Value Added Reseller Definition
Value-Added Reseller is an individual or an organization that adds value to the product before selling it to enhance the utility of the product and make the product attractive to the end-users. Generally, this is common phenomenon in Information technology and consumer electronics segment where resellers bundle up the old products with a variety of new services for a resell.
Explanation
- It is the process where the reseller buys the products from the supplier then adds utility creating value to the product in form of software, maintenance contracts or other services and then resells to the consumer.
- They generally buy the product from a centralized source like a distributor so that he gets it at a reasonable price and then by adding value to the same he tries to create a complete package that can be attractive for the end consumer.
- Another creative way to resell the products is to bundle up different products from various distributors and make altogether new product as per the customer requirement, for instance buying hardware from one distributor and software from another to make a unique tool for the customer.
- Mostly, the aim of Value Added Reseller (VAR) is to add value to the product not only with the intention of reselling that product but also to enhance the utility of the product as the need of the consumer, they provide key solutions and customize the product as the requirement.
- They are very good at what they do and have sufficient knowledge about the product they are reselling like the software or hardware, the customer doesn’t have to worry about the technical solution provided as they come from the technical experts suitable to the respective business.
Characteristics
- A Value-Added Reseller is considered to be an expert in the field they operate, as they provide exceptionally well-designed technical solutions customized as per the business requirement.
- Since these resellers are best to be found in the IT industry, they don’t have much to do with the manufacturing sector or producing any products, rather they are well versed with the hardware and software installation, maintenance, testing and so on.
- Some VAR is designated to any individual company while some carry several brands under their hood, but to increase sales through this medium most of the companies offer an attractive discount on the products for these resellers.
Example of Value-Added Reseller
- Let us consider the most renowned tech giant Infosys, which produces hardware and software solutions for large businesses as per their needs and requirement. With the fast-changing technology, the products ought to become obsolete very soon.
- So, as a company when Infosys designs a product there are a lot of failures, costs and research is involved in its development. The company cannot afford to incur such high cost and research with every upcoming tech advancement.
- So, to resolve this issue the company builds a reseller network where it trains them to resell the old programs by bundling them with new services and resell it to other businesses. Effective training and workshops are conducted to maintain a quality standard of Infosys and thorough knowledge is parted onto the reseller to make an efficient sale, this will not only increase the durability of the product but also enhance the value attached to it.
Value Added Reseller vs Managed Service
- Managed service is a subset of Value-Added resellers (var), where they provide one of the services offered by the VAR. A VAR typically tries to resell the product and Managed service provider has an annual agreement for the maintenance of the installed software.
- Due to the increasing competition and narrow margins, VAR has shifted its business to offer managed service too as a product to the end consumer.
- A managed service provider takes care of the software by signing a Service level agreement or Annual Maintenance contract proactively with periodic scans and checks.
Benefits
- Due to the advancement in technology organizations it is difficult to design complex IT products and at the same time take care of their reselling, so here is the window for VAR where corporates save themselves from investing more time and resources in making a sale of those products.
- VAR becomes a subject matter expert which is quite essential to strike any deal and gain the confidence of the buyer since they have a specific portfolio of the product offering and also they learn from the training workshops of the respective company which eventually makes them scholars in the products they are selling.
- With the qualified knowledge and industry contacts, they are considered to be trustworthy for any technical advisory needed in the business-related products.
Limitations
- Since they are the only point of contact between the companies and end-user they cannot take advantage of the market and operate on very narrow margins. Another reason for limited profitability is that they must maintain the cap and floor price assigned by the company to avoid any exploitation and to preserve the brand goodwill in the market.
- There are thousands of products to resell and there are multiple resellers, so in a way, these resellers are easily replaceable guaranteeing no stable career or income, as some might have specific sales targets to achieve.
- There is frequent change in technology and a reseller has to be constantly updated with the same in order to be competitive in the market.
Conclusion
Value-Added Reseller is at the right spot in the market enhancing value for the consumers and at the same time generating revenue for the corporates, in the due process the skillset and knowledge they develop are completely product specific and irreplaceable. Considering the advantages and limitations of being a VAR is very rewarding and challenging too.
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