Value-Added Resellers (VAR)

What are Value-Added Resellers (VAR)?

Value-added resellers (VAR) are companies that improve or customize products or services from the primary source for reselling. In addition to the products provided by suppliers or manufacturers, the companies may also sell their supplementary products and services. Typically, the value emanates from providing professional services, such as product assembly, consultation, installation, modification, and implementation.

VARs also develop unique applications that fit product design in line with customer demands at an additional fee. Besides their relationship with other sellers, value-added resellers enjoy proximity to the market, which establishes brand credibility and enhances smooth delivery. The relationship between manufacturers and resellers is based on value creation, where reseller companies can generate extra income from the customized goods and services.

Understanding Value-Added Resellers in Brand Performance

Value-added resellers play an important role in helping manufacturers grow their businesses through various distribution channels. In comparison to company-owned distributions, value-added resellers possess greater market knowledge, distribution networks, and sales skills. As a result, they guarantee greater flexibility and lower capital investment by bringing the products and services to the market more effectively than the producers.

For example, in the IT sector, VARs provide services such as hardware or software installation, training, and maintenance on behalf of producer brands. They are expected to possess in-depth knowledge of the products to deliver them to the end-users successfully.

The partnership between manufacturers and reseller companies also adds value by increasing the reported revenues. While some reseller companies may be exclusive to one brand, most of them deal with several companies to offer multiple choices to customers.

In some cases, the top-performing value-added resellers are considered sales partners. The strategically important partners to the producer companies command a strong influence in terms of product development and stand to reap more benefits from their strategic position in the market.

Value-added Resellers in the Software Market

Value-added resellers are common in industries such as computers and services, furniture, and automobiles. Notably, such industries offer numerous value-added products and services, such as installation services, prolonged warranties, software programs, and service contracts.

To keep up with customer demands, they’ve increased their relevance to their clients and also improved their service portfolio. In the computer and service sector, for example, manufacturers persuade resellers to promote or sell their products and services by offering them financial incentives.

One of the major players in the value-added resale sector is ePlus. The company is a US-based provider of IT solutions with associates in different countries. Its expertise cuts across the entire technology spectrum, including audio and video communication. The company provides technology products and services to businesses, healthcare centers, and governments, which can be leveraged to address business challenges successfully.

Advantage of Using Value-Added Resellers

Value-added resellers contribute positively to the competitive strategy of the primary producers. It is achieved by performing unique activities that rate higher than the competitors. For example, they evaluate the needs of different consumer segments and turn them into requirements for features and capabilities software applications.

Manufacturers outsource their sales function for two main reasons. First, the companies boast intimate knowledge of the market and can penetrate different markets with ease compared to primary producers.  Second, value-added resellers facilitate direct sales to focus more on larger accounts. The decision to hire value-added resellers depends on the competency of a producing company and customer needs.

The core economy of supply chain management gives a clear picture of the benefits of using value-added resellers, some of which include market coverage, lower costs, and customer contacts. Additional advantages come from activities such as market segmentation, marketing knowledge, and marketing skills, which enhance the creation and implementation of marketing strategies.

Thus, the relationship between value-added resellers and primary suppliers contains benefits and opportunities for the supplier companies, the resellers, and end-customers. Generally, the end-users benefit from reduced costs of services and maintenance, high levels of responsive services, and one-stop shopping.

Disadvantages of Using Value-Added Resellers

There are two main downsides of using value-added resellers.

First, most companies are not ready to lose control to other companies because of opportunistic tendencies. Resellers are, therefore, painted on a bad light because of the fear of devaluing, rather than adding value to products and services.

Another challenge hails from profits enjoyed by value-added resellers as intermediaries. Most often, manufacturers perceive reseller companies as parasites instead of marketing channels. Such a perception embodies other disadvantages, including loss of customer ownership and customer contact.

In addition, manufacturers’ experience in outsourcing to reseller companies may be a breeding ground for fear of poor communication, poor market management, and the contradictory objectives of the intermediaries.

Additional Resources

CFI is the official provider of the global Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:

• Brand Strategy
• Market Segmentation and Targeting
• Original Equipment Manufacturer (OEM)
• Value Proposition
• See all management & strategy resources