Is the Global Toy Industry Too Dependent on Fewer and Fewer Retailers?
The Ever Growing Power of Amazon, Walmart, Target and the World's Retail Giants
For most of the modern history of the toy industry, getting products into retail has always been difficult. Manufacturers have had to convince buyers that their products deserve limited shelf space, compete against hundreds of rival products and demonstrate that they can supply reliably at the right price.
Today, however, there is another challenge emerging alongside all the traditional difficulties of the business: the number of genuinely important retail customers appears to be shrinking.
In many of the world's largest toy markets, a relatively small number of retailers now account for an enormous proportion of toy sales. Amazon, Walmart, Target and Costco dominate large parts of the US market. In the UK, Amazon and Smyths Toys are hugely influential, alongside major supermarkets and other chains. Across Europe, large specialist retailers, hypermarkets, supermarkets and online platforms continue to dominate distribution in their respective markets.
This raises an important strategic question for the global toy industry: are toy companies becoming too dependent on fewer and fewer retail customers?
For many businesses, the answer is probably yes. And the consequences of this growing concentration of retail power could have profound implications for toy companies, inventors, factories, licensors and the long-term structure of the industry itself.
Retail Consolidation Is Not New – But the Consequences Are Becoming More Significant
Retail consolidation has been taking place for decades. Independent toy shops gradually lost market share to specialist chains, while specialist chains increasingly competed against mass-market retailers. Department stores declined in importance, supermarkets expanded their toy departments and then e-commerce arrived, fundamentally changing the competitive landscape once again.
The result has been a gradual transfer of power away from thousands of smaller retailers towards a relatively small number of enormous organisations. The closure of Toys "R" Us in the United States was perhaps the most dramatic example of how quickly the retail landscape can change. One of the world's most important toy retailers disappeared, and its market share was redistributed among Walmart, Target, Amazon and numerous other retailers.
Initially, the disappearance of Toys "R" Us appeared to create opportunities for a broader range of retailers. In the longer term, however, it may have contributed to even greater concentration. Amazon continued to grow, Walmart strengthened its omnichannel capabilities and Target increased its focus on differentiated assortments, exclusive products and curated ranges.
Today, a toy company can potentially reach millions of consumers through just a handful of major accounts. That is extraordinarily efficient, but it also creates an obvious strategic risk. When a small number of customers account for such a large proportion of a supplier's business, the balance of power inevitably shifts.
The Financial Evidence Is Already Visible
One of the clearest indicators of retailer concentration can be found in the annual reports of major toy companies.
Mattel reported that Walmart, Target and Amazon collectively accounted for approximately 42% of its worldwide consolidated net sales in 2025, compared with approximately 44% in the previous year. That means three retail customers accounted for more than two-fifths of the worldwide revenue of one of the largest toy companies in the world.
This is a remarkable statistic. Mattel is a global business with operations across numerous countries, hundreds of products and some of the world's best-known toy brands. Yet despite its scale and international footprint, a very substantial proportion of its revenue still comes from just three customers.
For smaller companies, the dependence can be even more extreme. Jakks Pacific reported that Target and Walmart alone accounted for 26.6% and 26.1% respectively of its 2025 net sales. In other words, more than half of the company's business came from just two retail customers.
Winning a major listing with Walmart, Target or Amazon can transform a toy company overnight. The reverse is also true. Losing a major account, or suffering a significant reduction in business from one, can have an immediate and potentially severe impact on revenue, inventory levels and profitability.
Retailers Now Control More Than Just Shelf Space
Historically, retailers possessed enormous power simply because they controlled access to consumers. If a manufacturer wanted to sell toys nationally, it needed shelf space. A successful listing with a major retailer could make the difference between a product becoming a major commercial success or disappearing without trace.
Today, however, retailers increasingly control something potentially even more valuable than shelf space: consumer data.
Amazon knows what consumers search for, what they buy, what products they look at but do not purchase and which products consumers buy together. It has extensive information on pricing, conversion rates, search behaviour and advertising effectiveness. Walmart and Target are also developing increasingly sophisticated consumer data and retail media businesses.
This changes the relationship between manufacturers and retailers. Toy companies no longer simply need retailers for physical distribution. Increasingly, they need access to digital consumer discovery, advertising platforms and valuable information about purchasing behaviour.
