What is a value-added reseller?
Value-added reselling is a business model that adds value to a product or service before selling it. This model is common in the IT and consumer electronics sector. The value addition can be in the form of software bundled with hardware to give users an integrated product or a complete solution, or value-added services such as setup, installation of software programs, and training service.
Value-added reselling is a business model that adds value. As the name suggests, a value-added reseller (VAR) offers services that go beyond the 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.
VARs often purchase products from distributors and original equipment manufacturers (OEMs), 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 customer 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 the client’s needs.
VARs have good knowledge about the software and hardware products they offer. The end-user does not have to run from pillar to post to find suitable technology. VARs ensure that the solution you buy from them best fits your business.
How do value-added resellers make money?
Pre-Sales or Solution Architects
Utilise your in-house experts to help discover, design and define the solution requirements, and write a Scope of Works. Good Pre-Salespeople are worth their weight in gold, but their experience does vary massively. The difference between a “Subject Matter Expert” (SME) and a Pre-Salesperson is that the Pre-Salesperson can understand and articulate how the technology will integrate to the customer’s specific needs, and will have a wider knowledge of the product area and not just the vendor you are positioning. E.g. if discussing Data Center servers, the Pre-salesperson will not only know your product, but also have knowledge of Cisco, Dell, HP, Intel, Supermicro, NVidia, Huawei, and if truly skilled, understand cloud-based servers e.g. AWS, GCP, and Azure.
They add value as they can speak independently of the vendor you may wish to sell to the customer, which is crucial for building trust and credibility, e.g. if you only know Cisco, then when a customer speaks with you, the answer will always be Cisco! However, if your pre-salesperson is aware of the landscape, and can match your strategic requirements to a vendor objectively, the customer will receive a much better solution and you will earn their respect as a trusted advisor.
Utilize in-house resources to manage and track quotations, delivery of items, and hand-over to Post-sales. Internal salespeople’s roles vary massively between companies. They can manage and coordinate all of the paperwork behind the scenes, to ensure the commercial and legal admin is kept in check. They play a vital role in keeping all parts moving from sale to post-sale, ensuring that items are delivered correctly and that the post-sales team(s) are aware of incoming customers. These team members are incredibly valuable for keeping a customer proactively updated throughout the sales/post-sales cycles and should always be rapid to respond to requests.
These teams will vary depending on the solution or technology sold and can include Professional Services, Managed Services, Adoption services, and so on. Typically, the vendor will not have the scale to support all customers with these services and will look to skilled partners to provide these services to the customer. With margins squeezed on reselling vendor’s technologies, this is the main area where a reseller can generate profit and offer massive benefits to the customer in return.
What is the difference between a value-added reseller and a distributor?
A distributor often acts as partner with the manufacturer, is generally first in line in the distribution channel, and is more closely associated with the manufacturer. A strong distributor relationship can be great for a new company that does not have established brand recognition in a new or existing market. The distributor usually buys directly from the manufacturer, holds inventory of the product, provides after-sale services, and resells the product to resellers and sometimes directly to end users. Because distributors generally take on marketing responsibilities for the product, or the obligation to obtain regulatory or government approvals for resale of the product, the manufacturer-distributor relationship is often an exclusive relationship. Therefore, an exclusive distribution agreement must account for minimum sale thresholds or minimum royalties in order for the distributor to maintain its exclusivity. Further, because a distributor may be a company’s first line of introduction into a new or existing market, it is important to find a distributor that will diligently market your products, have the right connections in new territories to obtain regulatory or government approvals for your products, and include an explicit commitment from the distributor to not sell competing products.
A reseller is generally less closely associated with the manufacturer, and sometimes does not have a direct relationship with the manufacturer as it generally buys products from distributors. Resellers usually do not keep inventory of product or provide after-sale services. Resellers generally only sell to end users or wholesalers. For a manufacturer with an established and well-recognized product, a reseller relationship may be the most profitable because resellers are less invested in developing the market for the product and therefore provide higher profit margins for the manufacturer.
What is a value-added reseller example?
Anyone can become a value-added reseller. If you’re an IT business, and you’re looking to expand your offering, you’re on your way to becoming a value-added reseller. Your best bet would be to partner up with Engati.
You’d get to build your brand with a strong, reliable platform that has proved itself and is used in 186 different countries (for context, there are 193 member countries in the United Nations).
You also get access to Engati’s Bot Experts. The experts will train your entire team extensively on the platform and even help you out with customizations and bot-building at a negligible cost.
Your customers would have a smooth experience, building intelligent and multilingual chatbots that run on our powerful NLP engine, with minimal effort. They won’t even need to code their bots thanks to our conversation builder.