It could be lost, yes, or the sender could be stretching the truth. Did they really post it then? Also, they aren't necessarily delivered in the order that they are sent. Believe it or not, once an item is 'late' it becomes low priority, as it's late, and prioroty is given the other items that aren't late, in order to reach targets.
Some areas still have serious backlogs due to the weather, and to changes ('Revisions') at Royal Mail.

Roughly what area do you live, and where was it posted from?

I think you should have received it by now, even if it was second class. First I would go to your local delivery office and ask them firmly to check. Sometimes a postman might forget to put a 'sorry you were out' card through your door, and it might be there waiting for you. After that the only thing to do is get a refund (or another cuddly toy) from the seller. They will have to claim from Royal Mail. Hopefully they will have proof of postage. You may be asked to fill a form in just confirming that you didn't receive the item. A good seller would refund you straight away, but some might make you wait until they get their compensation from Royal Mail. Don't let them fob you off, it's their duty to refund you, not send you the proof of postage and expect you to make the claim. They should have sent recorded or special delivery for their own benefit.

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