VAR is a business model that adds value. As the name suggests, a value added reseller (VAR) offers services that go beyond selling of products. VARS typically buy products from suppliers, add ‘value’ to them in the form of features and services, and then resell to end-users. An organization that does the job of only selling another company’s products cannot be considered a VAR.
Primary Objective of VAR
VARS are involved in enhancing existing products and provide a customized solution to consumers. Offering value added services can help to nurture and build customer relationship, which can lead to repeat business.
VARS often purchase products from distributors and original equipment manufacturers (OEMS) and then add features or bundle them together to create a new product as a complete package.
A VAR can also combine components sourced from different vendors to build a new system as per requirements. Bundling third-party hardware and software to create an integrated product for reselling is a common practice followed by VARS. The aim of VAR companies is to provide turnkey solutions that are ready for use and customized to client’s needs.
Examples of Value Added Reselling
VARS are common in IT and electronics industry who sell products manufactured by other companies in addition to selling their own products and services. For instance, computer retailers apart from selling IT products provide a variety of value added services such as setup, installation of software programs and training service.
Companies providing software products and services, give additional services like database management, web development and customer support to address any issues.
In the automobile industry too, you will find auto dealers offering value added services like custom parts and accessories and contract services. Free vehicle maintenance services are also provided for a specified duration of time.
Secret to Efficient VAR Business Management
Automation is the key when it comes to making VAR business more efficient. In fact, it has become an important component of today’s successful companies. When you automate your key processes it helps to eliminate redundant tasks, increase productivity and maximize business growth. For instance, instead of quoting manually, you can use a sales quoting software to speed up the process and ensure greater accuracy while quoting.
Today organizations are using an all-in-one business management software that comes with built-in quoting and CRM system to make their daily operations simpler and cost effective, which in turn helps to serve their customers better.
Why to Purchase from VAR
- Purchasing product from a VAR is always a better option than going directly to a vendor. VARS offer customization and maintenance services. It is a one-stop solution for all customer needs, thereby sparing you from dealing with multiple solution providers.
- VARS have good knowledge about the software and hardware products they are offering. You don’t have to waste your time and energy in finding out the technology suitable for you. They can provide a range of options that are right for you. All in all, VARS ensure that the solution you are buying from them best fits your business.
Benefits of Becoming a VAR
- Value added reseller is considered to be a cost-effective business model. As a VAR, when you make a strategic partnership with renowned suppliers, you get the opportunity to offer a wide range of products to your clients.
- You are not required to invest your resources on developing a product. All you have to do is identify the services that best supplements the offerings provided by the supplier.
- Many times, sales and marketing resources for VARS come from suppliers. As a VAR, you may not have to allocate funds for advertising as the supplier may offer sales and marketing support for you at no extra cost.
Disadvantages of Being a VAR
- VAR companies often operate on low margins. This business of reselling products from vendors doesn’t earn them high product margins. For instance, the selling price of the product cannot exceed MSRP, leaving little scope for VARS to get higher profit margins. So even if VARS get the products at wholesale prices, they can add only a certain percentage of margin when selling products.
- The key to improve profit margins is focus on providing quality value added service which can increase customer satisfaction and retention, resulting in higher sales.
- You don’t have to look for prospects to sell your products since VARS already have an established customer base for their business.
Advantages of Selling through VAR
- When the products that you sell need a significant amount of customization, it is always better to reach customers via a VAR channel. The reason being VARS can custom-configure products to suit your customer’s business environment.
- The upfront and ongoing cost of acquiring customers through VAR channel is low. You will pay only when there is a sale.
- VARS have their own sales team to promote their business. So during the early phase of your business, you can leave the burden of promoting your products to VARS.
Cons of Working with a VAR
- The disadvantage is that you pay more when purchasing products from VARS. OEM/distributors sell their products to VARS at wholesale prices. The VAR will then add a certain percentage margin on the wholesale price to get the desired profit.
- Compared to VARS, OEM/distributor have a greater understanding of products. This is because there sales and technical team are specialized in their own particular set of product lines, while VARS have to deal with extensive line of products coming from multiple suppliers.
Downside of Selling through VARS
- From an economic standpoint, is it beneficial to pursue a VAR channel for selling products? To be honest, VARS won’t sell your products for free. In fact they take a significant cut of your margins when selling products to their customers. You will have to pay big commissions to VARS for products that sell at a high price. So signing partnership with VARS comes at a cost.
- You might not know exactly to whom your products are being sold as VARS rarely provide access to their customer data. As a result, due to limited customer feedback, you might not be in a position to forecast sales correctly.
To know why to work with value added resellers, read the articles given below: