Walmart could soon find itself in the television business. And what that could ultimately mean for consumers - and the broader television industry - is something many market watchers are now keeping a close eye on.
The company on Tuesday announced plans to acquire television manufacturer Vizio for $2.3 billion. The deal, which is subject to regulatory approval, would give Walmart a foothold in the television market, where, until now, it's been content to solely sell TVs. With its Vizio acquisition, Walmart is instead joining the television market.
The move may create more questions than answers. For one, Walmart is now planning to sell its own televisions alongside competing televisions. And what that could mean for competition and whether it would give competing manufacturers a fair shake on store shelves remains to be seen. Similarly, it calls into question whether other retailers, like Target or Best Buy, will want to sell Vizio televisions that would bolster its competitor Walmart's bottom line.
The implications are potentially major. Vizio owned 10.4 percent of the U.S. television market last year, according to data from TrendForce. And the market researcher believes Vizio is poised to expand its market presence even further in 2024.
"Although Vizio's market share dropped to 10.4% last year, Walmart's acquisition is expected to propel it past Samsung, making it the largest TV brand in the U.S.," TrendForce said.
An eye on advertising
For its part, Walmart said that its focus is not necessarily on being in the television business but instead on Vizio's advertising business.
Vizio currently has more than 18 million users across the U.S., according to TrendForce data. And all those users are not just using its televisions - they're also interacting with the company's onboard SmartCast TV operating system. SmartCast features a host of apps, along with a full-fledged advertising business that displays brand ads to Vizio television owners. Walmart sees its Vizio acquisition as an entrée into television ads.
The Vizio acquisition "enables a profitable advertising business that is rapidly scaling" through SmartCast, Walmart said in a statement on Tuesday.
Walmart's advertising business currently hovers at about $2.7 billion. The Vizio deal allows Walmart to expand its ad network to millions of more television owners.
"Walmart is positioning the company to compete with Google, Amazon, and Roku with its own CTV platform to advertise direct to consumer," Wedbush Securities analyst Alicia Reese told Tech Times in an interview. "The proposed deal, if consummated, would allow the United States' largest retailer to leverage TV viewership data to market its products across its ecosystems, offer direct e-commerce sales on the CTV platform, and gain additional data on its viewers and customers to assist other advertisers in targeting on its platform."
For Walmart, therefore, it's an opportunity to not only grow its advertising business but critically for consumers to gain more information and data on the things Vizio owners watch, the content they engage in, and more. Whether consumers will want Walmart to have that data at its disposal, however, remains to be seen. And whether that concern with Walmart having user data will ultimately translate to a drop in sales is something to watch.
A decline in sales?
Indeed, Wedbush Securities analyst Michael Pachter thinks Vizio's sales could be affected by this acquisition - and not in the way Walmart may like. Pachter said that he is "baffled by the acquisition" and doesn't see the rationale for doing the deal.
In addition to the advertising angle, Pachter said that he believes Walmart sees this as an opportunity to create some exclusivity.
"I can only surmise that Walmart intends to expand the branding to other consumer electronics and to white label everything as Vizio, much like Amazon does with food products under the 365 label at Whole Foods," Pachter said in an interview.
However, he cautioned that such a move may backfire. He doesn't necessarily believe that consumers will respond favorably to white labeling, and Walmart's own competitors may cringe at the idea of selling its products.
"Vizio will be perceived to be a 'store brand,' which could cause other retailers to balk at carrying Vizio products," Pachter said.
Ultimately, Pachter believes the inevitable conclusion is Vizio becoming an exclusively Walmart-only product "shunned by competitors or by [Walmart's] design." Either way, he says, that could translate to lower sales.
The future, therefore, is decidedly in doubt for Walmart and Vizio. While the TV maker has solidified itself as a high-quality manufacturer with affordable pricing, its next phase may center on Walmart-only sales and a strong focus on advertising. And Walmart will have some deciding to do on how it wants to shape its TV-sales strategy and how it plans to not only grow Vizio's business, but maintain its existing customer base.
Along the way, consumers will need to decide if they want to entrust Walmart with their viewing data - a prospect not necessarily set in stone.
About the author: Don Reisinger is a longtime freelance writer who has written on topics as far-ranging as technology and business to science topics. His work has appeared in a variety of publications, including Fortune, Inc., The New York Times, Business Insider, Tom's Guide, and many others. Follow him at https://muckrack.com/donreisinger and https://twitter.com/donreisinger
