Will Vizio lose its No. 1 crown in TVs this quarter?

Inventory changes increased sales of Vizio flat-panel TVs in second quarter.

Update--Vizio stunned the consumer electronics world when it became the No. 1 seller of flat-panel TVs in North America.

But it may be only a temporary victory.

Vizio

During the second quarter, Costco and Sam's Club, the two primary retailers of Vizio TVs, asked the company for more TVs than normal to increase their own inventories, according to a Vizio spokesman. The store chains typically had been carrying one to two weeks of inventory. They requested that the inventory be increased to three to four weeks. (Costco, by the way, declined to comment.)

As a result, Vizio experienced a sudden acceleration in sales. Look at the second quarter numbers released in August by analyst firm DisplaySearch. In the second quarter, Vizio saw unit shipments of flat-panel TVs--which includes plasma and LCD TVs--increase 340 percent from the first quarter in 2007, a whopping jump in three months. Market share jumped from 8.8 percent to 11.9 percent.

Samsung, meanwhile, saw growth of 67 percent in flat-panel TVs for the same period, but saw market share decline from 14.4 percent to 11.3 percent. The other name-brand manufacturers grew at slower rates or even saw sales shrink. The market as a whole grew by 65 percent. Vizio, thus, was growing at more than five times the market rate. (Again, these numbers only reflect North American sales. Samsung is still No. 1 worldwide in LCD TVs and TVs overall.)

Meanwhile, iSuppli said that Vizio sold 606,402 LCD TVs in North America in the second quarter, a 76 percent jump from the first quarter. That put Vizio in first place among LCD TV vendors, with a market share of 14.5 percent, up from 9.4 percent, or fifth place.

Isuppli counts sales in to retailers, not out to consumers.

With inventory now at the levels requested by the companies, sources--at competing TV companies--allege that Vizio will see sales flatten out this quarter.

Does that mean the company will drop to second place or lower? It's hard to say, but there's a really strong chance. We will know soon because iSuppli and DisplaySearch are due to come out with third quarter numbers later this month.

"It likely will," said Riddhi Patel, an analyst with iSuppli, in a call after the story posted. Vizio also added Wal-Mart, Sears and K-Mart as customers in that quarter, so there was a lot of channel stocking activity.

Still, the company is enjoying a surge of interest among consumers because of its low prices. The company's TVs typically sell for less than similar-sized TVs from Sharp, Sony or Samsung.

It was growing rapidly, after all, even before the inventory changes. Two years earlier, in the second quarter of 2005, Vizio was ranked No. 15 in North America. In other words, not all of the TVs it shipped went into inventory at Costco.

The company may potentially benefit from further unanticipated inventory changes. The inventory of Vizio TVs remains below the inventory levels the stores carry for other vendors, according to the company. Seven or more weeks is normal for other vendors, said Vizio. Thus, the retailers may ask the company to boost inventory, which could then allow the company to rebound from a third quarter decline.

Then again, the established players haven't exactly taken kindly to the success of Vizio and other "silver box" TV makers. At CES, many of the major companies were somewhat dismissive of the small fry. Although the big companies do have better reputations for quality and service, price catches the eyes of consumers.

You can expect to see aggressive prices this holiday season. Hitachi recently told me that it will ramp up its marketing operations in the U.S. to gain more share in TVs.

By the way, tip of the hat to Gary Merson of HDGuru, who told us that it would be worthwhile to look into the inventory issues.

 

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