The Bubble Pops: When $30 Million of Toys Hit the Landfill

Part 3 of 3 in the Funko Chronicles

Picture this: Somewhere in a Utah landfill, perfectly good Captain Planet and WALL-E Funko Pops are decomposing next to actual garbage. The irony is thick enough to cut with a vinyl knife.

In early 2023, Funko made one of the most dramatic business decisions in toy industry history: they dumped $30-36 million worth of inventory straight into landfills. Not defective products. Not damaged goods. Just too many toys that were taking up too much space.

This is the story of how a hype machine became its own worst enemy.

The Warning Signs

By 2022, Funko was riding high. They'd crossed $1 billion in annual revenue in 2021 - a 58% jump from 2020. The "kidult" market was booming, and Funko seemed unstoppable.

But behind the scenes, trouble was brewing:

Inventory Crisis:

• Warehouse inventory: $246 million (up 48% from previous year)

• Arizona distribution center: Running at 100% capacity (should be 80%)

• Extra storage: Renting containers just to hold excess product

• Cash flow: Tied up in unsold toys gathering dust

Funko had become a victim of its own success. The "license everything, produce everything" strategy that powered their growth had spiraled out of control.

The Tipping Point

The breaking point came in Q4 2022. Funko's new CEO (an ex-Amazon executive brought in to fix operations) looked at the numbers and made a cold calculation:

The cost to store and manage excess inventory was greater than any money they'd ever recover by selling it.

So they made the call that shocked the business world.

$30 Million Down the Drain

The Numbers:

• Inventory destroyed: $30-36 million worth

• Q4 2022 loss: $47 million (vs. $17 million profit the previous year)

• Staff layoffs: ~10% of workforce

• Stock price: Tanked on the news

The decision wasn't made lightly. Funko explored alternatives:

• Deep discounting: Would damage brand value

• Donation: Logistics costs still too high

• International markets: Shipping costs prohibitive

• Component recycling: Vinyl doesn't break down easily

In the end, the landfill was the most cost-effective option. Cold? Yes. Rational? Unfortunately, also yes.

The Aftermath: Corporate Soul-Searching

CEO Brian Mariotti admitted publicly: "We had too much stuff." Simple words that summarized a complex failure of forecasting and inventory management.

What Went Wrong:

• Overproduced obscure characters that few wanted

• Misjudged cooling demand post-pandemic

• Failed to account for the psychological fatigue of collectors

• Supply chain couldn't adapt quickly enough to demand changes

The company implemented new systems:

• Better demand forecasting algorithms

• Stricter approval processes for new products

• Geographic inventory balancing

• Focus on proven performers over experimental releases

The Broader Collectibles Bubble

Funko's crisis reflected a larger pattern in collectibles:

Historical Parallels:

• Beanie Babies (1990s): Ty Inc. overproduced, market crashed

• Trading Cards (1990s): "Junk wax" era ended with worthless cards

• Comic Books (1990s): Speculation bubble burst spectacularly

Common Factors:

• Artificial scarcity creates speculative bubbles

• Overproduction eventually floods the market

• FOMO-driven purchasing isn't sustainable long-term

• Collectors burn out when "everything is limited edition"

Fighting Back: The 2024-2025 Strategy

Funko didn't just accept defeat. They adapted:

Product Strategy Changes:

• Reduced new releases by 30%

• Focus on "evergreen" properties (Disney, Marvel, Star Wars)

• Premium limited editions with genuine scarcity

• Better coordination between licensing and production teams

New Limited Edition Program:

• Clear tier labeling (1 of 3,000, 1 of 500, etc.)

• Transparent scarcity communication

• "Bringing FOMO back" in controlled doses

Market Positioning:

• Competing more directly with premium collectibles

• Less focus on mass market saturation

• Quality over quantity messaging

Lessons from the Landfill

The great Funko dump of 2023 offers several business lessons:

Growth vs. Sustainability: Explosive growth without operational discipline leads to spectacular crashes.

Know Your Market: Even devoted fans have limits. Oversaturating your core audience backfires.

Inventory Management: In retail, too much product can be worse than too little.

Brand Dilution: When everything is "limited edition," nothing is special.

Environmental Responsibility: The optics of dumping toys while preaching pop culture values hurt Funko's brand more than the financial loss.

The David vs. Goliath Reality Check

Funko's troubles also highlighted the difference between established toy giants and upstart challengers:

Funko's Disadvantages:

• Limited diversification (almost entirely dependent on collectibles)

• No evergreen toy lines like Barbie or Monopoly

• Higher dependence on pop culture trends

• Smaller cash reserves for weathering downturns

What Funko Does Better:

• Faster response to cultural moments

• Direct fan community engagement

• Lower overhead than traditional toy companies

• Agile licensing and production

Looking Forward: Can Funko Recover?

As of 2025, Funko appears to be stabilizing:

• Inventory levels back to healthy ranges

• New leadership focusing on operational excellence

• Strategic licensing deals with major properties

• International expansion continuing

But questions remain:

• Has the collectibles bubble permanently deflated?

• Can artificial scarcity work in an oversaturated market?

• Will competitors like Youtooz and other vinyl toy makers eat market share?

• Has the brand's premium positioning been damaged?

The Verdict

Funko's journey from garage startup to billion-dollar company to landfill scandal to potential recovery is a masterclass in modern business volatility.

They proved that in the internet age, a toy company can build a global empire by tapping into fandom culture. They also proved that hype machines require careful calibration—too much acceleration and you crash spectacular crashes (sometimes literally into a landfill).

For collectors still displaying shelves full of Pops, the landfill incident serves as a sobering reminder: today's "limited edition" might be tomorrow's literal trash.

But Funko's story isn't over. In a culture obsessed with nostalgia and self-expression through consumption, there's still room for little vinyl ambassadors of our favorite characters.

The question now is whether Funko can grow up from a hype machine into a sustainable business—without losing the pop culture magic that made them special in the first place.

What did you think of the Funko Chronicles? Which part of their story surprised you most? And more importantly: are you still buying Pops after reading this?

Hit reply and share your thoughts on one of the wildest business stories in recent memory.