While no one disputes that there are potentially enormous networking sales to be made in the retail environment, realising that potential has so far remained a mystery. It's no good having the right products if the market isn't educated as to what to do with them. At the same time, there's no point educating the marketplace if the products aren't ready.
Bay Networks believes it is balancing both sides of the equation with the full-scale release of its Netgear range into the Australian marketplace.
While Netgear had been available through Harvey Norman, this time Bay has appointed a dedicated distributor in modem distribution specialist Tecksel. Tecksel will work with Netgear to both educate the channel and build brand awareness and end-user demand (See story page 4).
It is up to Bay Networks to deliver the correct products.
Netgear itself was set up as a division of Bay in 1996, and has already enjoyed considerable success in the US and Japanese markets. Netgear director Patrick Lo says the precipitating factor behind its formation was the realisation that in 1995 PCs sold into the small business sector surpassed PCs sold into global 500 companies.
"We went off and looked at the statistics, and found out that the penetration rate of PCs into the small business sector had already gone up to 80 per cent in 1996, but the networking penetration was still about 15 per cent," said Lo.
"We asked, what if that penetration rate goes up from 15 per cent to 80 per cent to match with the PC penetration? There's a lot of business to be had. The market today is probably worth less than $1 billion, but in three or four years it's going to $3 or $4 billion or even more."
Having identified the opportunity, the next phase involved finding the right business model with which to approach it, said Lo. "We looked at the PC industry. The people who are making big waves into the small businesses are the nimble competitors, who have been able to ride that curve of the PCs."
Bay realised three things. "Number one; you have to get to the mass channel," said Lo. "Number two; you have to have a very quick life cycle of your product. Number three; you have to bring the latest technology into that particular segment.
"You cannot say to your small businesses that you deserve some backward technology. Trying to take existing Bay Networks products and rebadge them or cripple them would not work. So we decided to take a different approach: we would set up a new division called Netgear with our own R&D, manufacturing and channel infrastructure to go after this marketplace."
Lo says Netgear will follow a similar path to that beaten by Intel with its CPU line, which pushed high-powered products into all business segments. "We're going to bring them switching, we're going to bring them 100Mbit/sec Ethernet, we're going to bring them gigabit when the time comes, and at a very compelling price point, so it becomes a no-brainer for them to go for it."
A renewed push
According to Lo, the Netgear-Tecksel relationship represents the first "real" push to move the products in Australia. Netgear had been introduced through Harvey Norman late last year, but Bay Networks' national channel manager, Martin Christmas, says more focus needed to be applied. "I think one of the things we learnt in that exercise was that by getting the product to Harvey Norman you only do half the job," said Christmas. "You've got to actually educate people to walk in and ask to buy the product.
"And so from our perspective that's why the distribution piece is one element of the overall strategy. We've got to have points of distribution and points of access to the product, but we've also got to educate the marketplace to understand that there is this thing out there called Netgear, and you really should go and ask for that product.
"So that's the branding that Netgear has to do, and from a Tecksel perspective the idea is to make that product available to as many points of access as possible in the reseller/retail space."
For this reason Lo feels it is important to reach out to resellers that traditionally don't play in the networking marketplace, as there simply aren't enough network VARs to cover the entire opportunity. "You have to let loose all of the PCs' resellers to install networks in order to get the penetration rate up to 80 per cent."
The retail pitch
Tecksel national operations manager Mark Kofahl believes retailers will also play an important part in feeding Netgear demand, as it will be they who often field the enquiries generated by advertising. "We need to have points of reference," said Kofahl, "so that when we actually invite end users to start enquiring about Netgear we have a strategic reseller network that has the products on the floor with at least a couple of people there who can talk intelligently about networking."
Kofahl said opportunities will exist for resellers to carry out installation work on behalf of retailers when the need arises, with Tecksel coordinating such activities.
Support for the Netgear range will be back-ended through Bay's Netgear division itself, and a permanent Netgear representative will be appointed in Australia by July. The products will not be available through Bay Networks distributor, Westcon, but will be carried by Express Data in addition to Tecksel. Tecksel will only carry the Netgear range of Bay products.
RRP on the Netgear range is:
Hub - 4 to 5 port 10Base-T $50.63 per portHub - 8 to 10 port 10Base-T $37.21 per portHub - 16 port 10Base-T $31.42 per portHub - 100Base-T Fast Ethernet from $120.47 per port Switch - 2 port $605.12 per portSwitch - 7 port $504 per portRouter - 7 port $605.12 per portAdaptor card $166