The Toys “R” Us Bankruptcy and the R&D Tax Credit Aspects of 3D Printing

3D printing is a disruptive technology affecting nearly every manufacturing industry, with the toy industry being no exception.  Increased competition from online retailers and other technology oriented developments (that include 3D printers and home manufacturing) has forced Toys “R” Us to rethink its business strategy for the future. The once-dominant toy industry giant with over 1,600 stores in 38 countries has recently filed for bankruptcy: although the company doesn’t plan to close all stores, many brick and mortar closures are anticipated.  This news potentially opens an opportunity for toy designers and manufacturers utilizing 3D printers to fill the gap. New strategies should focus on embracing 3D printing and designing open source, with technology developments providing an excellent opportunity for R&D Tax Credits, which are available to stimulate innovation.

The Research & Development Tax Credit

Enacted in 1981, the federal Research and Development (R&D) Tax Credit allows a credit of up to 13% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

• New or improved products, processes, or software
• Technological in nature
• Elimination of uncertainty
• Process of experimentation

Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent. On December 18, 2015 President Obama signed the bill making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum Tax (AMT) and startup businesses can utilize the credit against $250,000 in payroll taxes per year.

Toy Industry & 3D Printing

The toy industry has the potential become one of the largest beneficiaries of 3D printing, with the industry projected to be worth $135 billion by 2020. 3D print users stand to etch out a significant piece of this market, as toys are commonly ideal shapes and sizes for 3D print manufacturing and are typically made from common 3D print materials that include plastics, carbon fibers, and ceramics. This allows for the development of replacement parts, missing accessories and new features via 3D printers.

The toy industry has increasingly realized the potential for allowing users to create their own toys and parts. In 2017, Mattel plans to release ‘ThingMaker,’ a 3D printer geared towards children that pairs with an accompanying software application and allows users to print a range of toys that includes jewelry and figurines. Simiarly, XYZprinting offers the ‘da Vinci miniMaker,’ which allows users to print smaller items of varying shapes. Parents and the educational community have embraced these offerings as they’re seen as a way for children to use their creativity and imagination while building a foundation to learn technology and engineering skills.

Custom Toys

3D printers provide the ability to produce toys of unique styles, dimensions and preferences. Traditionally, consumer choices for dolls or plastic cars were limited to limited models which were available in a small range of colors or sizes. With the emergence of 3D printers however, users can mix and match a seemingly never-ending number of permutations, creating custom toys that are unique. Shapeways has recently unveiled a platform called ‘SuperFanArt,’ allowing users to sift through unique toy models, customize, and order them 3D printed.  My Little Pony, Transformers, Dungeons & Dragons and other toys can be 3D printed in varying sizes, colors and shape patterns.

Cost Savings

Perhaps the largest benefit of 3D printers in the toys market involves the cost savings.  Not only does the consumer save on shipping and logistics costs (which are either internalized within off-the-shelf brick and mortar projects or charged directly with online purchases) but cost reductions also exist in manufacturing. In a study published in July 2017 by Emily E. Peterson and Joshua Pearce of Michigan Technological University, researchers found that 3D printing toys is on average about 75% cheaper than traditional manufacturing of comparable toys. One noted example involves Lego blocks, where it is estimated that the cost of an individual Lego block can be reduced from 6 cents to 0.5 cents by utilizing 3D printing.

Conclusion

3D printing is currently disrupting the toy making industry. One way for traditional toy companies such as Toys “R” Us to adapt to modern trends is by embracing technology by offering open source toy designs and printable accessories, allowing consumers to benefit by saving on costs. When technologies such as these are utilized, Research and Development Tax Credits are available to stimulate innovation.

Discuss this and other 3D printing topics at 3DPrintBoard.com, or share your thoughts below. 

Charles R. Goulding and Michael R. Wilshere of R&D Tax Savers discuss 3D printing and the toy industry.