The retailer is therefore becoming something much broader than simply a customer. Major retailers are now simultaneously distributors, media companies, advertising platforms and data businesses. That represents a significant and potentially permanent shift in the balance of power between retailers and suppliers.
Amazon Has Changed the Economics of Toy Retail
Amazon deserves particular attention because its influence extends far beyond simply being another major retailer.
Amazon is simultaneously a retailer, a marketplace, a search engine, an advertising platform, a logistics provider and a data company. For many consumers, it has become the first place they search when looking for a specific product, and that has important implications for the toy industry.
Historically, a child might see a toy advertised on television and then visit a toy shop with their parents. Today, a consumer might discover a product on TikTok, YouTube or Instagram and immediately search for it on Amazon. The journey from product discovery to purchase has become dramatically shorter.
This gives Amazon enormous influence over which products consumers ultimately buy. However, being listed on Amazon is not necessarily enough. Visibility increasingly depends on advertising investment, search ranking, consumer reviews, pricing, availability and fulfilment performance. Competitors are often only one click away.
For smaller toy companies, Amazon can therefore be both an extraordinary opportunity and a brutally competitive marketplace. The barriers to getting a product listed may be lower than securing a national listing with Walmart or Target, but the challenge of actually getting consumers to discover the product can be significant.
Walmart and Target Have Become Powerful Gatekeepers
In the United States, Walmart and Target remain critically important to the toy industry. A successful listing in Walmart can provide national scale almost immediately, while Target has become particularly important for companies offering differentiated, design-led, collectible and trend-driven products.
Both retailers are increasingly sophisticated buyers. They possess extensive sales data, understand consumer behaviour and can demand customised assortments, exclusive products and high levels of supply chain reliability. Because of their enormous scale, they also have substantial negotiating leverage with suppliers.
For a toy company, the relationship with a major retailer can therefore be both essential and challenging. Retailers want competitive prices, reliable supply, marketing support, exclusive products, rapid replenishment and strong margins. Increasingly, they also expect suppliers to participate in retail media programmes and other promotional activities.
Suppliers, meanwhile, want predictable orders, reasonable margins, long-term relationships and access to consumer data. Those objectives do not always align perfectly. And when one retailer represents 20%, 30% or even 50% of a company's business, there is little doubt about which side of the relationship has the stronger negotiating position.
Retailers Are Increasingly Asking for More
The relationship between retailer and supplier has become considerably more complex than it was in the past.
Traditionally, the commercial arrangement was relatively straightforward. The manufacturer developed and produced the product, the retailer bought it and then sold it to consumers. Of course, there were always negotiations over pricing, promotions and merchandising, but the basic relationship was clear.
Today, major retailers increasingly expect a much broader commercial partnership. Suppliers may be required to invest in retail media, sponsored advertising, digital marketing, promotional activity, exclusive products, customised packaging, specialist assortments and additional logistics services.
Retail media is particularly significant because major retailers have discovered that their consumer traffic and purchasing data are extremely valuable. Instead of simply earning money from selling products, retailers can now sell advertising access to the consumers visiting their websites and platforms.
For toy companies, this creates another cost of doing business. Getting a product listed is no longer necessarily the end of the sales process. In many cases, suppliers must also invest in making sure that consumers actually discover the product once it has reached the retailer's platform or shelves.
The International Picture Is Also Becoming Increasingly Concentrated
The United States is not unique in experiencing this trend.
Across much of the global toy market, a relatively small number of retailers dominate distribution. In the United Kingdom, specialist toy retail has become increasingly concentrated around a handful of significant players, while Amazon continues to exert substantial influence over online toy sales.
In continental Europe, major chains such as Smyths Toys, Carrefour, Auchan and other large retail groups have significant influence depending on the country. In some markets, hypermarkets and supermarkets remain particularly important, while in others specialist toy retailers dominate. In Australia and many other developed markets, a relatively small number of major retailers account for a substantial proportion of national toy sales.
The names may change from country to country, but the structural issue remains remarkably similar.
International expansion does not necessarily mean diversification. A toy company may sell products into ten or twenty countries but still be heavily dependent on a relatively small group of multinational retailers or dominant national chains. Funko's customer relationships provide a good example of this global pattern, with major retail partners including Amazon, Walmart, Target and GameStop in the United States, alongside Amazon, Smyths Toys and Carrefour in international markets.
There Are Genuine Advantages to Retail Concentration
It would be wrong to suggest that the growth of large retailers is entirely negative for toy companies.
