Brand Merch: From "Freebies" to Main Course

In China's consumer market, paying for brand merchandise (品牌周边) is no longer a niche hobby, but fast becoming mainstream. Shoppers are no longer drawn purely by a product’s functional value; instead, they are increasingly captivated by the emotional meaning and social currency embedded in limited-edition merchandise. Online, netizens have dubbed this trend “every generation has its own egg” (一代人有一代人的鸡蛋), a tongue-in-cheek spin on the idiom “buying the case instead of the pearl” (买椟还珠), used to describe younger generations who value the collectible “egg” more than the main product itself.

On Xiaohongshu, the hashtag #一代人有一代人的鸡蛋 (“Every generation has its own egg”) has nearly 50 million views.

Beneath the humor lies a profound shift in consumption psychology: Gen Z is willing to pay a premium for products that deliver emotional resonance and social recognition. Brands, in turn, have seized the opportunity by leveraging IP collaborations, limited releases, and exclusive drops to push the merch economy to new heights.

From“Free Gift” to“Core Product”

In its early days, branded merchandise was mostly a marketing afterthought - seasonal giveaways such as themed cup sleeves or tote bags from tea chains like Heytea and Nayuki Tea, designed to boost brand affinity. Today, brand merch has been upgraded from a “side dish” to the “main course,” often becoming the decisive factor in a purchase.

Heytea × CHIIKAWA

The collaboration between HeyTea and Chiikawa gained nearly 12 million views on Xiaohongshu

One of the most striking examples came on August 6 this year, when Heytea launched its collaboration with the viral Japanese IP CHIIKAWA. The hashtag #喜茶Chiikawa surged onto trending lists, racking up over 60 million views across platforms. On Xiaohongshu alone, the topic drew nearly 12 million views. In some Shanghai stores, over 800 drinks were queued for production within hours of launch. The limited cup sleeve set and metal badge sold out on day one.

For many customers, the real prize wasn’t the tea, but the social satisfaction of owning scarce, branded merch.

“I Am What I Own”: Merch as a Social Badge

The plush toys and figurines of the film's main characters are popular among fans

The phenomenon extends far beyond beverages. The animated film The Monsters of Langlang Mountain grossed over 70 million yuan within 24 hours of release, but its merchandise proved an even bigger success. The first batch of 100,000 plush pig demon dolls sold out almost instantly, alongside more than 400 SKUs of blind boxes, collectible cards, and other products covering multiple lifestyle scenarios. Crucially, merch planning was baked into the creative process from day one, maximizing the IP’s commercial value through a content + merchandise synergy.

Why the Merch Economy Is Booming in China

At its core, this trend is powered by the “small certainty effect” - the pursuit of small, guaranteed joys to counter life’s uncertainties. Sharing merch on social media reinforces its value: Xiaohongshu posts, resale markups on second-hand platforms, and trending hashtags all turn these products into badges of identity.

One of the hottest IP Labubu's resale prices surged by nearly 874%

More fundamentally, China’s consumer market is shifting from functional consumption to emotional consumption. The traditional value equation of “utility + brand premium” has evolved into “utility + emotional value + social value,” particularly for Gen Z shoppers.

The Scale of China’s  Merch Economy

In just seven years, China’s ACG (anime, comics, and games) merch industry has expanded from 5 billion yuan to 100 billion yuan, forming a complete commercial ecosystem. Top-tier IPs like miHoYo’s Genshin Impact sell over 300,000 units of merch via their Tmall flagship store. Meanwhile, companies like Pop Mart have built proprietary IP portfolios that generate gross margins exceeding 60%.

Genshin Impact's merch sold 100k to 300k pcs each on their Tmall flagship store

Why Brands Choose IP Collaborations

For new consumer brands, IP collaborations offer a shortcut to awareness. When brand equity is still nascent, a familiar IP can instantly transfer trust and cultural relevance.

The main drivers fall into three categories:

1.  Traffic Efficiency

IPs come with a pre-existing, highly targeted fanbase and built-in virality, enabling brands to cut through information overload and reach their desired audience quickly.

2.  Breaking Through Marketing Fatigue

IPs bring emotional depth and cultural meaning, infusing products with intangible value that transcends their physical use.

3.  Brand Value Upgrade

Deep integration with the right IP can refresh or reposition a brand in consumers’ minds, expand to new user groups, and accelerate youth-oriented transformations.

For an analysis of why brands may choose IPs over celebrity ambassadors, see: Celebrity Endorsement Dilemma in China Marketing

The Pitfalls of the IP Hype

Consumers' complaining on social media about the brand's "hunger marketing" strategy

However, the IP-collab boom comes with growing pains. In the Heytea × CHIIKAWA case, some consumers complained that “you have to pay extra to get the merch” and that “limited quantities aren’t restocked”, accusing the brand of “using the IP to milk fans.”

This reveals the core tension of the collab economy: consumers expect emotional connection, but some brands focus solely on traffic monetization.

Double V Tips: Where the Merch Economy Goes Next 

The next stage of China’s merch economy will move beyond the short-term hit of “limited” and “collab” drops toward a more systematic emotional supply chain. The real question for brands is not just how to create a viral merch item, but how to make merch an extension of brand culture.

🔵Balancing Business and Emotion

Profit is possible, but only when there’s co-created value, where consumers feel they are supporting a beloved IP and getting quality design in return. Formulaic marketing or overpricing may yield short-term gains but erode long-term trust.

🔵Avoiding Collab Saturation and Homogeneity

Homogeneity is becoming a serious issue: tea brands churning out near-identical cup sleeves, tote bags, and photo cards have left consumers fatigued. Without creativity and distinctiveness, the collab loses its spark.To protect the core value of IPs and sustain consumer interest, brands must double down on quality, originality, and cultural relevance, moving from “just another drop” to merch with meaning.

Double V Consulting is a marketing consultancy specialized in female consumer goods brands. We have been helping overseas brands navigate the complexities of the Chinese market since 2017. We specialize in creating strategies that resonate with Chinese female consumers, leveraging deep market insights and cultural understanding.

If you're interested in learning more about how we can assist your brand in understanding and connecting with Chinese consumers, don't hesitate to reach out by click the "Read more" link below.