Labubu's parent company's stock is down after China issued a warning on a lucrative sales strategy

• Pop Mart saw its stock price drop more than 5% after China issued a warning on blind boxes.
• Chinese state-run news outlet People's Daily wrote about children getting addicted to the mystery boxes.
• Pop Mart's stock is still up about 500% in the past year.

Labubu's parent company, Pop Mart, saw its stock price slide after China issued a warning on the addictive nature of blind boxes.

Pop Mart's stock dropped by more than 5% on Friday and by about 14% in the past five days.

The slump comes after People's Daily, a publication run by the Chinese Communist Party, published an article on Thursday warning about the blind box sales strategy, saying its addictive nature can hook children.

While the article did not mention Pop Mart specifically, it discussed products like blind trading cards and mystery boxes. China has, since 2023, banned the sale of blind boxes to children under eight years of age.

Blind boxes are toys with unlabeled packaging, leaving the contents a mystery to the buyer. This sales strategy spurs consumers to purchase more in the hopes of getting their hands on the toy design they want.

Figurines of Pop Mart's most popular product line, The Monsters — known for one of its characters, Labubu — are sold in the blind box format. Pop Mart's blind boxes in The Monsters collection cost between $10 and $20.

Ana Gonzales, a 38-year-old social media manager based in the Philippines, previously told BI that she has spent upward of $500 on blind boxes.

"Not knowing what color you'll get adds so much excitement," Gonzales said. "Opening a blind box after a long day or tiring week feels like unwrapping a gift to myself or a little reward."

Pop Mart isn't the only company selling toys in blind boxes, but the global success of Labubu makes it one of the most visible.

While its stock took a hit this week, Pop Mart has seen tremendous success recently, with its stock price increasing by about 500% in the past year.

Recently, Pop Mart paused physical sales of The Monsters in South Korea and the UK, citing long queues outside their stores. Labubu dolls have enjoyed celebrity endorsements from major K-pop artists, Rihanna, and Dua Lipa.

The trendy toy has also sparked legions of knockoffs, nicknamed "Lafufus" on social media.

Representatives for Pop Mart did not respond to a request for comment from Business Insider.