How aggressively cute toys for adults became a $686 million business
Funko Pops are now available from 25,000 retail brands worldwide, from Walmart to Amazon to Hot Topic and even, somewhat bizarrely, Foot Locker. In 2018, the company’s net sales increased 33 percent to $686.1 million, with figurines accounting for 82 percent of all sales. After the company released its Q2 earnings report in early August, declaring that sales up are 38 percent compared to this time last year, CEO Brian Mariotti called his company “recession proof.”
Collectors like Jack make up 36 percent of Funko’s customers, while 31 percent are “occasional buyers.” Wilkinson says Funko Pops appeal to both markets because of the “science of cute” behind the figurines’ design.
Funko now has more than 1,000 licensed properties, from the Avengers to the Golden Girls, Fortnite to Flash Gordon, Stranger Things to The Office. “Evergreen and classic” properties like Harry Potter, Star Wars, and Disney make up nearly half of all Funko Pop sales, but the company is seemingly constantly procuring new, unexpected licenses, from drag queens to food mascots to NASCAR drivers.
A May 2019 investor presentation from the company boasts that a Pop can be designed and submitted to a licensor in 24 hours, molded into a prototype in 45 days, and “sourced from Asian facilities while maintaining quality control” in just 15 days. Funko also prides itself on its low production costs — each new figure costs between $5,000 and $7,500 to develop.
Is it possible, then, that Funko will run out of things to Pop? At present, the company’s profits continue to climb, from $98 million gross profit in 2015 (when Funko had just 205 active properties) to $258 million in 2018. History has shown us that collectibles tend to decline in popularity, and it is possible that Funko Pops could go the way of the Beanie Baby. Yet at present, there are more than enough fans keeping the company in business.
To encourage collectors, Funko uses many tried-and-tested market tricks, like releasing toys exclusive to certain locations (Mr. Rogers is exclusive to Barnes & Noble) and producing limited-edition runs (only 480 holographic Darth Mauls were released at San Diego Comic-Con in 2012). Yet the company doesn’t just rely on people like Jack and Tristan. A third of all customers are only occasional buyers, and the customer base appears to be a diverse set of people with a diverse range of fandoms. In 2018, no single property made up more than 6 percent of purchases; Pops related to new theatrical releases encompassed 20 percent of sales, TV show-related Pops accounted for 16 percent, and gaming Pops made up 17 percent. There is a roughly equal gender split in customers (51 percent women to 49 percent men), and last year, international sales grew 57 percent.
Interestingly, Funko’s average customer is 35 years old — two years younger than Jack, who says his date recovered from seeing his spare room. “The rest of the night went very well and we went on several more dates,” he said. Although it ultimately didn’t work out with her, Jack says his “crazy room of Funko Pops” didn’t have “too much influence on it either way.”
Move over Lego: The next big collectable toy powerhouse is here
Collectibles are a $200 billion market on their own, and video games are on pace to be a $300 billion industry by 2025. And Funko sits right in the middle of it all.
Funko is very good at what it does; its revenue and fanbase is proof of that. But when Microsoft reached out about a video game collaboration, there were all sorts of new questions on Funko and Microsoft’s part because Funko wasn’t just an aesthetic anymore; it had to be interactive for the first time. And interactive is tricky. It forces designers to decide, how does a Funko walk? How does a Funko fight? Can a Funko bleed? (No, by the way, they can’t).
The real story of Supreme
Twenty-five years later, as fads (like televised street luge) have fallen by the wayside, Supreme remains a skate brand—a purveyor of all the hard and soft goods one needs for the sport. But it is something much more than that, too. Since its beginning, in 1994, Supreme has slowly worked its way to the very center of culture and fashion. Or more accurately, culture and fashion have reconfigured themselves around Supreme. Supreme’s clothing and accessories sell out instantly, and the brand has become a fashion-world collaborator of the highest caliber with projects now under way with designers high (Comme des Garçons, Undercover) and low (Hanes, Champion). Though the particulars of the privately held company’s business are undisclosed, a $500 million investment in 2017 from the multinational private equity firm the Carlyle Group, for a 50 percent stake, put Supreme’s valuation at $1 billion.
The formula for success—for building a brand that lasts for 25 years—sounds simple enough: Create a high-quality product that will last a long time, sell it for an accessible price, and make people desperately want to buy it. But executing such a plan is far trickier. And in figuring out how to thrive according to strict adherence to its own highly specific principles and logic, Supreme has, deliberately or not, re-arranged the alignment of the entire fashion industry.
Powerful as Supreme has become as a trendsetter, the company is still fiercely committed to its own novel approach. Supreme didn’t launch a website until 2006. It was purposefully late to Instagram, too. Outside of Japanese fashion magazines and downtown NYC wheat-paste poster campaigns, Supreme’s only real marketing efforts are made in the skate world. Conveniently, marketing to skaters is likely the best way for Supreme to market to the fashion world. In other words, the fact that Supreme doesn’t pander to the fashion industry only makes its allure more powerful.