NetGear's secret is focus
- 19 August, 1998 13:52
A single-minded focus on the low end of the networking market is proving a winner for Netgear, judging by this year's Inform ChannelTrends results.
NetGear, which didn't even figure in the results last year, was the number five preferred networking vendor this year, beating out established players like Hewlett-Packard, Digital, Kingston and D-Link.
"Every year we do ChannelTrends, there are two or three companies that come out of the blue. This year NetGear was certainly one of them," said David Hancock, Inform director.
NetGear, a division of Bay Networks, has only been selling into Australia for the past twelve months. It was established three years ago with a mission of focusing solely on the low end of the market. That focus is what has enabled NetGear to distinguish itself in the market, claimed Ian McClean, the company's Australian sales and marketing manager.
While the likes of 3Com and Cisco are attempting to sell their enterprise products into the low end of the market, NetGear is selling equipment designed and priced specifically for the market.
"We want to play at a price point that is 20 to 30 per cent below the other major brands and which is about on par with the cheapies," McClean said.
Despite the attractive price point, NetGear has done a great job of allowing resellers to retain margins and it rates number one of all vendors on this scale, according to Inform.
"Profit margin to the channel is one of the areas NetGear came through very strongly. They are commodity products but they are offering very good margins and they have a clear lead over the next players," said Hancock.
Even more importantly, NetGear was rated number one in terms of product technical quality.
"The single most important thing a vendor can provide the channel is product technical quality and NetGear was top there as well," said Hancock.
"They're doing well in all the important areas."
"We play off the fact that this is a Bay com-pany," said McLean. "Bay has always had a very good reputation for delivering quality products.
"It's Netgear's aim to bring the latest technologies to our space faster and cheaper than anyone else. We were the first to bring Fast Ethernet into the commoditised space, for example."
That combination of a winning price point and a quality product is winning over resellers like the Thames Group in Western Australia. "We used to use Bay Networks but their products were always very expensive. NetGear is very price competitive and it fits right down at the low end of the market and up to the midrange," said Chris Cunningham, sales manager for Thames.
"We're been very impressed with the quality. We have only had one failure out of all the stuff we've bought," he said. "When that one hub did die, the backup was great in that it was replaced pretty much the same day. Sometimes you only know how good a product is when it fails."
According to Cunningham, being able to sell low-price, quality networking products has opened up more of the low-end and midrange market to Thames. "We like to sell something to our customers that we won't have problems with. We're able to compete now with lower end brands at pretty much the same price but with a better brand. The customer is usually a lot happier to go with that."
As well as rating number one in terms of margins and product quality, NetGear also topped the list when it came to sales staff and post-sales technical support. "We are the only vendor in this space with 24 by 7 support," McClean said.
It rated third in terms of warranty but slipped a little when it came to education and training, rating only average. However, McClean defended NetGear's training as adequate. "You can always do more training and do more to let the market know you exist. But in terms of technical training, these products are so easy to install that I don't think the dealers in this space are demanding it. Our sales courses cover the fundamentals of networking, but beyond that I don't think there is much of a need."
While NetGear is obviously doing a good job, it has also obviously been aided by its strong line-up of distributors. Express Data is Netgear's national distributor, while regional distributors include Teksel, BMS in South Australia, J Mills in Western Australia, with IT&PC just appointed in Queensland.
Mark Kofahl, Teksel's national sales and marketing manager, said the product had been very well received because it is focused on the market. "It's been most widely accepted by smaller integrators and consultants as well as small-to-medium resellers," he said. "It's opened up a lot of business opportunities for these smaller resellers who have been fighting tooth and nail to make margins on PCs. Networking allows them to go in and hook it all together and charge for their time, which is something they previously haven't done."
"It has really taken the mystery away from networking and made them feel comfortable. Some of these smaller resellers would have been afraid to mention networking to their customers 12 months ago."
According to McClean, Netgear's biggest challenge is to convince the channel that networking is no longer black magic. "People's perception of networking is still based on when it was the hot topic two or three years ago, but it's changed a lot. Most small networks can now basically be pieced together with a network starter kit containing a hub and some ethernet cards. Operating systems like Windows 98 automatically detect the cards, and hubs are very much plug and play," he said. While users can choose to go with a Windows NT-based network, most will suffice with the networking capabilities bundled into Windows 95 or 98.
If the experience of Harris Technology is any indication, that realisation is catching on. Harris has been selling NetGear through its catalogue business since December last year.
"The demand for these products has been much stronger than I expected. I'm a bit mystified as to where all the demand has come from, actually," said Ron Harris, MD of Harris Technologies. "It's been mostly small-to-medium enterprise and some IT managers buying the product."
Harris said the products were excellent, that he had experienced no problems with returns, and that support had been good.
According to McClean, it will be "more of the same" in the coming year. NetGear will bring out a number of products developed specifically for the low end of the market.
It is only able to bring out products like this because it is so focused on the market, McClean said. Until his competitors take the same approach, McClean isn't spending too much time worrying about them.
"Let them come, but talk is cheap. These products have been designed from the ground up for this marketplace. If they try and continue with the same old models they will fail."