The "top four players" will take 54.7 per cent share of the market, say analysts.
Toy retail is set to face some of its toughest tests over the next few years, starting this Christmas.
According to IBISWorld, toy retailers will continue to experience tough trading conditions over the next five years to 2017-2018, with "industry revenue forecast to increase only marginally".
It says that due to fluctuatons in household disposable income, industry revenue is expected to decline at a compound annual rate of 1.8 per cent in 2013, to £1.23 billion.
IBISWorld also reckons 'the top four players' in toy retail will have 54.7 per cent share of industry revenue in 2012-2013, including Toys R Us, Early Learning Centre and The Entertainer.
And multichannel experts Powa Technologies says that toy retailers are under even more pressure this Christmas than usual, 'to deliver 40 per cent of their yearly profits as the end of the year approaches'.
IBISWorld industry analyst Andrew Johnson said: "Intense pressure from external players such as department stores, supermarkets, variety stores and online retailers has led to significant price-based competition across the industry and has created a challenging marketplace for toy retailers."
Dan Wagner, CEO and Chairman of Powa Technologies, added: "Convenience has been a real driver in the take up of online shopping and it now is do or die for retailers in terms of embracing how consumers interact with stores and their products.
"Multichannel shopping is now how consumers buy their items in a process that includes tablets, mobile phones and computers, as well as the High Street. Successful retailers will be the ones that subscribed early to this shift in the landscape and supported their customers in buying their goods when and where they feel most comfortable. The High Street certainly isn’t dead, it’s just being used differently, and the sooner retailers realise this, the better."
However, new research from Hitachi Consulting UK shows that 65 per cent of Brits still prefer to shop in-store rather than online, according to a survey of 1,000 UK consumers.
Chris Gates, director of retail at Hitachi Consulting UK, said: "Despite the massive growth in online shopping over the years, it’s good to see that consumers haven’t fallen out of love with the British High Street.
"The retail sector has clearly been having a difficult time lately, but our research shows that in-store shopping still has a crucial role in the modern shopping journey."
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