Costa Mesa’s Vizio Inc., a seller of flat-panel TVs, grabbed the No. 1 spot in its market in the second quarter in a coup that surprised industry watchers.
Vizio beat out big players Samsung Corp., Royal Philips Electronics NV and Sony Corp. with a big gain in market share in the quarter, according to El Segundo-based researcher iSuppli Corp.
The company jumped four spots on iSuppli’s list of liquid crystal display TV makers, ranked by shipments in North America. The company ranked No. 5 in the first quarter.
Vizio had about 14% of the North American market, up from about 9% in the first quarter.
It passed up some longtime dominant players: No. 2 Samsung, which had 11% of the market in the second quarter; No. 3 Sharp Electronics Corp., which had 10%; No. 4 Philips, which had 8%; and No. 6 Sony Corp., which had 6% and ranked No. 3 in the first quarter.
Vizio shipped 606,402 TVs in North America in the quarter, up more than 76% from the first quarter, according to iSuppli.
The company got a big boost in sales from new retailers, most notably Wal-Mart Stores Inc. and Sears Holdings Corp.
Vizio also sells through Circuit City, Kmart, Costco, Wal-Mart’s Sam’s Club and BJ’s Wholesale Club.
Industry watchers were anticipating a gain for Vizio,but not a takeover, according to iSuppli analyst Riddhi Patel.
“A year and a half ago, Vizio was an unknown brand,” Patel said. “They have gained great brand recognition. We anticipate that adding Wal-Mart and Sears to the mix is going to be a good move.”
Sales for the privately held company are $1 billion at the half-year mark and are expected to double by year’s end.
Vizio is growing as a cheaper alternative to the big-name brands. The company is riding a wave of growing sales of digital flat-panel TV, according to iSuppli.
Customers are being spurred to buy because of falling prices. Regulation requiring broadcasters to end analog broadcasts in favor of digital in 2009 also are a factor.
Prices for liquid crystal display TVs are falling fastest for 40- and 42-inch screens,at a rate of about 40% from the end of last year, Patel said. For smaller sizes, prices have fallen about 32% during the same period, she said.
Flat-screen TVs are being sold and promoted in more places than ever before, according to Patel.
“Now most brands are available across all types of retail stores,” she said. “You can walk into Wal-Mart and find a Sony.”
You’ll also find a Vizio alongside, often at hundreds of dollars less than Sony and Samsung.
Vizio founder and Chief Executive William Wang said he likens the company’s strategy to the low-cost approaches taken by PC maker Dell Inc. and budget airline Southwest Airlines Co.
The company’s 42-inch LCD set sells for about $1,000. Samsung sells a 40-inch LCD set for about $1,600.
“We have always had a vision that the flat TV should be more affordable, so that its adoption in the U.S. will be faster,” Wang said. “By using price, we are always trying to increase the overall market share, not steal it from our competitors.”
The market is growing. But Vizio took sales from big rivals in the second quarter: Samsung and Sharp were down nearly a percentage point. Philips was down more than 3 percentage points. Sony was off 5 points.
Among big names, only LG Electronics Inc. was up in the quarter.
Competition Looms
Big TV makers are likely to ramp up their own low-cost lines to compete with Vizio, iSuppli’s Patel said.
The other brands are going to react with price cuts for similar products,” she said. “They are going to maintain a premium line. But they are also going to have a lineup that competes with Vizio. There will be a lot more aggressive marketing.”
Wang runs a tight ship at Vizio.
“We kept ourselves pretty lean and efficient and overhead low,” he said. “We keep our inventory turn very fast and our cash flow coming in extremely fast.”
The company has about 85 workers in Costa Mesa,most are customer service and tech support representatives.
Nearly all design, manufacturing and packaging is done in China, Taiwan and Mexico, making Vizio essentially a sales and marketing arm for factories abroad.
Shipping is outsourced, too.
At this stage, Wang said he’s looking to cement Vizio’s reputation with customers,many of whom are first-time digital TV buyers, he said.
“To make our brand more attractive, price by itself won’t do it,” Wang said. “The brand has to do with customer loyalty and trustworthiness. The product has to be decent. But customer satisfaction after the sale is just as important.”
Vizio has put a lot of planning into what’s known by marketers as “the out-of-the-box experience.”
Each TV comes with a “quick start guide” that explains the parts of the TV that are needed to get it working, according to spokesman Jim Noyd.
“They are really proud of that,” Noyd said. “It’s exactly written for people who know nothing about TVs.”
Since the company began including the guide, customer support calls and returns to stores have dropped, Noyd said.
To keep hold of its market share, Vizio is stepping up spending on advertising and gearing up for the football season with sports-themed campaigns.
Its target customer?
“The couch potatoes,” Wang joked. “We are aiming at the mainstream American TV buyer, usually male, who is mostly very interested in sports.”
The company recently inked an endorsement deal with the NFL’s 2006 most valuable player, LaDainian Tomlinson. The first in a series of commercials featuring Tomlinson, known as “LT,” is set to run this week.
Vizio also has deals with the Los Angeles Angels of Anaheim, the San Diego Chargers and the Los Angeles Clippers.
“There’s no magic to it,” Wang said. “We have to keep on doing what we have been doing,and do it better.”