There are substantial advantages to working with major retail organisations. Selling to five significant customers can be considerably more efficient than managing relationships with 500 independent accounts. Large retailers can reduce sales costs, simplify logistics and forecasting and provide access to sophisticated point-of-sale data.
Perhaps most importantly, they provide scale. A small toy company can potentially reach millions of consumers without having to build a huge direct sales and distribution infrastructure. A successful relationship with a major retailer can accelerate growth dramatically.
Major retailers can also provide valuable consumer insights that help suppliers make better decisions about product development, pricing, promotions, inventory and replenishment. Amazon and other online platforms additionally offer relatively accessible routes for companies wanting to test demand in international markets.
The problem, therefore, is not retail concentration in itself. The problem arises when concentration turns into excessive dependency.
The Biggest Risk Is the Loss of Negotiating Power
The fundamental issue is relatively simple.
If a retailer represents 5% of your business, you can probably afford to disagree with them. If a retailer represents 40% of your business, the relationship becomes considerably more complicated.
The retailer knows how important the business is to you, and that can inevitably influence negotiations over price, payment terms, promotional funding, returns, exclusivity, marketing expenditure and supply chain requirements.
This is basic economics. The more concentrated a supplier's customer base becomes, the greater the negotiating power of those customers. As retailers become larger and account for an increasing proportion of industry sales, suppliers can become increasingly dependent upon them.
That can create uncomfortable situations for toy companies. A supplier may know that certain commercial demands are damaging its margins or increasing its risk, but feel unable to challenge them because the potential consequences of losing the customer would be even worse.
The Consequences of Being Delisted Are Becoming More Severe
Retail concentration also increases the consequences of failure.
If a small independent toy shop stops stocking a product, it is disappointing but unlikely to threaten the entire business. If one of a company's top three customers removes its range, however, the consequences can be dramatic.
A major delisting can result in lost revenue, excess inventory, factory cancellations, cashflow problems and reduced production volumes. Lower production volumes can lead to higher unit costs, which in turn put further pressure on margins.
The situation can become self-reinforcing. A company loses business with a major retailer, its factory volumes decline, purchasing costs increase and profitability weakens. With less money available for marketing and product development, the company's competitive position can deteriorate further.
This is why customer concentration should be regarded as a significant strategic risk for toy companies, rather than simply being seen as a normal part of doing business.
Could Retail Consolidation Also Reduce Innovation?
There is another potential issue that receives less attention.
Could the increasing concentration of retail power eventually reduce innovation in the toy industry?
Large retailers understandably prefer products with a high probability of success. They want reliable suppliers, predictable supply chains and products that fit established categories. They are accountable for sales performance and cannot afford to fill valuable shelf space with products that have little chance of selling.
The difficulty is that genuinely innovative products are often difficult to predict. The next major toy phenomenon may not look like anything currently on the market.
Historically, specialist retailers and independent stores have often provided an important testing ground for unusual, innovative or niche products. Smaller retailers can sometimes take risks that major national chains cannot. They may be more willing to support an emerging brand, an unusual concept or a product that does not fit neatly into an established category.
If the retail landscape becomes dominated by fewer giant buyers, there is a risk that product assortments become increasingly conservative. Retailers may naturally gravitate towards established brands, major licences, proven product formats and existing suppliers.
That could make it harder for smaller companies and independent inventors to break into the industry. Ironically, however, major retailers need innovation just as much as anyone else. Consumers eventually become bored with seeing the same products, and the future growth of the industry depends upon new ideas continuing to reach the market.
Direct-to-Consumer Could Provide Part of the Answer
One potential response to retailer concentration is the continued growth of direct-to-consumer business.
The internet has made it possible for toy companies to develop direct relationships with consumers through their own websites, social media platforms, crowdfunding campaigns and other digital channels. Companies can now sell through their own websites, TikTok Shop, Kickstarter and other specialist platforms.
Direct-to-consumer offers some obvious advantages. Manufacturers can retain greater control over pricing, collect consumer data, test new products, build communities and launch limited editions. In some cases, margins may also be higher than through traditional wholesale channels.
However, direct-to-consumer is not a perfect solution. Building consumer traffic is expensive, digital advertising costs money and logistics and customer service require additional capabilities. Competing for consumer attention online can, in some ways, be just as difficult as competing for shelf space.
For most toy companies, direct-to-consumer is unlikely to replace major retail distribution entirely. What it can provide, however, is something extremely valuable: diversification.
