Several signals of the labubu phenomenon reaching its peak

Source: Wall Street News

Author: Beauty of Bayes

Buy when no one cares, sell when everyone is talking?

In our previous article on deflationary sentiment value, we conducted an in-depth analysis of this year's hot new consumption from the perspective of spiritual consumption. Bubble Mart, Lao Pu, Mixue, and others share a common point that is not the classic "Giffen effect", but rather satisfying upward class identity imagination at the lowest bearable cost - a broad "identity economics". The core attribute of these three companies is that they allow consumers to buy "a sense of identity" at an extremely low threshold.

The LABUBU phenomenon has gone from being just popular on social media when we first discussed it to being almost LABUBU everywhere now. Traditional media is flooded with LABUBU news, and even customs seizures of LABUBU are shared in various WeChat groups, with both imported genuine products and domestic versions.

I have many friends who are trendy toy players and work in the industry, so I'm somewhat familiar with the trendy toy sector. The LABUBU phenomenon first reminds me of Be@rbrick, another trendy toy. Back then, Be@rbrick was almost a must-have in every internet celebrity's home, with two pieces being a sign of being a top-tier influencer. Even when my childhood friend shared renovation photos, I could see a dedicated space for two Be@rbricks. Then it grew more and more, from initially thinking "wow, how cool" to later becoming increasingly fake, until finally, I stopped caring whether the Be@rbrick was genuine or not.

Going further back, during my studies in the US, classmates had Yeezy Boost, which gradually expanded to AJ, Dunk, and other shoe series. Shoe reselling went from being a hobby for many young people to becoming a primary source of income. The most typical example is my childhood friend's brother, who transitioned from shoe reselling to luxury goods trading when there were no more shoes to resell.

Then came trading cards (Chen Guanxi was very fond of these, and he's probably a trendy toy icon). Later, Non-Fungible Tokens, the crypto market's carnival, where a single avatar could cost tens or hundreds of thousands of dollars, even making SOL a major blockchain like ETH. These phenomena, like tulip mania, rose quickly and then disappeared silently. So, in our view, the current LABUBU is not much different from Be@rbrick or AJ shoes - no matter how crazy the speculation, it will eventually come down, it's just a matter of when.

Retrospective of 4 "Young People's Speculative Assets" Peak Signals

The 4 assets mentioned are Be@rbrick, shoe reselling, trading cards, and Non-Fungible Tokens. When they peaked, they showed very similar signals, which can be broadly categorized into four types: popularity, supply, price, and derivative gameplay. Detailed breakdown involves 5 dimensions, which we'll examine one by one.

1. Media & Search Popularity Peaks First → Emotional curve enters "attention saturation".

2. Producers Massively Release Goods at High Prices → Queuing time shortens, secondary market listings surge.

3. "High-end Remains Stable - Mid-range Collapses" Price Gap Widens → Demand stratification, average price turns downward.

4. Liquidity Stagnation → Transaction volume maintains high levels, but price plummets, Bid-Ask spreads widen.

5. Financial Derivatives Proliferate → Mortgages, funds, indices, fractional trading, etc., penetrate the market.

Based on Bayesian probability calculations, the objective probability of LABUBU's price retreating ≥50% in the next 6-12 months is approximately 95% (± 10 percentage points).

From "Rich Women's Circle → Student Circle" Heat Spread Leading to Scarcity Decline

This might be the most interesting part of the discussion, derived from observations around us. The origin is seeing friends mention their children becoming interested in LABUBU, wanting to have one (likely middle school age). This indicates LABUBU's heat is spreading from the rich women's circle to the student circle. Two concepts are involved: the IP's vitality and its financial attributes or collectible value. The spread is a process of IP vitality increasing while its financial attributes decline.

However, the spread brings dilution of scarcity, not just of the commodity, but more importantly of the circle's identity scarcity. We observe the scarcity dilution through the spread path from "rich women's circle → student girls' circle"

• Innovation Diffusion Model (Rogers)

  Innovators / Early adopters (Rich Women and Trendy Toy KOLs): Low price sensitivity, willing to pay for scarcity and emotional premium. Early majority (Students): High price elasticity, more concerned with accessibility and social following. As population shifts from former to latter, demand curve's "bottom volume" increases, but peak willingness to pay decreases.

• "Identity Hierarchy" Descent

  In trendy toy context, rich women/KOLs' transaction prices often determine the "anchor point"; student groups follow this anchor.
  When anchor group exits, highest bid disappears → price ceiling drops.
  Analogy: Supreme after 2017 entered "Logo Everywhere" phase, social media heat peaked but Box-Logo average premium dropped from 5-6× to 1.2-1.5×.

• Supply Elasticity Rapidly Increases

  Facing more mainstream audience, brands often increase volume (GR blind boxes, collaborative flash sales, authorized plush toys) to "consume quantity".
  Supply growth rate > high-end demand growth rate → premium rate, transaction price, auction records decrease.

This phenomenon similarly occurred with Be@rbrick, AJ, Supreme, and Funko Pop. Within 6-12 months after social media heat peaks, scarcity decline leads to a stepped collapse in secondary market.

For example, rich women carrying Hermès bags with a LABUBU "self" might feel uncomfortable seeing students with third-generation LABUBU on their backpacks. This phenomenon is similar in the two-dimensional circle, where overly popular characters lose appeal. LABUBU itself is a circle identity and self-pleasing consumption. Increased supply (whether authentic or domestic version) dilutes the original intent of those who loved this IP.

IP Vitality Increase ≠ IP Longevity

For trendy toys/collectibles, its supply-demand model differs from classic models. Scarcity itself is "utility". Increasing supply raises accessibility (Quantity Demanded↑), but simultaneously weakens "show-off-identity-collection" utility (Willingness to Pay↓)—ultimately often manifesting as potentially higher short-term sales, but simultaneous price and financial premium collapse, with supply increase ≠ demand increase.

Three Mechanisms Explaining "Supply Increase ≠ Demand Increase"

In the collectibles market, demand function is inherently "embedded" with scarcity: when supply increases—whether from authentic restocking or counterfeits—it not only fails to linearly boost demand but also weakens identity signals, anchor prices, and mimicry motives, causing overall payment willingness to decline, ultimately manifesting as "volume may increase, but price and financial premium simultaneously drop".

For brands, the challenge is how to increase volume without abandoning the "top-end anchor point"; for investors, once "scarcity barriers" loosen and high-end buyers exit, it's a classic bubble turning point signal.