William Wang predicated the entire business model of Vizio around volume sales with discount retailers, extremely lean operating expenses to drive profitability. The following headers comprehensively elucidate Vizio’s business strategy.
Low Margins, High Volume: Unlike other major players in the HDTV manufacturing business, Vizio had razor thin margins (reported to be around 0.5-4%), very low inventory and their inventory turnover was one of the quickest in the industry. They focuses their entire sales efforts via deep discount retail channels such as Costco and eventually made its way to bigger names such as BJ’s and Walmart. This strategy also enabled them to cut down on selling and advertising expenditures. To serve their motto of selling a high volume of products, Vizio aggressively expanded in the international market as well, namely Japan and Canada. Vizio’s overhead costs were 0.7% of sales, as compared to 10-12% of the bigger sellers like Sony and Panasonic.
Efficient Supply Chain Management: Owing to Wang’s internal connections and experience in the electronics assembly business, Vizio was able to forge meaningful and flexible relations with its suppliers, which added greatly to the value of Vizio. Wang was able to maintain healthy relationships with its panel manufacturers and ODMs, especially Amtran which provided more than 80% of Vizio’s procurement and assembly work. This strategic alliance enabled Vizio to not only ensure the quality of their product, but also supported each other with synchronized activities and flexibility of operations.
Distribution Channel: Vizio utilized the deep discount retail channel as their primary source of distribution. This enabled them to cut selling and administration expenses, while at the same time garnering a greater exposure to their potential customers. Vizio was able to establish itself as a leading supplier of HDTVs to all the big brand discount stores such as Costco, Walmart, Bj’s etc.
Branding: Vizio was successfully able to break away from the stigma of being a cheaply assembled television, despite its extremely low price in comparison to Sony or Samasung. Their fundamental ideology was to assemble a high quality HDTV, with absolute zero features that the customers didn’t want, and in the most economical way possible. Despite having low gross margins, Vizio was able to change the
