Charles R. Goulding and Preeti Sulibhavi highlight the game-changing potential of additive manufacturing for retailers grappling with rising costs from China tariffs.
Retailers such as Walmart, Target, Lowe’s, and Home Depot are grappling with the anticipated economic impact of new China tariffs under a second Trump administration. These tariffs, poised to raise costs for goods sourced from China, have caused widespread concern across the retail sector.
Many large retailers have expressed apprehension about how these tariffs could drive up costs and impact consumers.
Walmart commented, “We’re concerned that significantly increased tariffs could lead to increased costs for our customers at a time when they are still feeling the remnants of inflation.” Lowe’s CFO Brandon Sink emphasized that nearly 40% of the cost of goods sold comes from imports, which could see a substantial increase in costs.
Target, meanwhile, declared it would not accept price increases from suppliers due to tariffs, urging its partners to develop contingency plans instead.
“Target will not accept any new cost increases related to tariffs on goods imported from China,” wrote Mark Tritton, executive vice president and chief merchandising officer for Target. “Our expectation is that you will develop the appropriate contingency plans so that we don’t have to pass price increases along to our guests.”
In a letter dated August 27, 2024, obtained by Oregon Public Broadcasting (OPB), Target informed businesses that fill its shelves (meaning their supplier) will have to absorb the increased cost of material imported from China.
Our view is that Target should assist its suppliers with 3D printiing product solutions in addition to merely telling them to simply absorb the additional costs, like Home Depot did (see below).
Home-improvement giant, Lowe’s, noted that Trump’s proposed tariffs would raise the costs of producing its goods.
“Roughly 40% of our cost of goods sold are sourced outside of the US, and that includes both direct imports and national brands through our vendor partners,” said CFO Brandon Sink in a call with investors on November 19, 2024. “And as we look at potential impact, certainly would add product costs, but timing and details remain uncertain at this point.”
Meanwhile, Home Depot projects the tariffs could impact up to US$2 billion in costs but is leveraging its diversified supply chain to manage the challenge effectively.
Home Depot’s CEO, Craig Menear, highlighted that over 50% of the company’s products are sourced within North America, which provides some insulation against the tariffs. The company is also exploring innovative strategies, including increased reliance on 3D printing technologies, to bolster domestic manufacturing and offset rising costs. This is a strategy we see Lowe’s could also benefit from.
How 3D Printing Can Solve Supply Chain Challenges
3D printing, or additive manufacturing, enables businesses to produce items on demand, reducing the need for extensive inventory and the risks associated with global supply chain disruptions. For retailers like Home Depot, this technology offers several strategic advantages, including localized production, customization, cost-reduction and sustainable practices with a reduced carbon footprint.
Home Depot’s 3D Printing Innovations
Home Depot has been a leader in integrating 3D printing into its operations. Three recent examples of its use include:
- Tool and Hardware Components: Home Depot has started leveraging 3D printing to create customized parts for tools and machinery, ensuring quick availability of hard-to-source items.
- Prototyping and Product Development: The company uses 3D printing for developing new product designs, accelerating innovation timelines, and reducing development costs.
- In-Store Customer Solutions: Home Depot has piloted 3D printing services in select locations, allowing customers to print parts for home improvement projects, such as plumbing fixtures or electrical components.
Home Depot partnered with MakerBot to offer 3D printing services in a pilot program, a decade ago in 2014. MakerBot 3D printers were available for purchase online and in select stores in California, Illinois, and New York. Dozens of Home Depot stores had MakerBot kiosks staffed by MakerBot workers to demonstrate how the technology worked.
Lessons for Lowe’s and Other Retailers
Lowe’s, which sources 40% of its goods externally, faces significant exposure to tariff-induced cost increases. By observing Home Depot’s advancements in 3D printing, Lowe’s could enhance its resilience in the following ways:
- Strategic Partnerships: Collaborating with 3D printing firms to establish domestic manufacturing facilities tailored to Lowe’s product range.
- Customer Engagement: Introducing in-store 3D printing kiosks to provide customers with tailored solutions for home improvement needs.
- Supply Chain Diversification: Incorporating 3D printing into the supply chain could decrease dependency on international vendors and mitigate the risk of tariff fluctuations.
Broader Implications for Retail
As geopolitical and trade uncertainties persist, embracing 3D printing technology allows retailers to reimagine their manufacturing and supply strategies. It aligns with trends toward localized production and customization, offering a way to remain competitive while maintaining affordability for consumers.
Online retailers like Etsy have already embraced 3D printing. For instance, Etsy has dedicated a part of its website to 3D printed collections that are fun and versatile. We see this trend emerging in the brick-and-mortar retail sector as well in the wake of increased China tariffs.
The Research & Development Tax Credit
The now permanent Research and Development (R&D) Tax Credit is available for companies developing new or improved products, processes and/or software.
3D printing can help boost a company’s R&D Tax Credits. Wages for technical employees creating, testing and revising 3D printed prototypes are typically eligible expenses toward the R&D Tax Credit. Similarly, when used as a method of improving a process, time spent integrating 3D printing hardware and software can also be an eligible R&D expense. Lastly, when used for modeling and preproduction, the costs of filaments consumed during the development process may also be recovered.
Whether it is used for creating and testing prototypes or for final production, 3D printing is a great indicator that R&D Credit-eligible activities are taking place. Companies implementing this technology at any point should consider taking advantage of R&D Tax Credits.
Conclusion
For retailers like Walmart and Target, expanding their use of additive manufacturing could also open new opportunities to meet sustainability goals and provide value-added services. In the wake of impending tariffs, 3D printing stands out as a critical tool for modernizing retail supply chains and reinforcing domestic manufacturing capacities.
By proactively integrating these technologies, companies can not only navigate the challenges of tariffs on Chinese goods, but also emerge more agile and innovative in a rapidly changing global market.