The Most Successful Toy Companies Will Probably Be Omnichannel
The future of toy distribution is unlikely to be about choosing between traditional retail and direct-to-consumer.
The strongest companies will probably use multiple channels simultaneously. A modern toy company may sell through major mass-market retailers, specialist toy retailers, Amazon, other online marketplaces, direct-to-consumer websites, social commerce platforms, international distributors and independent retailers.
The objective should not necessarily be to avoid major retailers. That would be commercially unrealistic for many businesses.
Instead, the objective should be to avoid becoming dangerously dependent upon any single retailer or channel. Major retailers can remain enormously important commercial partners without becoming existentially important to the future of the company.
That distinction could become increasingly important during the next decade.
Retail Concentration Is Changing What Toy Companies Need to Be Good At
The rise of increasingly powerful retailers is also changing the capabilities required to operate a successful toy company.
Twenty years ago, a toy company might have focused primarily on product development, manufacturing, sales and marketing. Those capabilities remain essential, but they are no longer sufficient on their own.
Companies increasingly need expertise in e-commerce, retail media, digital marketing, data analytics, search optimisation, marketplace management and consumer community building. The modern toy company is becoming part product company, part media company and part technology company.
Those businesses that successfully adapt to this changing environment may thrive. Those that continue to rely entirely on traditional retail relationships, without developing alternative routes to market or stronger direct connections with consumers, could find themselves increasingly vulnerable.
Could Retailers Eventually Become Too Powerful?
There is also a broader question for the industry.
At what point does retailer concentration become unhealthy?
Retailers need suppliers, suppliers need retailers and consumers need both. A healthy industry requires a reasonable balance of power between the different participants.
If retailers become too dominant, suppliers may struggle to invest sufficiently in product innovation, brand building, marketing, manufacturing quality and long-term intellectual property development. If supplier margins become excessively compressed, the industry's ability to invest in the future could eventually be affected.
That would not necessarily benefit retailers either.
Retailers depend upon exciting new products to attract consumers. The toy industry cannot survive indefinitely on established franchises and proven product formats. New ideas are the lifeblood of the business.
The challenge is ensuring that the commercial structure of the industry continues to provide sufficient opportunities for innovation, experimentation and new companies to emerge.
The Toy Industry Needs More Routes to Market – Not Fewer
Perhaps the most important conclusion is that the toy industry should welcome the growth of major retailers while actively encouraging alternative routes to market.
A healthy toy industry needs large mass-market retailers, specialist toy chains, independent toy shops, online marketplaces, direct-to-consumer brands, social commerce platforms, crowdfunding businesses and international distributors.
The more routes a product has to reach consumers, the healthier the overall ecosystem is likely to be.
The danger comes when too much power becomes concentrated in too few organisations. When that happens, a relatively small number of buyers can increasingly influence which products consumers see, which companies succeed, what prices are considered acceptable and which innovations ultimately reach the market.
That is an extraordinary amount of influence for any small group of organisations to possess.
Conclusion: The Retail Giants Will Become Even More Important – But Dependency Remains Dangerous
The global toy industry is undoubtedly becoming increasingly dependent on a relatively small number of major retailers.
Amazon, Walmart, Target and other retail giants possess enormous influence over the commercial success of toy companies. Their scale offers tremendous advantages, including access to millions of consumers, sophisticated data, efficient distribution and the ability to help companies grow rapidly.
However, greater concentration also means greater dependency. Greater dependency can mean reduced negotiating power, and reduced negotiating power can ultimately affect margins, innovation and the long-term health of toy companies.
The smartest toy businesses will not attempt to avoid major retailers. That would make little commercial sense.
Instead, they will recognise the importance of diversification. They will build strong relationships with the world's largest retailers while simultaneously developing alternative routes to market. They will invest in direct-to-consumer capabilities, maintain relationships with specialist retailers, explore social commerce and seek to build stronger direct connections with consumers.
Most importantly, they will try to ensure that no single retailer has the power to determine their entire future.
Because in the modern toy industry, getting listed with a major retailer can transform a business.
But becoming too dependent on one can also leave that business dangerously exposed.
The future of the toy industry may not be about whether retailers become bigger. They almost certainly will.
The more important question is whether toy companies can maintain enough independence, diversity and bargaining power to thrive alongside them.
That could become one of the defining strategic challenges for the global toy industry during the next decade.
