Just as a pessimist sees the glass half empty while the optimist sees it half full, the growing tendency for vendors to target both SMEs and consumer markets with the same products can be seen as either a threat or an opportunity for retailers and resellers.
If you look at the Channel Facts reports produced by Context at the end of last year, you can see evidence of both (see opposite). While the percentage of resellers who see retail as a high threat has almost doubled to 13 per cent, the number that see it as a low threat has also increased. At 31 per cent, this group is very much in the majority.
The change is put down to the many resellers that have now come to terms with retail and adapted their positioning accordingly. Most won't compete directly with retail, but it is also clear that a significant number of them will.
But Jeremy Davies, senior partner at Context, said the column we should really look at is the one marked 'none at all'. This has declined by three per cent but is still significant. "Over the past couple of years we have really seen retail come to the fore, and especially PC World," he said.
This is certainly true: many products originally destined for the SME market and the reseller channel are now being sold to the consumer through retail, and vice-versa. Wireless networking is the perfect example, with companies such as Netgear, D-Link and Linksys all offering product lines that have wide appeal to both markets.
But selling to two markets and through two separate routes is not easy or clearcut. Consumers and business users won't always use the route the vendor thinks they are going to take.
Retailers such as PC World Business undoubtedly want to attract more small businesses, so it's little wonder that a large proportion of resellers are concerned about retail and that the Context survey shows this company as the prime focus for the threat to traditional resellers.
But just how much of a threat is retail? The resellers CRN spoke to, on the whole, did not see it as a threat to their core business. Some of them saw good opportunities in providing a higher level of service to more affluent consumers that are willing to pay for additional service and support to deploy more complex IT systems.
Cardiff reseller ibbd has recently set up a dedicated showroom to demonstrate how plasma televisions and digital music centres, and even home security and appliances, can be run through PC and wireless networks. The idea, according to managing director Ian Brooks, is to attract customers who can afford to invest in these latest technologies but may need help setting it all up in the first place. "The dot to dot of the digital home is there for anybody to join up and consumers are realising it", he said.
He added that there are already digital video and audio recording devices and a whole slew of media centre products on the market, all of which can be connected using a wireless LAN, as well as home security (IP surveillance) and remote control systems that enable householders to monitor their lighting, heating and other utility functions from a distance.
"Is this something the average consumer will be able or want to do?" asked Brooks. "Right now, I think the answer is no. There will always be those that enjoy playing with the technology, but most will want all the features and benefits, with no interest in making it work."
Brooks believes that, as this more affluent type of homebuyer emerges, there could be a very significant opportunity for resellers willing to meet their needs. "It's early days yet, but the potential is similar to the one we saw with the emergence of the SME marketplace some years ago," he said.
"Where the potential purchase requires a solution, the local reseller is difficult to beat. The big retailer wants to sell the boxes as a commodity and has little real interest in the pain of onsite installation and support. The reseller also wants to sell the boxes but can eke out a margin from both this and the installation and support."
Whether home users will be willing to pay for implementation and support is the key question, said Mark Power, Netgear's country manager for the UK and Ireland.
"SME resellers are capable of providing in-depth service and support for networking applications and the same skills can be deployed in a home user environment. The key is making these services cost-effective for the home user. Installation and support would probably cost more than the products."
Today, most users with some technical understanding could probably have a go at setting up a small wireless network at home by following the instructions, but few would relish the prospect. As Hamish Mackness, server and storage business manager at Fujitsu Siemens Computers, pointed out, it is by no means clear how more complex products will be supported in the consumer market as they become available.
"It is certain that products traditionally considered to be only for business will cross over into the home," he said. "Consumers will then face the same management challenges that business faces. It could be argued that the challenges will be greater, with the main files stored in the home likely to be large media files and images rather than office documents.
"The skillsets needed to implement this technology sit in the dealer, rather than the retail channel. Over time, sophisticated products will be developed for home users to install themselves, but as with business, we need to remember that some of this data will be confidential and have a high value to the user.
"The risk of losing or corrupting any data must be removed. I expect most vendors to continue to address home users and business users as separate markets for the foreseeable future even when the products are valid for both."
In other words, the same products may be sold to both markets, but the message and the route to market may be different. D-Link is one company that already sells the same products to different markets, but it targets consumers and SMEs separately, said marketing communications manager, Balvinder Phull.
"Some of the requirements of the customer, be it business or consumer, will be the same," he said. "We sell a lot of wireless products and so we have products in this area that are targeted at the education market, SME market and so on, right through to the consumer, but they could all be using a similar wireless card or router."
It's important to note that the needs of customers in these markets are very different. "The vendor cannot presume anything about needs without asking qualifying questions," said David Freedman, IT sector head of Huthwaite International, a behavioural change consultancy specialising in sales performance improvement.
Even if an increasing number of products do cross over from business-to-business into consumer, it won't really matter, as retail is already servicing most of the lower end of the SME market. "One-man bands and micro-businesses typically buy in ones and twos, retail purchases can be made on a credit card and taken away on the spot, and the customer usually has very simple requirements," said Brooks.
Where a product will be sold, depends on its relative complexity and how it can be used in different scenarios, according to Stewart Hayward, commercial director at online SME reseller, WStore.
"Take LCD displays," said Hayward. "There is a large market for multimedia displays that are useful to both home and SME users. The key thing about them is that they are simple. Companies that offer no support to SME accounts are perfectly structured to deliver these products. The line isn't defined by the type of customer, it is defined by the nature of the products being supplied. SME customers will not buy a server from a supplier that they cannot phone and talk to about it, but they may well buy a screen or even a low-spec laptop."
It seems probable that retailers and B2B resellers that address the SME market will remain separate, serving quite different elements for the most part. Products may indeed migrate from one market to the other or be sold into both, providing they have the appropriate appeal, packaging and functionality. There would be little that retailers and B2B resellers could usefully learn from each other unless they try to address both communities.
The fact that online resellers such as WStore are successful shows that some business resellers have already harnessed the elements that make retail appealing to the SME, in particular convenience and credit. There may be a lot more that retailers can learn from B2B resellers, and this is something that vendors need to keep in mind when taking crossover products to market.
"In the small- and home-office environment, a sale of low monetary value to the seller is more likely to be a major investment for the buyer. This means that the seller must take a more consultative approach. Making an assumption that just because the overall value of the sale is relatively small, is entirely wrong," Freedman said.
"The stakes in terms of business and risk are far higher for the buyer at the lower end. Typically, skilled resellers take this into account; retailers do not. There is a market to tap, but only if VARs recognise that the sales process will not necessarily be the same."
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