Monday, September 27, 2010

How to Make Money Selling CCTV on the Internet

Every CCTV manufacturer is asking themselves the same question: should we sell product on the Internet? If so, how? How do we go about it? Won’t we make our core customer base- the integrators- mad? If we don’t sell product online, can we compete with manufacturers who do?

Can you sell professional grade product online and make money doing it? Well, that’s the million-dollar question, isn’t it? The entire CCTV industry is trying to figure out a rational end-user reseller strategy that helps their bottom line without alienating the integrator. I firmly believe that in the future, manufacturers who embrace e-sales will eat the lunches of manufacturers who are married to the channel-only model. That said, the current paradigm shift the industry is experiencing is just alienating integrators, e-sellers, manufacturers, and end users alike.

The main reason that online sales leaves a bad taste in the mouths of manufacturers is not due to any inherent flaw in the concept. Rather, I feel as though the marketing model most in the industry have followed is flawed on a very fundamental level. In the past, every manufacturer sold plain brown boxes via distributors, where there was very little differentiation between product and integrators simply bought a name on a box. Manufacturers marketed themselves, not their products, and relied on the integrator to market their product to the customer. I know, I was an integrator for a decade before becoming an Internet reseller. My family has been security integrators since 1979. I know lots of integrators, and I know exactly how they purchase product. Even today, a lot of them do not look at different products within the brand beyond, at most, form factor. You go to ADI and tell the guy behind the counter “I need five Speco bullet cameras, three domes- whatever’s cheapest- and give me an 8 channel Everfocus DVR with a 500GB hard drive”.

They’ve seen Everfocus and Speco at the trade shows and counter-days, drunk the free coffee and eaten the donuts, have spoken to tech support, and shop a brand based on 1) price, 2) past history of defective product, and 3) whether the tech support associates were able to help them with that weird question that one time. Sure, sometimes a rep will tell them about an interesting new product, or they will have an unusual application and the rep will suggest a product with a unique function, but beyond that there isn’t much product research.

End users, of necessity, shop very differently. For starters, they will have to live with whatever product they purchase for the next three years, so they need to make sure that the product they choose will do what they want it to do with not much trouble or downtime. They’ve never heard of 95% of manufacturers and have no way of judging them. They choose product based on 1) features and 2) price.

If an internet retailer knows nothing about surveillance or security, they have no way of explaining why one feature would be more desirable than another, or which specific product will be perfect for the particular application. This causes mad customers to jam the manufacturers’ tech support lines with angry phone calls, not understanding why the lipstick camera connected to the half CIF DVR recording at 7FPS doesn’t identify faces at 200 feet like on that TV show. Yes, let’s all pause to giggle at the stupid customers, until we remember that CDW and Newegg make a living selling the kind of high end computer and networking equipment that would have been science fiction seven years ago, and somehow they do not have to deal with calls from angry customers mad that the netbook they bought won’t hack the local traffic. That’s because the computer industry has done a terrific job 1) educating their potential customer base in what computers can do (darn near anything if you have enough free time) and 2) explaining what computers can’t do (power on after the warranty has expired).

Everyone knows that end users seeking to purchase product online are doing so only to save money, and are only interested in the 16 channel kits for $400 from eBay. Like a lot of things that everyone knows, this is wrong. First off, if the customer is shopping for product online, it’s because they do not see the value the local security dealer provides. Is it because the local security dealer provides no value? Not usually. All too often, the local security guy doesn’t understand that his job isn’t to sell security products; his job is to sell himself as a security expert, who uses security products to get the job done. The sales pitch rarely rises above the level of “buy this cause it’s awesome… or buy this other thing because it’s a little cheaper.” I shouldn’t be in business, or, at least, I shouldn’t be able to make money selling Pelco and Axis and Exacq. The reason I get away with it is because my customers are willing to spend extra money if only someone will tell them why it’s worth it.

But this post isn’t how security integrators can beat the internet reseller- I get it, sales is hard work and some people just can’t hack it. The topic is, how do manufacturers sell product to the people the integrator just isn’t reaching. So ignore the integrators whining about the race to the bottom, the integrators scared of the internet reseller were never selling to those customers anyway.

I agree that Costco and Amazon will never be able to sell anything more complicated than the $500 boxed kits, because selling security requires knowing security. But there are companies out there that know security and want to sell security solutions, not box kits, and they need your help, CCTV manufacturers. Invest a bit in marketing. Throw us some advertising. Make your stuff a little more user friendly. Heck, that last bit couldn’t hurt, even if you never end up selling direct. Basically, we all need to stop acting like the end users are idiots who need special handling by integrators. Trust the end users to be smart enough to be make informed decisions, given enough information, and the smart ones will end up being profitable.

The dumb ones will still buy $500 box kits from Costco, so what have you got to lose?

