Empty shelves and shuttered storefronts have become familiar in some of Mexico’s busiest shopping malls. Over the past year, significant toy store chains like Epic Land, Juguetrón, and Juguetibici have vacated retail locations, driven by internal restructuring—or perhaps the pressures of a constantly shifting market.

Whatever the cause, these vacancies reflect an undeniable truth: Mexico’s toy industry has been one of the retail sectors hardest hit between 2023 and 2024. According to SiiLA, toy retailers vacated three times as much space as they absorbed, leading to a 9% reduction in gross leasable area. Yet this does not imply the industry is declining. Toy stores continue to adjust their strategies, prioritizing more profitable locations and finding new ways to engage with consumers.

Currently, around 42% of toy sales in Mexico occur in shopping centers, according to the Mexican Toy Industry Association (AMIJU). The remainder is divided between traditional outlets, street markets, and flea markets, which account for over 50% of transactions, while digital channels comprise roughly 5%.

But with diversified sales channels, market growth, and key seasons like Christmas and Three Kings’ Day driving demand, why are toy retailers seemingly losing ground?

Beyond the empty storefronts left by a handful of companies—10 firms accounting for only one-fifth of the toy stores monitored by SiiLA—the industry faces deeper challenges. An uncertain economy, global logistics disruptions, and fierce competition are testing its resilience.

Data from INEGI and the Mexican Economy Secretariat indicates that, although the toy sector’s contribution to the manufacturing industry has gained ground over the past six years, it remains modest. Today, it accounts for less than 1% of the country’s manufacturing output, with annual sales nearing $3 billion. However, the AMIJU projects sustained growth for the next two years, with an estimated annual rate of 5.6%.

Nonetheless, the reality is that Mexico, rather than standing out as a significant consumer of toys in its domestic market, is distinguished as a key producer and exporter. This suggests that, while the national retail market remains relatively stable, the sector’s true strength lies in its ability to supply international markets. In fact, Mexico is home to the largest toy factory in the world: Lego’s plant in Ciénega de Flores, Nuevo León, whose production is almost entirely destined for export.

This duality presents a challenge for the sector: on the one hand, Mexican manufacturing must compete in a global environment dominated by giants like China; on the other, the domestic market faces pressures such as rising input costs, inflation, and competition from imported products.

Among these challenges, the dependence on imported inputs is among the most critical. According to INEGI, more than 50% of the materials used in toy manufacturing come from abroad, primarily from China, leaving the sector vulnerable to exchange rate fluctuations and global trade tensions. Furthermore, this reliance reflects a limited integration of national production chains, as less than half of the inputs are sourced locally, reducing the sector’s economic impact within the country.

The trade deficit compounds this situation, highlighting the sector’s heavy reliance on both imports and exports. In 2023, toy imports far exceeded exports, generating a trade deficit of over $570 million, according to the Ministry of Economy. On the one hand, more than 80% of imports come from China, which sets price and volume standards that are challenging for local manufacturers to match. Conversely, 92% of Mexico’s toy exports are destined for the United States, leaving the sector vulnerable to the volatility of a single market and limiting its reach to other international destinations.