The Labubu Craze: A Behavioral Economics Masterclass in Viral Markets

The global frenzy over Labubu plush toys—those toothy, mischievous creatures from Hong Kong artist Kasing Lung—has become a case study in modern consumer behavior. Over the past year, Pop Mart's blind-box strategy has turned Labubu into a $44 billion valuation juggernaut, surpassing legacy toy giants like Hasbro and Mattel. But beneath the hype lies a timeless story: how viral trends create short-term market distortions and offer hard-won lessons for investors.

The Labubu Phenomenon: Scarcity, FOMO, and Celebrities

=text2img>A vibrant Labubu plush toy displayed alongside Pop Mart's signature blind boxes, illustrating the blend of collectible culture and strategic scarcity driving the craze

Labubu's rise mirrors the classic arc of a viral consumer trend. Its success hinges on three pillars:
1. Blind-Box Psychology: Pop Mart's model exploits scarcity and surprise, with rare “secret” variants (1-in-72 odds) fueling repeat purchases.
2. Celebrity Endorsements: K-pop star Lisa (Blackpink) and Rihanna have turned Labubu into a cultural currency, amplifying FOMO (fear of missing out) among Gen Z and millennials.
3. Resale Market Mania: A four-foot Labubu sold for $172,800 at a 2025 Beijing auction, proving the toy's status as both collectible and speculative asset.

Yet this frenzy is not without parallels. Consider the Beanie Babies craze of the 1990s, which reached a $1 billion peak before collapsing in 2000. The lessons from that era offer critical insights for investors today.

Historical Echoes: Beanie Babies as a Warning (and a Blueprint)

Like Labubu, Beanie Babies leveraged scarcity and social proof to create artificial demand. At their peak, rare editions like the Royal Blue Peanut Elephant sold for thousands, driven by Ty Inc.'s “retirement” strategy. But when the bubble popped, prices plummeted. By 2000, most Beanie Babies traded for pennies on the dollar—except for ultra-rare misprints.

The key takeaway? Viral trends are cyclical, and sentiment-driven volatility demands discipline. Investors who sold at the peak (e.g., Beanie Babies' 1998–2000 surge) thrived, while those holding through the crash lost everything. For Labubu, the question is: When does the frenzy peak?

Behavioral Traps and Investment Strategies

1. The Herd Mentality: Labubu's global reach—100+ countries and 10 million units/month—resembles Beanie Babies' saturation. When demand outstrips supply (as seen in Pop Mart's UK sales suspension in May 2025), it's a signal of overheating.
2. Sentiment Over Substance: Pop Mart's valuation now reflects investor optimism about Labubu's longevity. But history shows that such optimism often overestimates a trend's staying power.
3. Exit Strategies: The Beanie Babies crash teaches that holding too long can be catastrophic. Investors should consider trailing stops or profit-taking when secondary market prices peak, as seen in Labubu's $700 resale spikes.

Portfolio Implications: Riding the Wave, Not the Tide

Investors should treat Labubu as a momentum play, not a core holding. Key takeaways:
- Entry Points: Look for dips in Pop Mart's stock (e.g., after a sales pause) or when media buzz wanes.
- Exit Thresholds: Sell a portion of holdings when resale prices hit unsustainable premiums (e.g., >10x retail) or when celebrity endorsements fade.
- Diversification: Allocate a small percentage of a portfolio to viral trends, using options or ETFs to mitigate risk.

The Long Game: Valuation and Cultural Capital

While Labubu's collectible appeal may wane, its cultural impact could endure. Like Pokémon or LEGO, it might transition from a fad to a generational nostalgia brand. For now, though, the risks of overvaluation loom large.

Final Takeaway:

Viral trends are powerful engines of growth—and destruction. Labubu's rise is a masterclass in behavioral economics, but its future hinges on whether Pop Mart can sustain scarcity without triggering a Beanie Babies-style collapse. Investors who heed the lessons of history will navigate the craze with clarity, turning volatility into opportunity.

In the end, the Labubu craze isn't just about plush toys—it's about understanding how human psychology inflates markets and how investors can profit without becoming the bubble's casualties.