Walmart-Vizio Tie-up Poses Supply Chain Questions

Walmart’s just-announced acquisition of Vizio will draw plenty of attention, but not nearly what it deserves.

The spotlight is on the synergy between the world’s largest physical retailer and a Top 10 maker of smart TVs. Walmart, which already sells Vizio’s smart flatscreens by the boatload, is expected to benefit by expanding its ad-targeting capabilities to connected television, per Axios and other analysts.

But I find it intriguing for other reasons: It is an audacious revamping of the OEM-distributor relationship.

Walmart is in fact the world’s largest retailer, with annual revenues topping $635 billion. That’s well above that of Amazon ($350 billion range in retail; much larger if services are included). The margin grows if we subtract the billions in revenue Bezos and Co. collect selling their internally sourced brands, such as Eero routers, Kindle e-readers, Fire tablets and TVs, and of course Alexa and Echo smart home devices. And that’s just the electronics side of its vast private label businesses.

Walmart, of course, has its own private labels as well, but they tend to be in the home and sporting goods and automotive spaces. Electronics was an after-thought.

Adding Vizio, however, adds a $1.7 billion electronics arm, complete will all the requisite supply chain demands, from design to parts procurement to manufacturing to logistics. How will this affect Vizio’s sourcing strategy? Will Walmart overlay its procurement approach? Will Vizio’s competitors attempt to undercut their tie-up with Walmart by asserting that the new owners will give their own channels precious advantages on retail walls and shelves?

I’m not discounting the already robust Vizio supply chain practices, but there’s a learning curve both organizations are about to experience: Vizio with a new corporate overlord, Walmart with an outside team whose operational methods are almost certainly different than its own. Who will bend, and how?