
This means that the quarter-over-quarter rebound in fourth-quarter revenue does not necessarily indicate that the company's international operations have yet regained their capacity for sustained growth.
With overseas expansion costs continuing to rise and the sales outlook remaining uncertain, Pop Mart has begun to evaluate new stores more cautiously, while shifting its operational focus more toward existing stores and consumers.
Managing overseas repeat customers
Compared with the Chinese market, which has been operated for many years, Pop Mart's overseas membership system still has considerable room for improvement.
During the third-quarter earnings call, China business head Chu Yin revealed that, at present, cross-channel consumption in the Asia-Pacific market accounts for less than one-third of that in mainland China, and there is also a significant gap in the share of sales generated by members.
Cross-channel consumption reflects consumers' purchasing behavior as they move across different sales channels. For example, a consumer who initially purchased a product at a brick-and-mortar store may later buy other products through the brand's official online channel.
Although this metric does not directly equate to the repurchase rate, it does reflect the extent to which online and offline channels jointly serve consumers.
For Pop Mart, whether overseas consumers who first discovered the brand and made their initial purchase through LABUBU last year will continue to buy other IPs and develop cross-channel purchasing habits represents a promising growth opportunity for the next phase.
Currently, Pop Mart has established membership systems in the vast majority of global markets and incorporates acquiring new members for its offline stores into its daily operational performance evaluations. However, turning system coverage into stable shopping habits among consumers still requires ongoing operations.
In the second half of this year, Chu Yin, head of China operations, took on additional responsibility for managing the Asia-Pacific region. Management explained that this restructuring is intended to enhance communication and collaboration between the China team and the Asia-Pacific team, enabling the Chinese team to gain a deeper understanding of overseas markets while helping the Asia-Pacific region strengthen its long-term operational capabilities.
Behind this adjustment lies a shift in Pop Mart's global management model.
In the early stages, when its overseas operations were relatively small, each market enjoyed considerable operational autonomy. As the business expanded, the company has steadily restructured its management framework over the past two years: the Asia-Pacific operations were initially overseen by Wen De-yi and Si De, and more recently, the company has further integrated the operational expertise of its China‑based team.
Our Asia-Pacific operations span roughly ten countries and regions, where consumer demand and channel structures vary across markets, necessitating extensive coordination between headquarters and local teams.
Chu Yin stated that, following the handover, the Asia-Pacific team began streamlining business processes, enhancing collaboration between headquarters and country-level managers, and bringing in talent with international brand‑management experience.
Beyond organizational coordination, product and channel management in the Asia-Pacific region is also shifting toward greater sophistication.
During last year's peak sales period for LABUBU, regional teams focused primarily on the performance of popular IPs. Today, the Asia-Pacific region is drawing on China's operational expertise, refining product management down to specific categories and SKUs, and dynamically adjusting product offerings based on market‑by‑market sales trends.
On the channel front, the Asia-Pacific team is scaling back redundant investments in small online platforms across certain markets, concentrating resources on higher‑performing channels while enhancing coordination between online and offline operations.
Chu Yin emphasized that the experience accumulated in the Chinese market will not be simply replicated; the Asia-Pacific region must continue to adapt by taking into account local consumer needs and cultural differences.
Last year, LABUBU accounted for a significant share of sales in the Asia-Pacific region; now, the company is placing greater emphasis on multi‑IP operations. In the third quarter of this year, six IP brands in the Asia-Pacific market collectively contributed over 60% of sales, offering consumers a wider range of choices across different IPs.
In Si De's view, the next phase of growth in overseas markets will require a return to the day-to-day operations of individual brick-and-mortar stores.
At the earnings call, he cited an example: a Pop Mart store in Rome, Italy, located in a shopping center frequented by local residents, with a floor space of about 180 square meters, generating monthly sales of over one million yuan and maintaining a decent profit margin. While these results are not particularly outstanding, they align more closely with the operating model Pop Mart has long been familiar with in the Chinese market.
By enhancing its product assortment, in-store services, and marketing initiatives, Sider aims to steadily build a loyal base of local consumers and brand advocates, with the goal of gradually boosting the store's monthly sales to RMB 1.5 million, RMB 1.8 million, or even RMB 2 million.
From grabbing goods to managing inventory
Inventory pressures, which had at one point drawn market attention in the first half of the year, underwent a new shift in the third quarter.
Pop Mart's management stated at the earnings call that the group's inventory reached a high level in May, began to decline in August, and by the end of September had already shown a noticeable downward trend.
However, the company will not resort to large-scale promotions to clear its inventory for now, in order to avoid undermining its brand pricing structure and profitability.
Compared with the decline in inventory balances, what deserves even more attention is that Pop Mart is recalibrating its global merchandise procurement and allocation mechanisms.
Si De revealed that this year, Pop Mart established a centralized team at its headquarters to manage global procurement.
Previously, the four global regions each assessed demand and arranged procurement independently; when popular IP titles were in high demand, they might simultaneously increase inventory. When sales performance varied across markets, the group had to coordinate product supply among the different regions.
Today, headquarters has begun to centrally coordinate procurement needs across regions and increase the frequency of interregional product transfers.
Meanwhile, the company dynamically adjusts replenishment based on the sales performance of specific SKUs across different markets and channels, rather than waiting until the initially allocated inventory is nearly sold out before taking action.
This mechanism seeks to both prevent redundant inventory stocking across different regions and mitigate the dual issues of excess stock in some markets and shortages in others, thereby enhancing the efficiency of existing inventory utilization.
For the inventory that has already been built up, the company is also expanding its sales channels.
Management disclosed that the U.S. has begun collaborating with major retail chains, both to sell high‑value‑added branded products and to clear excess inventory; meanwhile, in the Asia‑Pacific market, sales are being boosted through expanded distribution channels and targeted promotional campaigns.
However, even more refined product allocation still cannot fully resolve the delivery‑lead‑time challenges in overseas supply chains.
Currently, Pop Mart's primary production base remains in China. Although the company has been exploring manufacturing in Vietnam for more than three years, logistics lead times to European and American markets still lag behind those in China. The company has also conducted small-scale trials of production in Mexico, but so far has not identified a viable pathway to develop it into a major production hub.
Si De acknowledged that relocating production sites alone cannot resolve overseas delivery‑lead‑time challenges; the company must continue to balance timeliness and cost by leveraging advanced forecasting, meticulous production scheduling, and rolling shipment plans, while integrating air, sea, and rail transport.
Although U.S. e‑commerce companies have already adopted domestic fulfillment, and Europe is also moving toward localized order fulfillment, these measures can only enhance last‑mile delivery efficiency; they cannot shorten the transit time before goods reach overseas warehouses.
Accordingly, overseas operations remain reliant on advance inventory stocking, and demand‑forecasting inaccuracies could once again exert pressure on inventory levels. Moreover, a decline in inventory does not necessarily translate into a corresponding recovery in profitability.
Management expects the gross margin for the second half to decline by no more than 2 percentage points compared with the first half, primarily due to a lower share of high-margin overseas revenue and the re‑pricing of certain products in the U.S. market.
Meanwhile, the continued opening of new stores in Europe and North America is driving up costs such as labor, rent, and depreciation on store renovations. Management expects the expense ratio to rise in the second half, putting further pressure on profit margins.
In the past, a concentrated surge in sales of popular products could quickly spread out channel and operational costs. Today, as overseas demand has stabilized, both existing inventory and the steadily rising costs of physical stores require more predictable revenue streams to absorb them.
How to improve product turnover and per-store output while managing inventory risks is becoming a critical test for Pop Mart's overseas operations in regaining profitability.