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Will Recent Phone and Washer Recalls Affect Samsung TV Sales?

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Samsung-TV-225x140.jpgA middle-aged male consumer was recently looking at the TVs on display at a Sears store in Hicksville, New York. There were Kenmore and LG HDTVs in front of him, along with HD and Ultra HD Samsung models, when he commented to the woman standing next to him (likely his wife) that he wanted to avoid Samsung TVs due to the widely reported product recalls.

Just how widespread that consumer's reaction has been to Samsung's recalls of its exploding Galaxy Note 7 smartphones and 34 models of top-loading washing machines remains unclear. Reports about the defective problems started late in the third quarter, so it's a bit too soon for any quarterly sales reports to show whether Samsung has lost any market share since the product recalls were announced. And Samsung TVs sure seemed to be selling pretty well over the Thanksgiving/Black Friday weekend.

Industry analysts we interviewed didn't seem to think that the recall fallout has been, or will become, that significant for Samsung, especially on a long-term basis and especially when talking about products other than cellphones and washing machines. However, that could change if there's another high-profile Samsung product recall, Paul Gagnon, director of TV Sets Research at IHS Markit, told me on November 28. If that happens, Samsung (which didn't respond to a request for comment) might end up having a lot more to worry about than batteries causing phones to explode and the need to duck when those washing-machine covers start shooting into the air.

As it has for about the past eight to nine years, Samsung continued to dominate global TV shipments in the third quarter of this year, Gagnon said, citing the most recent data that his company reported. No manufacturer came anywhere close to catching up to Samsung's TV revenue market share. However, he explained that it was probably too soon for the product recalls to have any impact on Samsung TV sales, pointing to the fact that many TVs shipped in the third quarter were earmarked for the holiday quarter closing out the year.

Regardless, Gagnon said, "I really don't believe" that the product recalls will have any impact on Samsung's TV sales. "When we look at the kinds of companies that do get impacted by events like this, they tend to be brands that have less equity with consumers." He added, "I think that Samsung has done a pretty solid job of building up a lot of brand equity with consumers over the last decade. I think that the TV and the phone categories are dissimilar enough that it shouldn't have a direct impact on demand for TVs."

In addition, Samsung just has a "pretty overwhelming advantage over most of the other companies in terms of market share," he said, explaining: "They lead their second-closest competitor, which is LG globally, by double LG's market share."

Samsung was number one in global TV revenue market share for the third quarter, at 27.8 percent, up from 26.2 percent in the third quarter last year, he said. LG followed at number two globally, about flat at 13.5 percent. Sony's share inched up about half a percent at 8.7 percent, Hisense was about flat at 6.2 percent, and TCL was up a little less than a percent at 5.6 percent. In North America (U.S. and Canada), Samsung's TV revenue share was also far in the lead, growing about 4 percent to the mid-30 percent range, Gagnon said. LG was number two (up about 4 percent, thanks to OLED TVs gaining some traction), closely followed by Vizio (down a bit)--each with about a 15 percent share--while Sony was number four with about a 9 percent share, and the very promotional Funai (whose brands include Philips, Emerson, Sanyo, and Sylvania in the U.S.) was fifth.

Although Gagnon doubted whether the phone and washer recalls would have much of an impact on Samsung's TV business globally, the impact on Samsung down the road "all depends on if there are problems" with the smartphones that it introduces next year, he said. It "might be symptomatic of kind of a broader problem at Samsung" if it can't straighten out issues with its smartphone line or if "you start to see other kinds of quality-control problems in other electronics categories: DVD players, maybe some TVs."

But Gagnon said he had "never seen a problem" with product defects in Samsung's TV business at anywhere near the scale that is being seen with the smartphones or washing machines. So far, whatever data he has seen hasn't shown any impact from the recalls on Samsung's TV business. He added: "I think it would take a direct issue with one of their televisions ... to really dent their TV business because they just have so much momentum in that category."

Samsung-Note7.jpgRegardless, we shouldn't be too surprised, for the time being anyway, if some consumers are at least a bit hesitant to buy a Samsung smartphone, washing machine, or other device. "I think there will be a subset of consumers who will wonder about the safety of their Samsung products because of the Note 7, but I don't expect it to last very long," said Ben Arnold, executive director and industry analyst-consumer technology for NPD Group. "I think Samsung has built a very good reputation in televisions for quality, and as a product category TVs are fairly divorced from mobile phones," he told us by email, adding: "I think the Note 7 issues are topical now because it's a huge story right now, but I'm not so sure the matter stays top of mind for long. As news cycles go, something else is probably poised to replace it. I wouldn't expect someone buying a TV this time next year to recall the Note 7 and wonder if the product they are about to buy is safe."

