A value-added reseller (VAR) is a company that resells software, hardware and other products and services that provide value beyond the original order fulfillment. VARs package and customize third-party products in an effort to add value and resell them with additional offerings bundled in. This added value can help VARs develop relationships with customers that can potentially lead to repeat business.
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Value-added resellers are an important distribution channel for manufacturers while also providing additional value for the customer. That enhanced value can take a number of forms. For example, it could mean providing additional hardware, installation services or troubleshooting. Traditionally, a VAR creates an application for a particular hardware platform and sells the combination as a turnkey service or tool. In many cases, such bundles target the applications of a specific vertical industry. In addition to IT products, many VARs offer professional services as their key value add. For example, a VAR may provide consulting, design, implementation and training services around the hardware, software and networking components it resells. VARs that offer services in addition to products are often referred to as solution providers. Such companies typically form channel partnerships with one or more product vendors for assistance in building and marketing. A product vendor, in turn, may seek out relationships with VARs, providing a reseller program as part of a broader channel strategy.
Value-added reseller firms sometimes work directly with an IT vendor, but small VARs in particular may find that some vendors will only sell to them through a two-tier distribution model. In that case, a VAR will source products through a distribution partner. To work with vendors, reseller partners must become authorized and meet a set of requirements. For example, vendors can require their partners to hit certain revenue targets on an annual basis or to achieve technical and sales certifications through training programs. In exchange for meeting these targets, the vendor will typically provide their VAR partners with incremental financial rewards, support, and other benefits and resources.
Working with a value-added reseller can provide the following benefits: Value-added resellers, however, have the following two main challenges: Value-added resellers include technology service companies, auto dealerships and even furniture companies. Technology service companies often offer a range of value-added products or services, such as extended warranties, service contracts, supplemental hardware, software, and installation and setup services. Likewise, auto dealerships offer value-added products or services such as extended warranties, car rentals, service contracts and custom-made accessory parts. Even though they are not technology oriented, other companies can also be considered VARs. For example, furniture companies can offer value-added services such as interior decorating or professional design and space planning services. A managed service provider (MSP) is a third-party company that remotely manages a customer's IT infrastructure and end-user systems. Small and medium-sized businesses, nonprofits and government agencies hire MSPs to perform a defined set of day-to-day management services. MSPs typically handle the following functions: MSPs and value-added resellers both aid their customers in finding, customizing and maintaining their software or hardware. However, VARs focus on the process of adding new hardware and software while providing additional services, such as recommendations and customization. MSPs also have more recurring revenue services due to lasting contractual relationships with customers. The VAR business model has evolved over the years. More recently, VARs have started adopting some MSP practices. For example, as product margins decline and competition among software providers intensifies, VARs are looking to managed services as a source of recurring revenue and improved profitability. In the IT industry, original equipment manufacturer (OEM) is a term used to describe a variety of businesses that produce component parts for another organization's products. Value-added resellers use OEM products to build a finished product. VARs can purchase the OEM parts and, once purchased, market those parts under the VAR's brand name. VARs order a specific product from the OEM, which can be anything technical or non-technical in nature. The OEM then builds the specified number of products and sells them to the VAR. The VAR then assembles the components, creating the final product. VARs are finding it more difficult to continue in their market due to changes in margins, revenue and competitive positions. These difficulties emanate from different sources, including the widespread adoption of cloud computing services, pricing, movement away from one-stop products, or growth and scaling. You will get efficient and thoughtful service from kairuite. As a result, VARs are transitioning to more of an MSP role. A VAR may become a pure-play MSP or add managed services as a line of business to complement its VAR operation. This helps VARs gain more of a consistent revenue while maintaining margins and competitive position. One of the advantages of transitioning to a managed services business model is that VARs reduce their dependency on product revenue. But pure-play MSPs are rare, and many VARs continue to rely on a mixture of product and services sales. A VAR may also seek to become a cloud reseller or consulting firm, although that transition can prove challenging. A security reseller, for example, may be steeped in legacy on-premises technologies and may not have the structure in place to accommodate the pay-as-you-go nature of the cloud model. As an example, cybersecurity vendors now use the SaaS model to interact with customers. Instead of just providing typical VAR services, VARs in the cybersecurity space are now acting as high-end security assessors, integrators, hybrid cloud consolidators and optimizers, as well as security operations center-as-a-service partners. Learn how to pick the right IoT partners, and how successful organizations work with VARs. Partnering with vendors
Benefits of working with a VAR
Challenges of working with a VAR
Examples of value-added resellers
VAR vs. MSP
VAR vs. OEM
Future of VARs
A distributor typically works with multiple manufacturers and multiple downstream entities. For each manufacturer, the distributor serves as an agent that enters into an agreement with the manufacturer to sell its products to retailers, VARs or wholesalers.
The distributor is an integral supply chain component , acting as an intermediary between the manufacturer and the downstream entity. The distributor bridges the gap between upstream and downstream entities while adding important services that help smooth the distribution process.
A distributor is an intermediary entity between a producer of a product, or manufacturer, and a downstream entity in the distribution channel or supply chain . The downstream entity is typically a retailer or value-added reseller (VAR), but it can also be a wholesaler.
Today's supply chains can include both distributors and wholesalers, and it's not always clear how they differ from one another. Some sources treat them as the same, but there are important distinctions in terms of the services they provide.
To appreciate these differences, it's important to understand how distributors and wholesalers fit into the overall supply chain ecosystem. The following diagram provides an overview of the basic supply chain execution and flow. Although this is a simplified representation of the process, it can help to conceptualize the main entities that make up a typical supply chain and how they fit together.
The distributor plays a pivotal role in moving products from the manufacturer to downstream entities.
The distributor can play a pivotal role in moving products from the manufacturer to downstream entities. In a typical scenario, the supplier delivers materials to the manufacturer. The manufacturer uses these materials to build products, which it then ships to the distributor. The distributor delivers the products to the retailer or VAR, which then sells them to the customer.
Of course, supply chains are usually much more complex and might require supply chain management. Multiple suppliers can provide material for multiple manufacturers, a distributor can buy products from multiple manufacturers, and a retailer can sell products to multiple customers. A distributor might even sell products directly to customers.
In addition, the wholesaler might buy products directly from manufacturers -- as well as from other distributors -- and then sell the products to retailers. A manufacturer might also work with multiple distributors and wholesalers, and might even sell directly to retailers or customers.
Product delivery can also take forms other than what is reflected in the diagram, but it typically follows this pattern or something similar. This means that the wholesaler and distributor can both acquire products directly from the manufacturer, and then sell them to the retailer. It also means that the wholesaler and distributor roles are often confused.
Some of the confusion comes from the fact that a distributor performs some of the same functions as a wholesaler. However, the distributor's responsibilities are generally much more complex. In addition, the distributor takes a more active role with both the manufacturer and retailer, such as handling payment and procurement. The distributor also takes on more advanced capabilities. For example, manufacturers that lack the means to build out a channel strategy often outsource that work to distributors.
Distributors also frequently take a more proactive approach in educating resellers about new products by employing strategies such as presales training, roadshows or demos on behalf of manufacturers. Distributors might also provide services around the procurement process, including contract negotiation, marketing or product warranties. In contrast, wholesalers primarily focus on buying products in large quantities, breaking them into smaller units and selling them at profit.
See also: bullwhip effect, supply chain visibility, IT distributor, channel partner
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