What Is a Value-Added Reseller (VAR)? Meaning, Model, and How It Works
Table of Content
- What Is a Value-Added Reseller (VAR)?
- Comparing VARs vs. Traditional Resellers and Distributors
- Brief History of the VAR Business Model in the IT Space
- The Working of the VAR Business Model
- VAR vs. MSP vs. OEM
- The VAR’s Role in the B2B Sales Channel
- Key Functions and Operations in a VAR Business
- Benefits of the VAR Business Model
- The Challenges of Being a Value-added Reseller
- Strategies for VARs to Overcome Challenges
- How VARStreet Helps VARs Overcome These Challenges
- Conclusion
- FAQs
Buying technology for a business isn’t always as simple as choosing a product and placing an order. Companies often need help selecting the right products, integrating them with existing systems, setting them up, and supporting them after the sale. That’s where a Value-Added Reseller (VAR) comes in.
A VAR does more than resell hardware or software. It combines products from manufacturers or distributors with services such as integration, customization, installation, training, and ongoing support to deliver a solution tailored to the customer’s needs.
But how does the VAR business model actually work? How do VARs make money, how are they different from traditional resellers, distributors, and MSPs, and what challenges do they face as technology sales become increasingly competitive?
This guide explains the VAR business model, its revenue streams, core operations, benefits, challenges, and the strategies VARs can use to build a more efficient and profitable business.
Key Takeaways:
- A value-added reseller purchases products from vendors or distributors and adds services such as integration, support, and customization to deliver complete solutions to customers.
- The VAR business model depends on combining thin product margins with higher margin services, recurring contracts, andlong term customer relationships.
- Modern VARs face pressure from vendor direct sales, cloud marketplaces, and commoditized hardware that squeeze margins and weaken traditional resale economics.
- Operational complexity in quoting, procurement, renewals, and project delivery makes manual tools risky for VARs that managemulti vendor deals and long sales cycles.
What Is a Value-Added Reseller (VAR)?
A Value-Added Reseller (VAR) is a business that buys products, often from manufacturers or distributors, and then adds its own services or features before selling them to customers. These added services can include things like installation, customization, integration with other systems, technical support, or training.
Comparing VARs vs. Traditional Resellers and Distributors
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 on.
This focus on services also highlights VARs’ strengths in consultation and support, as they work closely with clients to understand their specific needs and provide expert guidance.
| Distributor | Reseller | VAR | |
|---|---|---|---|
| Buys from | Manufacturer directly | Distributor or manufacturer | Distributor or manufacturer |
| Sells to | Resellers, VARs | End customers | End customers |
| Adds services? | No | Rarely | Yes, always |
| Customer relationship | Minimal, sells in bulk | Transactional | Ongoing, consultative |
| Main value | Logistics, volume, reach | Product availability | Customization, integration, support |
Brief History of the 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 the 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.
Most of a VAR’s actual profit comes from this services layer, not the product markup. Product prices typically can’t exceed MSRP by much, so there’s limited room to profit on hardware or software alone.
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) enable VARs to expand their portfolios into subscription-based cloud services that cater to clients’ digital transformation needs.
Many manufacturers also run formal certification programs for their VAR partners, often with tiers such as “select,” “premier,” or “gold” based on expertise and service levels. Vendors periodically audit certified VARs to confirm they still meet the bar, which signals to customers that a VAR has actually been vetted, not just self-described as an expert.
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.
VAR vs. MSP vs. OEM
Two comparisons come up constantly when people are trying to place VARs in the broader ecosystem:
| Factor | VAR | MSP | OEM |
|---|---|---|---|
| What it does | Resells products with added services | Provides ongoing managed services | Designs and manufactures the product |
| Focus | Product sales + setup/support | Continuous service delivery | Product design and production |
| Involvement after sale | Often winds down after installation and initial support | Stays deeply involved long-term | Not customer-facing |
| Relationship to VAR | — | A VAR that leans heavily into ongoing services starts to look like an MSP | A VAR buys finished goods from an OEM and resells them |
An MSP is closely related to a VAR but focuses mainly on ongoing services, like managing IT infrastructure or security, rather than product sales. An OEM, meanwhile, is the actual manufacturer; VARs don’t build anything; they buy finished goods from an OEM or distributor and resell them with services layered on top. That’s part of why VARs tend to be more flexible than OEMs: they aren’t tied to manufacturing, so they can adapt offerings faster to what a specific customer needs.
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
A VAR model can benefit both the reseller and its customers by combining products with services, expertise, and ongoing support. Key benefits include:
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, reduces complexity, and enables 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 such as 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
Running a VAR business involves more than selling IT products. VARs have to manage large product catalogs, changing distributor prices, complex quotes, inventory decisions, and growing customer expectations. Some of the biggest challenges include:
1. Tight Margins and Pricing Pressure
VARs often work with thin product margins, while customers expect competitive pricing. Prices can also vary between distributors, making it difficult to know which supplier offers the best deal. Discounts, rebates, and promotions can affect the final margin, so VARs need clear visibility into supplier pricing before quoting customers.
2. Managing Large Product Catalogs
IT distributors can have millions of SKUs across hundreds of brands and product categories. VARs that work with multiple distributors have to manage an even larger product selection. Keeping product descriptions, specifications, pricing, and availability accurate across these catalogs can become difficult without automated data feeds.
3. Complex Quoting and Sales Processes
B2B customers often need quotes that combine hardware, software, services, and products from multiple vendors. Each may have different pricing, discounts, configurations, and delivery rules. Creating these quotes manually increases the risk of errors and can slow down approvals and sales cycles.