Thursday, January 21, 2010

ASIS apparently has plenty of money to toss around

So, ASIS announced that their keynotes would be Captain Sully of Miracle on the Hudson fame, Dave Barry of generally being hilarious fame, and former Prime Minister of Pakistan Pervez Musharraf. While I don't doubt that General has some interesting things to say about the GWOT, I have to wonder about ASIS's budget. According to Gen. Musharraf's wilipefia page (to which I am unable to link because I am blogging on my iPhone), he gets "$150,000 to $200,000... for a day plus jet and other VIP arrangements on the ground" according to one of the PR firms trying to land a piece of that sweet, sweet speaker fee moolah. Probably somewhat inflated but not by much. Good to hear ASIS spends my membership dues wisely. Now I know why the PSP prep classes are so expensive.

Posted with altBlogger.

Monday, January 4, 2010

How to Not Go Out of Business: The Manufacturer Edition

Someone asked me about the state of the surveillance industry. As I'm sure everyone is aware, times are tough. People aren't making as much money as they used too. New construction is down, which means sales are down too.

Interestingly, crime seems to be down. Some have speculated that it has something to do with the fact that gun sales are up. I don't know about that, but I do know that the security industry can't even go to people and say “boogity boogity, give us money or your children will be murdered by rampaging thieves!!!” which is of course the go-to pitch for lazy salespeople since Linus Yale invented the pin tumbler way back before the Civil War.

Slow sales to end users translate of course to slow sales by manufacturers. This means that all the manufacturers are scrambling for an ever shrinking pool of potential integrator dollars. What can manufacturers do to make their offerings more attractive to integrators?

There are several factors that go into the decision to purchase this or that product. Physical security integrators are a conservative and cautious lot, and so reliability is almost always the most important factor. There is a real lack of impartial product evaluation in the security industry, so purchasers are often forced to rely on personal experience and word of mouth reputation in order to judge the perceived reliability of products. This of course means that it takes a while for new technologies to filter through the industry. Put simply, physicals security integrators are not exactly hostile to change, but do not believe in change for change’s sake. This makes it far too easy for a company to rest on its laurels, believing that because customers are buying now, they will buy forever, with no need for technological innovation. Eventually the technology stagnates, and suddenly all your customers are buying from AverMedia or somebody. Put simply, a lot of product offerings out there is nothing special. It’s just the same old same old that we’ve been seeing for the past couple of years, and prices have stayed exactly where they are, too.

GE is a terrific example of this. They (or the companies they devoured, anyway) were early innovators, back in the 90s when the industry was slowly going digital, and either led the way forward with carefully rolled out technological innovation. But then they just got fat and lazy and stopped innovating while keeping their pricing sky high, believing that customers would “shop the name”, purchasing cameras and DVRs because there was a GE sticker on the outside. And it worked for a while. Then, in August 2009, GE started looking for a buyer for their security segment, and was eventually acquired by UTC. This was widely seen as an effort by UTC to enhance their already strong access control and fire alarm offerings, two markets in which the former GE Security remain strong- and it is important to note that both access control and fire are relatively low tech, unlike surveillance video. If I may, I'd like to refresh everyone's memory with a link to this acrimonious thread on IP Video Market.

Simply put: aging, expensive product simply will not fly. With the economy the way it is now, everyone is sensitive to price.

The economy is also the reason why a lot of the old guard is experiencing a sharp drop off instead of a slow steady decline in terms of sales. Basically, the two factors that drive DVR sales is new construction and product failure. With new construction in the toilet, especially new construction of large complicated high security multibuilding projects, I’m not surprised that no one is buying expensive DVRs. There is still some replacement activity- as in, replacement of failed equipment- but it takes a while for a DVR to fail, failures can to a certain extent be planned for because they happen on a more or less predictable timeline, and the only time you buy a legacy DVR is to replace another legacy DVR and you have enterprise management software that requires you to use that manufacturer's product. If your DVR goes kablooie tomorrow, and it’s a standalone 16 camera installation, the first thing you do is find a cheaper DVR with similar or superior specs. After all, analog cameras work with all analog DVRs; you don’t have to buy a specific DVR to work with your existing cameras.

Replacing failing cameras is a good steady business, but there is very few cameras out there that you can’t find from somewhere else cheaper. In other words, it’s a simple matter to just go to another manufacturer’s offerings, and budgetary constraints are encouraging security managers to shop around, and the integrators are required to deliver.

You want to know who will ride out the financiapocalypse? EverFocus. You'll note that their stock price has climbed steadily all year long. Why? Three reasons: they've been incredibly aggressive on pricing, they've announced new product on a fairly regular basis (every few months or so, not so quick that it just looks like their spewing in all directions but not so slow that everyone forgets who they are, either), and most importantly, they are one of the prime movers behind HDCCTV, a concept that may revolutionize the industry forever ('forever' meaning 'probably for the next eight to ten years or so') if it actually works.

We are in the beginning stages of a worrying trend in the surveillance video business. Simply put, there is a lot of redundancy in the security market, and we are seeing a contraction of the industry. Manufacturers that cannot entice customers to purchase their products will simply cease to be. So if you're sitting on some cash reserves, you can 1) dump as much money and effort into R&D as possible as quickly as possible, 2) buy some startup with an awesome idea and a cash flow problem, or 3) find some sucker to buy you out. You have a little time to decide... but not much.

The best part? Even if new construction does pick up, customers may get used to paying less money for newer technology, and you may never recover if they continue the way you've been going on.