What Is a Value-Added Reseller (VAR)? Definition and Example

What Is a Value-Added Reseller (VAR)?

A value-added reseller is a firm that enhances the value of third-party products by adding customized products or services for resale to end-users. Value-added resellers play a prominent role in the information technology (IT) industry, providing additional hardware, installation services, consulting, troubleshooting, or other related products or services on top of core products.

Value-added resellers play an important and prominent role in the information technology (IT) industry.

Understanding Value-Added Reseller

Value-added resellers exist because they represent an important distribution channel for manufacturers, particularly those in the IT sector. A value-added reseller takes a core hardware or software product or an entire system and customizes a package of additional system add-ons for a customer. The reseller is not the manufacturer of the equipment, but it is expected to have a thorough knowledge of the product to properly customize, install, test, and maintain for the customer.

Recognizing the benefit of value-added resellers, an IT corporation will typically offer product discounts to them as a means to increase sales through this channel. Some of these resellers can be exclusive to one company, but most carry a few or several brands to offer more choices to customers.

Key Takeaways

  • A value-added reseller enhances the value of other companies' products by adding customized products or services to the core product for resale to end-users.
  • A value-added reseller can increase repeat business through the added value they provide.
  • Value-added resellers can’t really control the costs of the product they're selling.

Example of Value-Added Reseller

Like other large IT product manufacturers, Cisco cultivates a reseller program that encompasses authorization, certification, training, and auditing of the members to ensure quality control. A reseller must first be authorized to carry Cisco products, demonstrating that it has the personnel and infrastructure to support the sales of the products.

Depending on the level of service, it may receive a "select," "premier," or "gold" certification from Cisco. Cisco further provides training for resellers to specialize in a number of areas such as enterprise networks, cybersecurity, Internet of Things (IoT), and data centers. Periodically, value-added resellers must submit to audits by Cisco to prove their ongoing worthiness as members of the reseller network.

Advantages of Value-Added Resellers

A value-added reseller can increase its potential for repeat business by virtue of the added value they provide. A VAR can also act as the single point of customer service-centric contact for customers of certain products and solutions. A VAR is often better positioned to understand the customers’ challenges and offer the kind of expertise that ensures customer satisfaction.

The majority of a VARs margin comes from the value-added products and services, not the products themselves, which usually are marked up only a small amount. There is no such thing as a standardized VAR program. Every company has a unique business climate and terms, conditions, and methods.

Disadvantages of Value-Added Resellers

Value-added resellers can’t really control the cost of the product they're selling, and the whole reselling process is sometimes not transparent. Sometimes, manufacturers will try to alleviate this problem by offering a discount to resellers, which allows a reseller greater control over the prices they charge their customers.

A reseller also has little to no control over the quality or features of their product, and they must rely on their manufacturer to adjust to changing customer requirements.