September 5, 2008

Selling GNU/Linux in a box

Author: Bruce Byfield

Eight years ago, computer stores stocked a choice of GNU/Linux distributions -- established ones like Caldera, Red Hat, and SUSE, and newcomers like Corel, Progeny, and Stormix. Now, only Ubuntu and openSUSE offer box sets, and both face challenges that other distributions found unsolvable, ranging from reasonable prices and features sets through to getting into distribution channels and finding the right marketing approach -- all for an effort that may be only moderately profitable at best, and perhaps best undertaken for non-financial reasons.

Each vendor begins by learning from previous efforts to sell GNU/Linux in retail channels. Gerry Carr, a product manager at Canonical, Ubuntu's commercial side, suggests that past efforts "have been set at fairly unrealistic prices," by which he means $100 or more -- prices near to those for a Windows upgrade. "People need to see a significant price saving if they're going to make a leap from the known," he says, pointing out that the Ubuntu box currently available from Valusoft is on sale for a mere $20. He further suggests that, as a modern distribution that emphasizes usability, Ubuntu is a more attractive product than its predecessors.

At $60, openSUSE is more expensive than Ubuntu, but as a more established product, perhaps it can afford to be. Still, Joe Brockmeier, openSUSE community manager and a former Linux.com editor, says, "If a boxed version is going to be successful, it needs to offer something above and beyond what users can get by just downloading Linux." Both vendors' currently available retail boxes provide that extra in form of a manual and installation support (60 days for Ubuntu, 90 days for openSUSE). Both, too, make a point of listing the software included in the box.

Getting into distribution channels

Another challenge for distro vendors is to deal with the dilemma of retail distribution: distributors are reluctant to carry a product from a company unknown to them, yet unless you can persuade a distributor to do business with you, you can never become known. This is not a problem for openSUSE in Europe, where it the successor to the long-available SUSE retail box and is "very popular," according to Brockmeier.

However, it is a problem that openSUSE has not managed to overcome elsewhere. "We no longer sell the retail version in North America," Brockmeier says, "due to the extra costs associated with placing the box in retail stores like Best Buy." Instead, the box is available through Novell's online store.

In addition, Brockmeier that "there are some up-front costs in terms of actually creating a box set and developing a sales channel. Then there are the costs from retailers like Best Buy that want vendors to pay or give major price breaks in order to have their products appear in the weekend ads in Sunday papers. Then there are the return costs, warehousing costs ... it gets expensive, and unless there's a massive demand, it's not really worth it."

By contrast, Ubuntu has largely sidestepped the dilemma by partnering with Valusoft, a company already known to wholesale distributors. "Valusoft has done a wonderful job of getting us on to Best Buy shelves," says Carr. "I don't think we could have done that -- or at least it would have been a huge amount of work for us to get into Best Buy, who don't know us. It would take months and years of going door to door to get distributions rights, and maybe it just wouldn't happen. It's the benefit of partnering that gets us on to the shelves." Besides providing the software, Canonical's main involvement is to approve packaging and plans developed by Valusoft.

Marketing a retail distribution

Commercial attempts also imply marketing. "An operating system typically isn't an impulse buy, right?" Brockmeier says rhetorically. "I don't think most people will make the decision to switch OSes when they're browsing the software setion of Best Buy or whatever -- they need to want to switch, and then seek out the software. So just placing Linux in retail sections isn't good enough. It would really help if there were some mainstream advertising and momentum behind desktop Linux."

Carr agrees. "It's a huge challenge to us: How do you persuade ordinary users to use Linux, which they're not familiar with? We probably need a more simplistic message than we would deliver to an open source crowd." For instance, instead of talking about kernel versions and update cycles -- "none of which matters a damn to the consumer," Carr suggests -- commercial distributions need to talk about benefits to the user, such as stability and security.

At the same time, Carr sees product differentiation as critical, both in mass advertising and on the box itself. "You have to be careful about Linux in retail. You need to sell it appropriately, to let people know that they're not buying Windows, that it's a different operating system and has its own -- shallow -- learning curve. One of the things we've been very careful about in approving the box that Valusoft uses is to make sure that the average consumer isn't confused about what he's buying or thinks that he's buying a Windows replica." For this reason, the copy for the Valusoft immediately identifies Ubuntu as "an alternative operating system to Windows," and lists some of the other programs that come on the CD, so that potential buyers understand what they are purchasing.

Continued retail prescences

Neither Canonical nor openSUSE give sales figures. However, although Brockmeier describes openSUSE retail sales as "not spectacular," he points out that "historically, SUSE Linux had very strong retail sales," suggesting that openSUSE might one day enjoy the same success.

After only a few weeks in the stores, Ubuntu's success is still being determined. However, presented with the conventional wisdom that GNU/Linux doesn't sell in the stores, Carr's reply is, "Valusoft would disagree with you, and we're hapy to work with them to find out. So far as I'm aware, they're happy where their revenue sales and projections are. And certainly the numbers we've seen have been promising. They're probably higher than I expected, to be honest."

That said, Carr suggests that Canonical (if not necessarily Valusoft) might be content with modest sales, although he rules out treating the Ubuntu retail box as a loss leader -- a product whose expense is seen as a marketing cost rather than as a way to produce income. "We are continually looking to expand the ways people can get Ubuntu," he says, explaining that most people obtain the operating system through the download of a CD image, a pre-install, or a shipped CD. The store shelf is "a fantastic way for us to be available, and brings us to an entirely different user type than the ones who would download. I don't expect that the boxes will be the majority way by which we distribute Ubuntu, but it is certainly a valuable route to market."

Similarly, Brockmeier sees sales as desirable but not the only concern for a community-based distribution like openSUSE. "We are mainly interested in spreading Linux rather than making money from the distro," he says. "The openSUSE project's goal is to encourage the use of Linux everywhere, and so I'm quite happy if people choose to download openSUSE even if that means they don't buy a retail box.

"On the other hand, I do think it lends credibility for many users to see Linux on retail shelves. To many people, 'free' means 'has no value,' because they equate a price tag with a thing's value. Oddly, you may convince some people to try Linux at $30 or $60 by putting it in a box with a manual when you can't get them to try the same distro on a burned CD or DVD. The same person who turns up their nose at a free download may think that a $60 retail set is a bargain because of all the software that they get."

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