A Value-Added Reseller (VAR) is a crucial player in the distribution chain of technology products and services. These firms enhance the value of third-party products by adding unique or customized components, services, or solutions, making them more appealing and effective for end-users. Particularly relevant in the Information Technology (IT) industry, VARs provide additional layers of support including hardware, installation services, consulting, troubleshooting, and other related offerings on top of the core products they resell.
Understanding Value-Added Resellers
Value-added resellers effectively bridge the gap between manufacturers and end-users. They provide an important distribution channel for manufacturers, especially for those businesses in the tech sector that may struggle to reach the end-user directly.
When a VAR takes a core piece of hardware or software, they customize and enhance it based on the specific needs of the customer. This might include integrating other products, offering training sessions, or providing ongoing support. While VARs are not the manufacturers themselves, they are expected to possess extensive product knowledge to successfully tailor solutions for their clients.
Recognizing their importance, many IT corporations incentivize VARs through product discounts, aimed at driving increased sales through this channel. Some VARs may focus exclusively on one brand, while many represent multiple products to provide broader options.
Key Takeaways:
- Enhancement: A VAR elevates the value of other businesses' products through added customization and services.
- Repeat Business: The value-added services can help in securing repeat customers.
- Cost Control: VARs typically have limited control over the costs of the products they are selling, relying on supplier pricing.
Example of Value-Added Reseller: Cisco
Cisco, a leading manufacturer in the IT space, has developed an extensive VAR program that focuses on quality control and support. This program involves authorizing, certifying, training, and auditing resellers to ensure they meet Cisco’s high standards.
To become a Cisco VAR, organizations must demonstrate the competence and infrastructure needed to sell and support Cisco products. Based on their level of service and expertise, VARs can earn different certifications such as "select," "premier," or "gold." Cisco also offers training in various areas, including enterprise networks, cybersecurity, Internet of Things (IoT), and data centers. In addition, VARs must undergo periodic audits to maintain their standing within the reseller network.
Advantages of Value-Added Resellers
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Increased Repeat Business: VARs often cultivate long-term relationships with customers, which can lead to repeat business due to the trust and added value they provide.
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Customer Centric Service: Many VARs serve as a single point of contact for customer service, thus simplifying support and enhancing customer experience.
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Expertise: Due to their proximity to customers and their varied experience levels, many VARs are better positioned to understand and address specific challenges faced by their clients.
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Margin: The main profitability for VARs typically arises from adding value through services rather than from the products themselves, which usually have only modest markups.
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Flexibility: VARs can adapt their offerings to fit unique customer needs, providing tailored solutions that manufacturers might not be able to offer directly.
Disadvantages of Value-Added Resellers
Despite their advantages, VARs face several challenges:
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Limited Control Over Pricing: VARs often have little control over the product costs associated with their offerings. Many manufacturers may provide discounts to assist VARs in pricing competitively, but overall, reselling can still be a precarious business.
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Quality and Features Dependence: VARs rely heavily on manufacturers to update and enhance product quality and features. If manufacturers fail to meet evolving consumer needs, VARs may struggle to keep their offerings relevant.
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Transparency Issues: The resale process can sometimes be opaque, making it challenging for VARs to clearly communicate the value of their offerings to customers.
Conclusion
In summary, Value-Added Resellers play a significant role in the IT industry and beyond by layering additional value on third-party products. By providing customization, support, and expertise, they create unique solutions that meet specific client needs. As the tech landscape continues to evolve, the VAR model remains a relevant channel, contributing to the overall customer experience and product accessibility in the marketplace.