Value-Added Reseller

In addition to a business’s traditional revenue streams (e.g., sales, services, and advertising), a value-added reseller (VAR) can represent a valuable additional source of income. 

VARs are companies or individual contractors who purchase products from manufacturers or other vendors, then add features (such as installation, customization, and technical support) before selling the finished product to customers.

What is a Value-Added Reseller?

A value-added reseller (VAR) is essentially a middleman who buys products from vendors and resells them to customers. From there, the reseller takes care of the business operations and customer relations so that the vendor doesn’t have to.

The value-added aspect of the process means that the reseller adds additional features or services to the product before selling it to the end user. This could include installation, customization, technical support, training, or any other value-adding service that the customer needs.

This business model is popular in business-to-business (B2B) technology service companies, where a VAR can represent an additional revenue stream for both the vendor and the customer. By providing services that the vendor doesn’t offer (or not offering them as efficiently), VARs can fill gaps in the market and benefit parties on both sides of the transaction.

VARs are also becoming increasingly popular in business-to-consumer (B2C) settings, where customers may appreciate the convenience of having a single point of contact for all their product needs.

Synonyms

• VAR – The abbreviation for the term “value-added reseller.”
• White Labeling – VARs may also purchase products from a manufacturer and then “white label” them, which means they relabel the item with their own branding or logo.
• Reseller Partner – A term used to describe the relationship between a VAR and the manufacturer or other vendor that supplies them with products.

The Value-Added Reseller Business Model

Because VARs add features or services to the product before selling it, they can charge a premium for their services.

There are two ways to be a VAR:

• Value-Added Services: In this business model, the VAR provides additional professional services to the customer (such as installation, customization, or technical support). The customer may be willing to pay a premium for these services in addition to white-labeled services from the original vendor.
• Value-Added Products: A VAR may also purchase products from a vendor, then add features or components to the product before selling it. This could include additional software, hardware, accessories, or anything else that enhances the original item’s value.

This business model works well when there is a clear demand in the market for specialized products and services that manufacturers may not be able to provide quickly or economically. It also allows vendors to leverage existing sales channels without investing in creating their own.

VARs may also offer additional services such as marketing support, system integration, ongoing maintenance, and training. This can be a great way to differentiate themselves from competitors and add further value to customers.

Understanding How Value-Added Resellers Work

Selling third-party products as a VAR can effectively leverage existing relationships and provide customers with specialized products. As long as the added value is clear, it can be a great way for businesses to increase revenue streams and differentiate themselves in their markets.

Simply put, the value-added reseller model works as follows:

1. A VAR purchases products from a vendor for a predetermined price (typically lower than retail), then customizes and re-sells them to customers.
2. Usually, the VAR takes on the responsibility of providing additional services such as order fulfillment, installation, customization, training, and support that may not be available directly from the manufacturer. By taking on these responsibilities, the VAR can offer their customers an enhanced product.
3. In return for their services, the VAR charges a premium price that allows them to make a profit.
4. The end result is a win-win situation for both vendors and customers.

The bottom line is that value-added resellers can provide great benefits to businesses who are looking to add new sources of income and increase their customer

Advantages of Working With VARs

For both the vendor and the customer, there are many advantages to working with VARs:

• Product vendors can boost sales without sacrificing product margins or investing in additional sales infrastructure.
• For customers, VARs can provide valuable customization and personalized service that may not be available from the original vendor.
• VARs make it easier for customers to purchase products as they can rely on a single point of contact for multiple needs, improving the customer experience.
• VARs are often more agile and flexible than traditional product vendors, as they can quickly and easily customize products for specific customer needs.
• Value-added resellers improve relationships with customers by giving them access to cutting-edge products and services that may not be available from the original vendor.
• Original solution providers and manufacturers can maximize revenue growth without having to constantly find new customers—the reseller takes care of that.

These benefits often make third-party resale the best distribution channel for manufacturers and technology vendors, especially when the market is highly competitive or specialized.

Challenges of Working With VARs

Working with VARs does come with its own set of challenges. These include:

• VARs may not always be familiar with the product or technology they are selling, meaning they may not be able to provide adequate support or advice.
• VARs must be mindful when it comes to competitive pricing, as they may end up competing against the vendor’s own direct sales channels.
• Reseller partners may not always be trustworthy, meaning the vendor must ensure that their products are being sold properly.
• A reseller must have the technical expertise in their niche and be able to provide value-added services in order to differentiate themselves from the competition.

Because of these difficulties, it is important for vendors to thoroughly vet their potential value-added resellers before agreeing to a partnership.

VAR vs. MSP

An MSP (managed service provider) is a specific type of value-added reseller. But there are some subtle differences between the two.

• MSPs tend to focus more on providing services than selling products, whereas VARs tend to focus on product sales.
• When selling a software product, an MSP will normally provide ongoing support and maintenance services beyond the initial implementation of products, whereas VARs may just provide initial installation services, or simply resell a product.
• MSPs have more of a technical focus, as they are expected to have an in-depth understanding of the software systems and technologies they support.

VAR vs. OEM

An OEM (original equipment manufacturer) is a company that designs, manufactures, and distributes finished goods to customers.

In contrast, VARs purchase goods from other vendors and then resell them with added services such as customization, training and support.

VARs are not responsible for the design or manufacture of the products they sell—they use a two-tier distribution model to buy the products and then resell them. This means VARs are more agile and able to adapt their offerings to meet customers’ needs more quickly.

How CPQ Helps VARs Sell More Efficiently

CPQ software is a must-have for VARs, as it helps automate and streamline the sales process. CPQ software enables VARs to quickly create quotes that are accurate and up-to-date with the latest pricing information.

It also makes it easier to track customer orders, manage stock levels, and provide customers with quick access to product information.

Using CPQ software, VARs can deliver better customer service and more accurate quotes, resulting in a smoother sales process, faster quote-to-cash (QTC), and improved customer satisfaction.

Especially for companies with complex pricing models (e.g., enterprise service contracts) or high product complexity, CPQ software automates time-consuming manual processes like pricing calculations, configuration, and approvals, making the sales process less labor-intensive.

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