The Value Added Reseller Model: Powering Enterprise Tech Growth

The broader IT VAR market (including services, hardware, software) is expanding steadily at 5.5–7.5% CAGR, with estimates ranging from USD 106 billion to USD 150 billion in 2024 (Market Research Intellect).

This statistic shows that the overall IT VAR market is steadily expanding year over year.

Comparing VARs Vs Traditional Resellers

The idea behind the “value-added” concept is that VARs don’t just resell a product as it is; they enhance it in a way that makes it more useful, tailored, or complete for the buyer’s needs.

This is what sets VARs apart from standard resellers or distributors, who typically sell products in their original form without offering these extra solutions. In simple terms, a VAR takes a product and makes it better or more suited for the customer before passing it.

This focus on services also highlights the consultation and support strengths of VARs, as they work closely with clients to understand their specific needs and offer expert guidance.

Brief History of VAR Business Model in the IT Space

Value-Added Resellers (VARs) first emerged in the 1980s as technology companies started selling computers, software, and networking equipment. Instead of just reselling products, VARs offered additional services like installation, customization, and training, helping businesses use technology more effectively.

Over the years, as IT and technology evolved, VARs became crucial partners for manufacturers and distributors, bridging the gap between complex products and the end customers who needed complete, tailored solutions.

Industries Served by the Value-added Resellers

IT Sector: VARs commonly operate in the IT sector, offering hardware and software solutions, as well as networking and security systems to ensure robust and secure IT infrastructure.

Telecommunications: Many VARs also cater to the telecommunications industry, supplying equipment and services that support communication networks.

Office Supplies:They serve businesses requiring office supplies and equipment, helping streamline day-to-day operations.

Specialized Industries: VARs often focus on specialized industries such as healthcare technology, manufacturing automation, retail point-of-sale systems, and education IT solutions, delivering customized offerings that address unique industry challenges and regulatory requirements.

The Working of VAR Business Model

1) Core Revenue Streams

VARs earn through multiple income channels. Product reselling remains the foundation, where they purchase hardware or software from manufacturers or distributors and sell them to end customers at a markup.

VARs enhance products with value-added services such as integration, customization, end-user training, and ongoing maintenance, which increase deal size and customer loyalty.

Managed services and consulting bring predictable, recurring income by handling IT infrastructure, security, or cloud operations on behalf of clients. Additionally, subscription-based software (SaaS resale) allows VARs to offer cloud solutions with monthly or annual billing, ensuring a steady revenue stream.

2) Partnering with OEMs, Distributors, and Cloud Providers

Partnerships are essential to the VAR business. Working with OEMs (Original Equipment Manufacturers) gives VARs access to authentic products, competitive pricing, and vendor certifications that enhance credibility.

Distributors provide a broader product range and logistical support, enabling VARs to fulfill diverse customer requirements without maintaining massive stock. Collaborations with cloud providers (such as Microsoft, AWS, or Google Cloud) let VARs expand their portfolio into subscription-based cloud services, catering to clients’ digital transformation needs.

3) Pricing Models

VARs adopt different pricing structures depending on the product type and customer relationship. Markup pricing adds a fixed percentage to the product’s cost, while margin-based pricing focuses on maintaining a specific profit margin regardless of fluctuations in vendor pricing.

Subscription pricing works for SaaS, managed services, or cloud solutions, charging customers on a recurring basis. Bundle pricing packages hardware, software, and services together, creating perceived value and simplifying purchasing decisions for customers.

4) Inventory Management

Inventory management strategies differ across VARs. Direct stocking involves purchasing and holding inventory, ensuring immediate availability for customers but requiring higher capital investment and storage space.

On the other hand, dropshipping allows VARs to fulfill orders directly from the distributor or manufacturer to the customer, reducing inventory costs and risks but potentially increasing delivery times. Many VARs adopt a hybrid approach, stocking fast-moving items while dropshipping specialized or low-demand products.

The VAR’s role in the B2B Sales Channel

The Value-Added Reseller (VAR) plays a crucial role in the B2B sales channel by acting as a bridge between manufacturers or distributors and end customers. 

Their value-added approach helps businesses acquire solutions tailored to their unique needs, simplifies complex purchasing decisions, and fosters long-term relationships. In essence, VARs enable manufacturers to reach niche markets more effectively while providing buyers with a comprehensive, ready-to-use solution.

Key Functions and Operations in a VAR Business

1) Procurement & Vendor Management

a) Building relationships with distributors and manufacturers

A VAR’s success often depends on strong ties with distributors and manufacturers. Good relationships mean access to better deals, priority in stock allocation, and early updates on new products. This also helps VARs deliver solutions faster and more competitively.

b) Negotiating pricing and rebates

VARs negotiate with suppliers to get the best possible prices and secure rebates based on sales volumes. These savings can either increase profit margins or be passed on to customers to stay competitive. Skilled negotiation is a key factor in winning more deals.

