Value Added Reseller

What Is A Value Added Reseller

A value-added reseller is an individual or an organization that adds value to the product before selling it to enhance its utility and attract the end-users. Generally, this is a common phenomenon in the information technology and consumer electronics segment, where resellers bundle up the old products with various new services for a resell.

Value-Added Reseller (VAR) is at the right spot in the market, enhancing value for consumers. At the same time, generating revenue for the corporates, the skills and knowledge they develop are product specific and irreplaceable in due process. Considering the advantages and limitations of being a VAR is rewarding and challenging.

• A value-added reseller is an individual or an organization that adds value to the product before selling it to improve its utility and appeal to the end-users.
• It is common in the information technology and consumer electronics segment in which resellers bundle up the old products with many new services for a resell.
• Managed service is a subdivision of Value-Added Resellers (VAR), where they offer one of the services by the VAR.
• It generally sells the product, and the managed provider possesses an annual agreement to retain the installed software. 

Value Added Reseller Explained

When the value added reseller companies buy the products from the supplier, it adds utility, creates value to the product in software, maintenance contracts, or other services, and then resells to the consumer.

They generally buy the product from a centralized source like a distributor to get it reasonably priced. By adding value to the same, he tries to create a complete package that can be attractive to the end consumer.

Another creative way to resell the products is to bundle up different products from various distributors and make new products according to the customer's requirement. For instance, buying hardware from one distributor and software from another creates a unique tool for the customer.

Value added reseller agreement aim to add value to the product to resell that product and enhance its utility to the consumer’s need; they provide robust solutions to customize the product as the requirement.

They are very good at what they do and have sufficient knowledge about product reselling, like software or hardware. Therefore, the customer can handle the technical solution provided as they come from the technical experts suitable to the respective business.

Business Model

• A value added reseller companies are considered an expert in their field, as they provide exceptionally well-designed technical solutions customized as per the business requirement.
• Since these resellers are best found in the IT industry, they do not have much to do with manufacturing or producing products. Instead, they are well-versed in hardware and software installation, maintenance, testing, etc.
• Some VARs are designated to any individual company. At the same time, some carry several brands under their hood. Still, to increase sales through this medium, most companies initiate value added reseller agreement to offer attractive discounts on the products.

Example

Let us consider the most renowned tech giant Infosys, which produces hardware and software solutions for large businesses as per their needs and requirements. However, the products ought to become obsolete quickly with fast-changing technology.

So, as a company, when Infosys designs a product, there are a lot of failures, costs, and research involved in its development. The company cannot incur such high charges and analyses with every upcoming tech advancement.

So, to resolve this issue, the company builds a value added reseller list where it trains them to resell the old programs by bundling them with new services and reselling them to other businesses. Practical 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. As a result, it will increase its durability and enhance its value. Thus an efficient value added reseller contract helps in increasing sales.

Benefits

• Due to the advancement in technology organizations, it is not easy to design complex IT products and at the same time take care of their reselling. So here is the window for value added reseller list where corporations save themselves from investing more time and resources in making a sale of those products.
• VAR becomes a subject matter expert, which is essential to strike any deal and gain the buyer's confidence since they have a specific portfolio of the product offering and learn from the respective company's training workshops that eventually make them scholars in the products they are selling.
• They are considered trustworthy for any technical advisory needed in business-related products with qualified knowledge and industry contacts.

Limitations

• Since they are the only point of contact between the companies and the end-user, they cannot take advantage of the market and operate on 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 preserve the brand goodwill in the market.
• There are thousands of products to resell, and there are multiple resellers. Thus value added reseller contract are easily replacable. There is no guarantee of a stable career or income, as some might have specific sales targets to achieve.
• There is frequent change in technology. A reseller must constantly stay updated to compete.

Value Added Reseller Vs System Integrator

Value added resellers add value to manufactured products and help in reselling them whereas system integrators build a customized software system to upgrade products and services. The difference between them are as follows:

Value Added Reseller	System Integrators
They purchase products from manufacturer.	They do not always purchase products.
They add value through new designs or better product specifications.	They add value through customised software systems.
They act as an agent for clients to provide upgraded services in package.	The deliver hardware and software solutions to make the manufacturing and distribution system stronger.

Frequently Asked Questions (FAQs)

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This article is a guide to what is Value Added Reseller. We explain it with examples, its business model, benefits, difference with system integrator. You may learn more about financing from the following articles: -

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