Out of the box: unpacking the Labubu phenomenon

It’s one of the hottest consumer trends in the world – but customers don’t even know what they are buying until they get home and open the box.

“We’re wired to follow the crowd. The ‘bandwagon’ effect is our tendency to follow what others are doing, simply because it seems like everyone else is doing it. Seeing something grow in popularity makes us want to be part of it too.”

It’s advocated by celebrities like K-Pop star Lalisa “Lisa” Manoban of Blackpink to music icons Lizzo and Rihanna, primarily used as a quirky fashion accessory.

They are the Labubu doll, first produced in 2019, when Chinese toy maker Pop Mart struck a deal with artist Kasing Lung to create dolls based on “The Monsters” illustrated book series.

To say the Labubu story defies talk of hesitant consumer spending is an understatement.

Last year, as makers of Labubu, Pop Mart raked in circa 13.04 billion yuan (or US$1.8 billion) in revenue.

Pop Mart spokespeople say the dolls alone brought in US$423 million of revenue last year – which they say is a 729 per cent increase from the previous 12 months.

As ANZ Chief Economist for Greater China Raymond Yeung recently wrote, Labubu dolls also serve as a symbol of the resilience of domestic Chinese consumption.

All pretty amazing for a company which only kicked off by a then 23-year-old owner Wang Ning when he opened a tiny shop in Beijing 15 years ago.

But what does the Labubu phenomenon tell us about the way we make consumer decisions in our sometimes-turbulent globalised economy?

For answers, bluenotes turned to the expertise of ANZ’s Behavioural Science team.

Pretzels on trains

To understand the Labubu phenomenon, our experts say you need to take a trip back to a couple of train journeys taken between Munich and Stuttgart in 2010.

And when you are on the train you need to pay attention to the pretzel cart.

Scientists have long debated the extent of how much we are actually wired to follow the crowd, so with the help of Deutsche Bahn they were able to test this.

The scientists in the German study set up a snack cart selling pretzels which passed through a second class train carriagein open-plan cars on inter-city trains between Tuesday and Thursday.

At first, only one in 12 passengers bought pretzels. But when actors were placed in the carriage pretending to buy pretzels, sales jumped to one in seven. Just seeing others buy was enough to influence people to do the same. This went on to bedubbed the “bandwagon” effect.

This is our tendency to follow what others are doing, simply because it seems like everyone else is doing it.

Seeing something grow in popularity makes us want to be part of it too.

We’re wired to follow the crowd. The bandwagon effect is our tendency to follow what others are doing, simply because it seems like everyone else is doing it. Seeing something grow in popularity makes us want to be part of it too.

This same effect is at play with Labubu and other items sold in blind boxes (sealed packages that contain a randomly selected item).

When we see others collecting them, showing them off online, or queuing up to buy, it creates a sense that this is something that is gaining popularity. That signal can be enough to make us want to jump on the bandwagon, either to avoid missing out or to feel like a part of the group.  

Two cookies left

Our experts next pointed to another study, in which people rated chocolate chip cookies as more desirable when they saw only two cookies in a jar compared to when they saw ten cookies in a jar, even though the cookies were identical, showing that the scarcity of the cookies made them more desirable. Other research also shows that people with a strong need to feel unique are especially drawn to products that are limited in supply.

The scarcity of Labubus, especially the rare, limited-edition ones, plays into their desirability. Also, the “ugly-cute” aesthetic feels niche but cool, creating a sense of belonging to an exclusive group that ‘gets it’.

Don’t tell me!

In another study, people had to drink a set amount of water in two minutes to earn a cash reward. When they were told exactly how much they would get, about four in 10 completed the task. When they were told the reward could be either a small or large amount, decided by a coin toss, that jumped to about seven in 10. 

The ANZ Behavioural Scientists said this same effect helps explain the appeal of blind boxes like Labubu. Some figures are common, while others are rare and highly sought after. You don’t know which one you will get until you open the box, which builds anticipation and creates a small rush with each unboxing. The chance of getting a “secret” or rare Labubu, even if low, keeps people coming back. 

Sunk cost fallacy

Another study pointed saw participants asked to imagine they had spent $100 on a trip to Michigan and later $50 for Wisconsin (on the same weekend). They were told the latter would be more enjoyable and when asked where they would go to – more than half said Michigan because they had made the initial investment (sunk cost), even though Wisconsin would be more enjoyable and both costs were lost. 

When it comes to Labubu, there are different dolls - some have specific colours, characteristics, and there are a few limited-edition ones that drive higher value. Because of blind boxing, people don’t know which one they’ll get, so they keep buying until they find the one they want. If they don’t find it in the first few boxes, they may feel that they can continue buying further – since they already have bought a few. The ANZ Behavioural Science team said this meant these consumers are making current decisions based on previous costs that can’t be recovered. 

The good old days

Nostalgia is also pointed to as a powerful motivator.

A study they point to found that participants who were feeling nostalgic rated money as less desirable as compared to their counterparts who were in a neutral state and rate money as more desirable.

Labubu dolls may remind people of the days gone by, and evoke positive emotions associated with a toy and blind boxing (such as the McDonalds’ happy meal or collecting trading cards or Pokemon or Kinder Joy). This emotional connection, in turn influences spending behaviour and motivates them to buy it. 

The big picture

Either way, in an environment in which worldwide consumers are said to be holding their cash tighter due to uncertainty – Labubu and Pop Mart are proving that there are ways to engage consumers if you press all the right buttons.

Jeff Whalley is a Journalist at ANZ