4. Constant Product and Price Changes
Technology products, availability, and pricing change frequently. Products can become outdated, distributor promotions can expire, and new models can replace existing ones. VARs need current product and pricing information to avoid quoting outdated products or eroding their margins.
5. Inventory and Fulfillment Challenges
Keeping large amounts of IT inventory can tie up significant capital, especially when products become obsolete quickly. At the same time, relying completely on distributors can make fulfillment dependent on their inventory and delivery times. Many VARs need to balance stocked products with dropshipping while maintaining real-time inventory visibility.
6. Managing Multiple Distributors
Working with multiple distributors gives VARs access to more products and pricing options, but it also creates operational complexity. Comparing prices, inventory, promotions, and fulfillment options across suppliers can be difficult when information is spread across different portals and systems.
7. Competition From Online Sellers
VARs compete with marketplaces, e-tailers, and vendors selling directly to customers. Buyers can quickly compare products and prices online, putting pressure on VARs to offer more than just competitive pricing. A strong online presence, personalized service, and value-added solutions can help VARs compete.
8. Managing Multiple Business Processes
A VAR may need separate systems for quoting, CRM, eCommerce, procurement, inventory, and order management. When these systems don’t work together, teams have to enter data manually and switch between platforms. An integrated business management system can give VARs better visibility across these processes and reduce administrative work.
Strategies for VARs to Overcome Challenges
VARs can overcome these challenges by improving their processes, using the right technology, and focusing on areas that strengthen customer relationships and profitability.
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.
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.
Pro Tips:
- Redesign your value proposition around business outcomes and lifecycle services, rather than specific products, so vendor or technology shifts do not erode your relevance.
- Use centralized platforms and standardized playbooks to capture your best solutions and delivery patterns so every rep can sell and deliver like your top performers.
4. Leveraging vendor marketing funds
Many manufacturers and distributors provide funds to help their partners promote products. VARs can use these funds for advertising, events, or digital campaigns. It’s a cost-effective way to boost brand visibility without spending heavily from their own budget.
5. Build niche expertise
Instead of trying to serve everyone, VARs can focus on a specific industry or technology. By becoming experts in a niche, they can offer specialized solutions, win trust faster, and compete less on price.
6. Strengthen customer relationships
Rewarding customers for repeat purchases or long-term partnerships can go a long way. Loyalty programs with discounts, exclusive offers, or priority service keep buyers engaged and encourage them to return.
7. Using analytics for smarter decisions
Guesswork in pricing or stock management can lead to lost sales or reduced profits. By using analytics tools, VARs can understand customer buying patterns, set competitive prices, and keep the right amount of stock on hand.
How VARStreet Helps VARs Overcome These Challenges
VARStreet brings quoting, distributor catalogs, eCommerce, CRM, and procurement into one platform built for IT and office supplies VARs.
Aggregated Distributor Catalog
VARStreet connects with 50+ IT and office supplies distributors in the US and Canada and brings their product data into a single catalog.
VARs can access product information, pricing, inventory, and promotions in one place, rather than checking multiple distributor portals.
Sales Quoting
VARStreet’s sales quoting software helps VARs create quotes for complex product configurations, apply pricing rules, and manage the quoting process more efficiently.
B2B eCommerce
VARStreet’s B2B eCommerce solution supports large product catalogs and allows VARs to create personalized online stores for B2B and B2G customers.
VARs can set customer-specific products, pricing, and payment terms while using their aggregated distributor catalog to keep product information up to date. This can be particularly useful for VARs looking to build an online eCommerce store without managing product data manually.
CRM
VARStreet’s CRM for VARs helps sales teams manage leads, customers, opportunities, and follow-ups from one system. A centralized CRM can also make it easier for sales teams to maintain customer relationships as the business grows.
Procurement
VARs can compare supplier options, convert quotes or carts into sales orders, create purchase orders, and send them to distributors without manually entering the same information.
Managing Your Business on the Go with VARStreet’s Cloud-Based Solutions
Conclusion
Running a VAR business involves managing complex quotes, large product catalogs, changing supplier prices, and multiple business processes. The right combination of automation, supplier visibility, customer relationships, and specialized expertise can help VARs operate more efficiently and protect their margins.
VARStreet brings these functions together in one platform, from distributor pricing and quoting to eCommerce and procurement. Book a demo and explore VARStreet.
FAQs
Is a VAR the same as a distributor?
No. A distributor buys in bulk directly from manufacturers and sells to resellers, generally without adding services. A VAR buys from distributors or manufacturers and adds services like setup, integration, or support before selling to the end customer.
What's the difference between a VAR and a systems integrator?
The terms overlap a lot in practice. Systems integrators tend to focus on connecting different technology systems, while VARs offer a broader range of value-added services, including product resale, support, and training.
Do VARs only sell hardware?
No. Many VARs sell software, cloud subscriptions, and managed services alongside or instead of hardware. The VAR model applies to any product category where a business benefits from customization or support on top of the base product.
How do I know if my business needs a VAR instead of buying direct from a manufacturer?
If your business needs help with installation, integration into existing systems, staff training, or ongoing support, a VAR is usually a better fit than buying direct, since manufacturers typically don’t provide that level of hands-on service.
Are VARs more expensive than buying directly from a manufacturer?
Not necessarily. VARs often get vendor pricing and rebates they can pass on, and the added services can save money long-term by reducing setup time, downtime, and support costs.
What size businesses typically work with VARs?
VARs serve businesses of all sizes, but they’re especially common among small and mid-sized businesses that don’t have large in-house IT teams and need outside expertise to select, deploy, and maintain technology.