2) Catalog & Product Data Management

a) Keeping SKUs, pricing, and specs accurate

Customers expect product information to be up-to-date and accurate. VARs need to regularly update SKUs, pricing, descriptions, and technical specs so that buyers can make informed purchasing decisions without delays or confusion.

b) Role of datafeed management software

Datafeed management software automates catalog updates by pulling product data directly from distributors. This ensures accuracy, reduces manual work, and helps keep online stores and quoting tools in sync with the latest pricing and availability.

3) Sales & Quoting

a) Handling Complex Quotes

Many B2B customers need tailored solutions, like bundled hardware, software, and services. VARs need to use tools and expertise to combine these elements into a single, seamless package, making purchasing easier for the customer.

b) Approval workflows for high-value deals

For big-ticket deals, an approval process ensures that pricing, discounts, and contract terms are reviewed before the quote goes to the customer. This prevents profit losses and maintains consistency in sales policies.

4) Integration & Implementation Services

VARs don’t just sell products, they make sure those products work within the customer’s existing systems. This involves integrating software, configuring hardware, and providing on-site or remote setup so the customer gets a ready-to-use solution.

5) Customer Support & Account Management

After the sale, VARs provide ongoing support for troubleshooting, upgrades, and maintenance. Dedicated account managers build long-term relationships, understand customer needs, and offer solutions that encourage repeat business.

6) Billing & Finance

a) Quote-to-cash automation

This is the process of automating everything from creating a quote to receiving payment. It speeds up the sales cycle, reduces paperwork, and ensures all billing is accurate and on time.

b) Recurring billing for service contracts

VARs offering managed services or subscriptions use recurring billing systems to automatically charge customers at regular intervals. It creates consistent income and lowers the risk of clients defaulting on payments

7) Marketing for VARs

a) B2B lead generation strategies

VARs use digital marketing, email campaigns, trade shows, and partnerships to find and attract potential customers. The goal is to generate high-quality leads that have a real interest in their products and services.

b) Building trust with enterprise buyers

Enterprise clients look for reliability and expertise before making a purchase. VARs build trust by offering tailored solutions, transparent pricing, case studies, and excellent customer service to prove their value.

Benefits of the VAR Business Model

1) Deliver end-to-end solutions to customers

VARs combine products from multiple vendors with their own integration, customization, and implementation services to provide a complete, ready-to-use solution.

Instead of a customer having to deal with multiple suppliers, the VAR acts as a single point of contact, managing procurement, configuration, installation, and support. This integrated method streamlines operations for customers, cuts down on difficulties, and provides a seamless rollout.

2) Stronger customer relationships

By offering value added services such as installation, training, system customization, and ongoing technical support, VARs move beyond being just product sellers.

These additional services foster trust, loyalty, and long-term engagement, as customers view the VAR as a strategic partner rather than a transactional vendor. The personalized, consultative approach makes it harder for competitors to displace them.

3) Opportunity for recurring revenue

Shifting from one-time product sales to subscription-based services like managed IT, cloud hosting, and software licensing ensures a steady cash flow.

These recurring contracts create predictable revenue streams, reduce dependency on single large deals, and allow VARs to build a more stable, scalable business. Over time, this model increases customer lifetime value and business resilience.

4) Vendor incentives and co-marketing opportunities

Manufacturers and distributors often reward VARs with incentives such as volume-based rebates, discounted pricing, and access to exclusive training.

In addition, vendors may provide marketing development funds (MDF) for promotional campaigns, events, or lead-generation programs. These perks not only improve profitability but also help VARs strengthen their market presence without bearing the full cost of marketing activities.

The Challenges of Being a Value-added Reseller

1) Low margins

VAR companies often operate on low margins. The selling price of products cannot exceed the MSRP, leaving little scope for VARs to get higher profit margins. Even if a VAR buys the products at wholesale prices, they can add only a certain percentage of margin when selling the products.

The sourcing stage is typically the most profitable aspect of a VAR’s operations. Distributors run promotions and deals that help the VARs make their money.

2) Millions of products

IT distributors have product portfolios that run in the millions. Ingram Micro, a leading IT distributor in the United States alone has a catalog of 1.6 Million+ SKUs from 650+ brands across 25+ categories and 500+ subcategories.

That is ONE distributor. VARs usually partner with multiple distributors so one can imagine the enormity of the catalog at play.

3) Complex Quoting and Sales Processes

Many B2B deals require configurations that combine multiple products, software licenses, and services from different vendors. Each vendor may have its own pricing structure, discount rules, and delivery timelines, making it harder to create a single, accurate quote.

On top of that, when quotes are prepared manually, there’s a higher chance of mistakes such as incorrect pricing, missing items, or mismatched product specifications, which can delay approvals and frustrate customers. These delays not only slow down the sales cycle but can also cause the customer to lose confidence and explore other suppliers.

