August 20, 2007 1:20 PM PDT
The secret of Vizio's success
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August 20, 2007
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For Vizio, small is big. The company employs 85 people in the U.S., and most of them are in customer support. The company also has a few employees overseas. Most of the actual manufacturing is conducted by contract manufacturers. Lavish corporate parties and massive salaries are largely absent.
Vizio also emerged with an unusual distribution strategy. It started by selling TVs solely through Costco and Sam's Clubs, though it now sells some models in Wal-Mart, Sears and Circuit City. These retailers, which are selling an increasing number of TVs, typically are looking for gross margins on their products only in the 10 percent range. Electronics retailers are looking for 25 percent or more. For Vizio, that's a two-way benefit: the price of its TVs are comparatively lower than those from major manufacturers at electronics stores, and major manufacturers can't participate as fully as they'd like to at places like Costco.
The lower prices coincided with another trend: Customers became more acclimated to buying electronics at superstores. Thus, the company was selling cheap TVs at the places people were frequenting. Last year on Black Friday--the traditional blockbuster sales day just after Thanksgiving--Vizio sold between 35,000 and 37,000 TVs.
But will it be able to sustain its strong momentum? Most likely yes, especially since the frantic holiday sales season is nearly upon us, according to iSuppli's Patel. The third and fourth quarters are very important to the TV business, and iSuppli is betting that Vizio will continue to grow its shipments.
"Now, having said that, we do understand that other brands like Samsung, Sony and Sharp are not going to sit quietly," Patel said. "They are going to work on their pricing strategy or promotion plans to compete effectively with the onslaught Vizio has brought on."
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