Retail investors can easily buy 1 lot with a simple transaction, but if large institutions buy 10k lots and execute a market order directly, it will cause prices to spike and costs to spiral out of control.

This is the market impact cost that must be avoided.
For large institutional traders, the core task is not predicting price movements, but finding and accumulating enough liquidity to complete large trades without attracting market attention.
And the stop-loss orders set by retail investors are precisely the liquidity they most desire.
So now you understand why the market needs retail investors?
Because you and I are both exit liquidity for institutions.