4) Frequent technology and price changes

The IT industry is dynamic. The pace at which technology changes affects every sector that requires IT, which is almost EVERY possible sector in the world!

Technology gets outdated, sometimes within weeks. The product catalog needs to be updated regularly to avoid redundancy. Doing this for over a million products is exhausting and overwhelming.

Frequent technology changes lead to frequent price changes. Obsolete products get marked down heavily, deals and discounts from suppliers affect margins and keeping track of everything manually is next to impossible.

5) Constant learning

Due to the dynamic nature of the industry, IT resellers need to regularly stay updated about the latest technology and the newest products in the market. Even slight negligence can be detrimental to business.

Keeping abreast of a million products is exhausting, updating product information regularly even more so, and unless these processes are not integrated with the supplier’s product data feed, it can lead to massive losses due to incorrect quotations.

6) Requires trained staff

The VAR industry is demanding, the product range vast and processes are complex. Highly skilled and trained staff is required to handle the admin side of the business as well as sales and customer retention.

Sales reps are required to be highly competent and updated about the products they offer. The processes, if done manually are time-consuming and need manpower which adds to business costs.

7) Keeping stock is not advisable

Because of constant technology upgrades, and the resulting product redundancy keeping stock feels like holding onto a ticking bomb.

Not keeping inventory increases the VARs dependency on their suppliers. A VAR is completely reliant on the supplier to fulfill orders.

In a scenario like this having access to real-time inventory information is the differentiator between a struggling business and a successful one.

8) High inventory investment

If despite all the reasons not to, a VAR decides to keep stock, the investment required is extremely high, especially to stock high-ticket items like servers. A reseller can decide to stock fast-moving items and adopt a hybrid dropship model.

A hybrid model is where a reseller stocks some fast-moving products at their warehouse while also offering their customers a dropship catalog. For example, while stocking 100,000 products is impossible, a VAR can easily stock 20 of their popular products.

What this enables a VAR to do is at times ship their popular products to customers faster than the distributor. Keeping inventory requires a larger amount of cash than dropshipping and poses a certain amount of risk. But if the VAR knows his business well, a hybrid dropshipping model is worth a try.

9) Price variation between distributors

A VAR partners with multiple distributors and the competition amongst distributors is fierce! The same product is available from multiple distributors at different pricing. In the absence of a tool that aggregates all the catalogs and offers a one-window view of price and inventory from various distributors, it can be difficult to compare and choose the best price to quote customers.

10) Visibility of different promotions from various distributors

Due to this fierce competition, distributors always offer many deals and promotions. As the VAR business runs on low margins, it is these deals where the VARs typically make their money. But a VAR needs visibility to these deals to decide which distributor to buy from.

A quotation and eCommerce platform like VARStreet solves this problem for the resellers. VARStreet has aggregated the catalogs of 40+ IT, consumer electronics, and office supplies distributors in the United States and Canada. This catalog is updated in real-time and gives VARs a single-window view of products, prices and deals from multiple distributors.

11) Competition from e-tailers

E-tailers are traditional retail businesses that sell products online as well. For example, Best Buy, CDW etc.

VARs are facing competition from not just marketplaces like Amazon and Newegg but also from e-tailers, all vying for the same customer base.

Not many VARs offer eCommerce, which honestly is the need of the hour. This puts their business at risk of dying out to competition from e-tailers and marketplaces unless they adapt.

12) eCommerce no longer a luxury

eCommerce has revolutionized buying behaviors, and every business needs to be online or die down eventually. Going online with their businesses is not easy for VARs due to the very nature of the business and complex catalog requirements.

The vast size of the product catalog makes setting up an eCommerce store extremely difficult. Most popular eCommerce platforms fail to support the complex business and catalog needs of resellers, especially IT resellers. The product catalog for an IT VAR runs in millions and finding an affordable eCommerce platform that allows users to upload such an immense catalog is next to none.

13) No single tool to manage all aspects of business

Finding a single solution to manage all major business processes is challenging. The business management solution needs to seamlessly integrate with all the systems the business uses as well as the ecommerce solution.

Implementation is time-consuming and depending on the solution, can require developers, adding to business costs further.

Strategies for VARs to Overcome Challenges

1) Automate quoting process

Manually creating and approving sales quotes takes time and can lead to mistakes. By using automated quoting software, VARs can generate accurate quotes quickly and route them for approvals without delays. This helps close deals faster and reduces the risk of errors.

Read the blog—–>Maintain a Steady Flow of Repeat Business with Sales Quoting Software

2) Adopt integrated software tools

Running different systems for sales, inventory, finance, and customer management can be messy. An integrated business management solution connects all these functions in one place. This means smoother operations, less manual work, and better visibility into the business.

3) Expand into managed services

Selling products alone can lead to unpredictable income. By offering ongoing services like IT support, maintenance, or cloud management, VARs can earn steady, recurring revenue. This also strengthens customer loyalty as clients rely on them for daily operations.