Value-Added Reseller (VAR) – Understanding How It Works

What is Value-Added Reseller (VAR)?

A value-added reseller (VAR) is a firm that enhances the value of third-party products. By adding features or services to an already existing product. Which then resells, usually to the end-user as a product or solution. This outfit is usually part of a sales channel. For an original equipment manufacturer (OEM). The OEMs offer their goods to VARs at a discount. And the VAR in turn helps in moving product sales on behalf of the OEM. By adding pre-sales value to the end-user. (like facilitating proof of concepts and offering pre-sales engineering and sales support). The VAR adds a markup. To the final sale price of the product for these services.

Value-Added Reseller (VAR) - Understanding How It Works

How Value-Added Reseller (VAR) Works

Typically, a VAR creates a form for a particular hardware platform. And then, sells the combination as a turnkey solution. Most times, such bundles are aimed at the use of a vertical industry.

Apart from IT solutions, many VARs offer services as their key value-add. The VARs offer such services added to the products. Are often known as solution providers. Now such companies form channel partnerships with one or, more. Often, multiple product vendors for assistance in the process of building and marketing solutions. A product vendor, on the other hand, may seek out relationships with VARs. Offering a reseller program as part of a broader channel strategy.

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Advantages of Value-Added Resellers

A value-added reseller has a potential for repeat business owing to the virtue of the added value they offer. A VAR can also come across as the single point of customer service-centric contact for customers of certain products and solutions. Typically, a VAR is often better positioned to understand the customers’ challenges so as to provide the kind of expertise which ensures customer satisfaction.

Each VAR comes with its own distinct portfolio of product offerings and skillsets. Some VARs possess the expertise of working with organizations in specific industries, like healthcare or financial services, and thus understand the unique technical and regulatory requirements of their customers.

Disadvantages of Value-Added Resellers

Value-added resellers are not really in control of what they are offering for sale, and the reselling process may not be transparent enough. Manufacturers on their end sometimes try to solve this problem by coming up with a discount price to resellers, which gives a reseller greater control over the prices they charge their customers.

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A reseller, on the other hand, has little to no control over the quality of features of their product, and have to rely on their manufacturer to adjust to changing customer requirements.

Partnering With Vendors

Sometimes, value-added reseller firms are known to work directly with an IT vendor, while small VARs, in particular, may discover that some vendors will only sell to them via a two-tier model. When this happens, a VAR will source products via a distribution partner. There are also other vendors who sell through distributors, so VARs must purchase products through the two-tier model irrespective of the size.

In order to work with vendors, reseller partners will have to become authorized and meet a set of requirements.

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