Value-Added Resellers (VAR)

Definition

Value-Added Resellers (VAR) refers to a business model where companies purchase products, such as hardware and software, from manufacturers or distributors, then enhance or modify them by adding unique features or services. These companies then resell the improved products to end-users, often targeting specific industries or markets. The value addition typically provides a competitive edge and offers customers a tailored solution, while also generating higher profit margins for the reseller.

Phonetic

Value-Added Resellers (VAR) in phonetics is:ˈvalyo͞o ˈadəd riˈsɛlərz

Key Takeaways

1. Value-Added Resellers (VAR) are partners or intermediaries that buy products from manufacturers, enhance or customize them with additional features or services, and then resell them to end-users or clients.
2. VARs can offer significant value to customers by bundling products or services, providing technical expertise, and offering tailored solutions to specific customer requirements, often at a lower cost than purchasing individual components.
3. In order to be successful, VARs need to maintain strong relationships with their suppliers and customers, stay up-to-date with technology advancements and market trends, and constantly improve their offering to meet the evolving needs of their clientele.

Importance

The business/finance term Value-Added Resellers (VAR) is important because it represents a crucial component within the supply chain management and distribution process. The role of a VAR is to enhance the functionality of an original product or service by adding features or supplementary services to it, which in turn provides added value to the end consumer. This can range from customizing software packages, offering training services, or integrating multiple products and services to form a complete solution. The ability of a VAR to align their services with the needs and requirements of the customers ultimately fosters a more effective and efficient delivery of solutions. Furthermore, the collaboration between the original manufacturer, VAR, and end consumer helps strengthen partnerships and promotes the development of competitive advantage for all parties involved.

Explanation

Value-Added Resellers (VAR) play an integral role in enhancing the overall utility and functionality of products within the finance and business realms. The primary purpose of VARs is to foster a symbiotic relationship between manufacturers and end-users by bundling or integrating diverse components and services, thereby creating tailored solutions aligning with the unique needs and requirements of their clientele. By extending their offerings beyond the original product specifications, VARs can effectively differentiate themselves in a competitive marketplace and build stronger connections with their customers.

The benefits of collaborating with VARs are manifold for both manufacturers and customers. For manufacturers, partnering with a VAR allows them to focus on their core competencies, such as product development, while the VAR tackles the customization, implementation, and support aspects. This enables a more seamless integration of the product into a client’s existing infrastructure and assurance that the implemented solution achieves its intended objectives. Meanwhile, customers benefit from the specialized expertise and resources VARs provide, which would be otherwise inaccessible or too pricey to develop in-house.

Consequently, collaboration with Value-Added Resellers (VAR) contributes significantly to increasing the product’s appeal and value proposition to the target audience, ultimately fostering long-term customer relationships, and ensuring marketplace success.

Examples

1. Cisco Systems Inc. (Technology): Cisco Systems is a US-based multinational technology company that designs, manufactures, and sells networking equipment. Cisco partners with Value-Added Resellers (VARs) like CDW, Insight, and SHI International Corp., who purchase Cisco products, add their expertise and services, and then resell them to the end customers. These VARs can customize Cisco’s networking equipment to better fit the specific needs of businesses and organizations.

2. Microsoft Dynamics (Software): Microsoft Dynamics is a line of enterprise resource planning (ERP) and customer relationship management (CRM) software products developed by Microsoft. Microsoft works with VARs like Velosio, JourneyTEAM, and Blue Horseshoe, who buy Microsoft Dynamics software licenses, customize the software, and provide additional support and services to customers. VARs in this space focus on tailoring the software for a specific industry or use case, such as retail, manufacturing, or financial services.

3. Hewlett Packard Enterprise (HPE) (Computer Hardware): Hewlett Packard Enterprise is a multinational enterprise IT company that provides servers, storage, networking, and other technology solutions. HPE collaborates with VAR partners like PCM-G, Softchoice, and Zones, who purchase HPE hardware products, add value through additional services, and resell the complete solution to customers. These VARs may offer services such as installation, integration, and technical support, in addition to tailoring HPE hardware to meet the unique needs of their customers.

Frequently Asked Questions(FAQ)

Related Finance Terms

• • Channel Partners
  • Original Equipment Manufacturers (OEM)
  • Distribution Channels
  • Systems Integrators
  • Reseller Agreements

Sources for More Information

• TechTarget
• Investopedia
• The Business Professor
• Corporate Finance Institute