What Is a Value-Added Reseller (VAR)?
Let me explain what a value-added reseller is: it's a firm that takes third-party products and boosts their value by adding customized products or services, then resells them to end-users. You see this a lot in the information technology (IT) industry, where VARs provide extra hardware, installation services, consulting, troubleshooting, or other related offerings on top of the core products.
Important Note
I want to emphasize that value-added resellers play an important and prominent role in the information technology (IT) industry.
Understanding Value-Added Reseller
You should know that value-added resellers exist because they form a crucial distribution channel for manufacturers, especially in IT. A VAR starts with a core hardware or software product or even a full system, then customizes it with additional add-ons tailored for the customer. Remember, the reseller isn't the manufacturer, but they need thorough knowledge of the product to customize, install, test, and maintain it properly for you.
Manufacturers recognize the benefit here, so an IT company will often give product discounts to VARs to boost sales through this channel. Some VARs stick exclusively to one company, but most carry a few or several brands to give customers more options.
Key Takeaways
- A value-added reseller enhances the value of other companies' products by adding customized products or services to the core product for resale to end-users.
- A value-added reseller can increase repeat business through the added value they provide.
- Value-added resellers can’t really control the costs of the product they're selling.
Example of Value-Added Reseller
Take Cisco, for instance, as it's like other large IT product manufacturers with a reseller program that includes authorization, certification, training, and auditing to maintain quality control. A reseller must first get authorized to carry Cisco products, showing they have the personnel and infrastructure to support sales.
Based on the service level, they might earn 'select,' 'premier,' or 'gold' certification from Cisco. Cisco also offers training for resellers to specialize in areas like enterprise networks, cybersecurity, Internet of Things (IoT), and data centers. Periodically, these value-added resellers have to undergo audits by Cisco to confirm they're still worthy of the reseller network.
Advantages of Value-Added Resellers
One clear advantage is that a value-added reseller can boost its potential for repeat business thanks to the added value they deliver. They can serve as the single point of customer service contact for certain products and solutions. Often, a VAR is better equipped to understand your challenges and provide the expertise that leads to satisfaction.
Most of a VAR's margin comes from those value-added products and services, not the core products, which are usually marked up just a little. Keep in mind there's no standardized VAR program; every company has its own unique setup with specific terms, conditions, and methods.
Disadvantages of Value-Added Resellers
On the downside, value-added resellers have little control over the cost of the products they're selling, and the reselling process can lack transparency at times. Manufacturers sometimes address this by offering discounts to resellers, giving them more say in the prices they charge customers.
Additionally, a reseller has minimal control over the product's quality or features, and they depend on the manufacturer to adapt to changing customer needs.
