China's designer toy market looks to IP for a way out

A new lifeline powered by AI

Consumer 30 Jul 2026

China

This article focuses on China's designer toy market: breaking the IP deadlock, and the new lifeline AI offers.

In an era of no net market growth, how can designer toy IP break out of the homogenisation impasse? Can Labubu's formula for staying power be replicated? And how will multimodal AI reshape the smart designer toy ecosystem? Below is our latest in-depth expert analysis.

1. Market size and growth

The fan base for China's designer toy scene is around 50 to 70 million people, with core designer toy users at roughly 10 to 30 million. Growth has been very slow, and this has consistently been a mature market with little net expansion. Industry growth has decelerated, and the user base is shifting from core fans towards a more mainstream audience. Purchase frequency for standard releases is falling, with buyers moving towards limited editions instead. As consumer sophistication rises, launching new IP will become more challenging.

2. The industry has entered a phase of homogenisation

Third Bridge experts believe the designer toy industry may in future focus more on building a mental connection with buyers, evolving from designer toy companies into emotional lifestyle product companies. Third Bridge experts believe competition in the industry will return to the underlying strength of the IP itself. Proprietary IP that offers only a visual identity, without a world and an emotional narrative, has a short life cycle. Smiley, cute-style IP may already be the worst-affected segment for homogenisation, whereas strongly emotion-driven IP such as Crybaby and Labubu holds a more differentiated barrier.

3. Labubu, from breakout hit to deeper long-term IP operation

Labubu is gradually moving from a phenomenon-level designer toy IP towards a cultural IP with long-term staying power. Pop Mart has this year extended Labubu's content settings and audience reach through World Cup marketing and a film project, exploring ways to lengthen the IP's life cycle.

Third Bridge experts believe Pop Mart's IP, including Labubu, currently derives its influence mainly from distinctive character design. To lift long-term value further, the company will need to keep strengthening story content and world building. By comparison, established IP such as Disney's tends to achieve long-term operation through complete story systems and diversified content ecosystems. Experts note that the Labubu film, theme parks and games are all important attempts to drive the IP's long-term development. That said, building this kind of IP ecosystem usually requires sustained investment and continuous operation, and market performance will still depend on content innovation and commercial execution.

Third Bridge experts believe the industry has yet to establish a standardised path for incubating IP, and that continuous trial and error may be required. Labubu-style explosive growth requires a rare alignment of timing, conditions and people. Designer toy IP has a short life cycle and high uncertainty, making it very hard to predict whether a new breakout hit will emerge.

Future overseas growth is likely to be driven mainly by new store openings reaching new consumers, with North America the priority market.

4. China's AI designer toy market: limited technical barriers, with IP and content ecosystems forming the long-term moat

China's AI designer toy industry completed its upgrade from single-modal to multimodal interaction in 2026. The industry has settled into a three-tier structure, with leading players including major internet groups and high-quality startups. The internet majors hold a leading position on the strength of traffic and cost advantages, though product homogenisation among them is fairly pronounced. Startups stand out through rapid iteration and differentiated innovation, but face greater pressure on customer acquisition.

General technical barriers in the industry are not high, and cyclical barriers exist alongside them. IP, content ecosystems, user retention and data iteration are the long-term core competencies.

On technology, Third Bridge experts believe multimodal interaction is not the end point, and that the industry will focus future iteration on model capability and user experience. AI toys may achieve stronger personalised and emotional interaction by continuously learning user behaviour and preferences, creating a bespoke experience that "understands the user better than the user does". Product functions will also deepen into vertical settings, with more targeted content and services in segments such as education and children's companionship. Companies will additionally keep lifting user stickiness and product value by enriching gameplay, upgrading IP content and expanding ecosystems.

Third Bridge experts believe the biggest challenge facing today's booming AI smart toys is the difficulty of building them into IP. One important reason is that most AI toy companies are led by teams with technology backgrounds and lack the capability to create and operate IP. This will produce pricing logic quite different from the current designer toy market, in that previous-generation products tend to be discounted quickly as new generations launch.

All insights in this article are based on information provided by Third Bridge experts.

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