Nevertheless, Arnold said he wasn't surprised to hear about a consumer looking to avoid a Samsung TV: "The story is on the news, and if you fly often like I do, the airlines remind you about it every time you get on a plane. I think it's natural to ask those questions right now because it's a big tech story, but again I'd be surprised if that conversation happens a year from now."

There have been consumer polls in the wake of the Samsung product recalls, but they have targeted a limited number of consumers with a very limited set of questions that didn't specifically factor in Samsung video and audio products. For instance, a Reuters/Ipsos opinion poll conducted between October 26 and November 9 found that current Samsung smartphone owners were as loyal to their brand as Apple iPhone customers. The same survey also found that consumers aware of the Note 7 recall were just as interested in Samsung phones as those who weren't aware of the recall.

That poll didn't specifically mention the recalled washing machines or ask if the respondents would consider buying specific Samsung products, including TVs and speakers. Respondents were asked only "how likely are you to buy another Samsung product in the future?" To that question, 49 percent said they were "very likely" to do so, compared to 33 percent who said they were "somewhat likely," 8 percent who said they were "not very likely," and 5 percent each who said they were either "not at all likely" or "don't know."

Any way you slice it, those responses are good news for Samsung and certainly seem to suggest that most consumers aren't ruling out Samsung TVs or other video and audio products.

Forty-nine percent of those polled even said they were "very likely" to buy another Samsung smartphone in the future, and 29 percent said they were "somewhat likely" despite the Note 7 recall, according to the findings of the Ipsos/Reuters poll. A sample of 7,514 Americans 18 and older were interviewed online for the poll, Ipsos said.

ReportLinker, meanwhile, surveyed 500 adult consumers between October 24 and 26. The results of that poll also indicated that few consumers wouldn't consider buying a Samsung smartphone despite the Note 7 recall. Respondents weren't asked if they would avoid buying other Samsung products, such as TVs, due to the phone recall, ReportLinker spokeswoman Intissar Guettou said. But she said, "We can assume that, if the impact on Samsung phones has been so insignificant, it must be even smaller on other Samsung products." She conceded, however, that to really gauge that "would require another study that we haven't conducted yet." Then there's also the fact that only 500 people were polled for the study.

The impact of the Samsung smartphone and washer recalls has affected retailers to varying degrees. While some appliance and CE dealers--like Sears and Florida/Georgia retailer BrandsMart USA--only carry one of those two product lines, others carry both, along with other Samsung products.

"We did not carry the phones that were recalled. We did carry the washing machines that were part of the recall and have addressed that with our consumers," Angus Bryan, senior vice president of merchandising at BrandsMart USA, told us by email. "We have not heard any issues from customers concerning buying other Samsung products," he said.

As of November 1, the recalls had impacted sales of Samsung smartphones at Abt Electronics in Glenview, Illinois, said Mark Sasicki, its TV buyer. But "washers are still selling at a steady pace. What is interesting is that we are taking a lot of calls from customers that bought washers that are not Samsung asking if there has been [a] recall," he said. That would, obviously, be welcome news to Samsung.

"Obviously this has not been great" for Samsung, "but overall I believe that consumers like and trust the quality of their products, so [while] a small few may shy away, the masses have continued to be drawn to them from their previous experiences," Sasicki added.

We'll have a much better sense of just how much the recalls have impacted Samsung's total business and sales of products, including TVs, in 2017. If we start to see LG, Vizio, and/or Sony significantly narrowing the gap between their TV market shares and Samsung's, those product recalls will start looming larger than they are now.

How do you feel? Have the recalls of the Note 7 and/or washing machine had any impact on your decision whether or not to buy Samsung products? If so, let us know why and which products?

Additional Resources
Five Questions to Ask Before Shopping for Your Next HDTV at HomeTheaterReview.com.
TV Makers Are Still Trying to Address the Weakness of Flat-Panel TV Sound Quality at HomeTheaterReview.com.
How Hollywood Blew the Launch of Ultra HD Blu-ray at HomeTheaterReview.com.

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