Value Added Resellers: A Guide to Working with IT VARs

When you're buying IT (Information Technology) equipment to support your business or IT infrastructure, you'll likely work with value-added resellers (VARS).

IT VARS partner with Original Equipment Manufacturers (OEMs) – such as Dell, Microsoft, IBM, etc. – and distributors, acting as intermediaries between them and end-users (that’s you) who need IT equipment. Oftentimes, VARs are the ones you’re buying the products from.

For many businesses, working with a VAR is the only choice, as many OEMs simply won’t sell to you directly. Many OEMs don’t have the supply and sales infrastructure to sell directly to every customer that wants to purchase their products and thus they’ll rely on their VAR partnerships.  While the quality of VARs varies (like any business), in theory, they should generally be well-informed about the goods they sell and can provide you with information on the hardware and software solutions they represent.

However, there are certain challenges inherent in working with any VAR that you must understand to avoid headaches, particularly regarding logistics and shipping, where VARs often struggle to deliver a quality solution. 

In fact, at FGX, as a provider of global IT logistics solutions in over 174 countries, many of our clients found us after working with a VAR that either:

• Didn’t have the ability to help them ship to their target country. Often, you’ll be working with a VAR in your domestic country, but when you go to ship internationally, that same VAR won’t have the resources or the know-how to help you navigate international shipping and customs. 
  
  

• Offered to handle shipment and logistics but was charging an exorbitant fee. When VARs do take on international shipping, they themselves are outsourcing a lot of the leg work to other companies (such as in-market VARs in your designation country). This adds to mark-ups on your initial order. Or they resell a shipping company.
  
  

• Tried to handle their shipment but the shipment got delayed for months or stuck in customs. Sometimes, a VAR will work with a shipping partner to help get your equipment to its final destination, but then the goods get stuck at customs due to compliance issues. 

VARs themselves often contact us to help them resolve customs issues when they arise.

To help you better understand how to work with VARs and avoid costly mistakes, this article will describe:

• How VARs work

• The challenges you will face when working with VARs

• Why you shouldn’t rely on VARs for logistics and shipping

We’ll also describe how FGX can help you work with VARs and streamline your IT equipment procurement process, so you can get the equipment you need without any hassle or unnecessary mark-ups.

Many multinational enterprises trust our team at FGX to deliver best-in-class, seamless, global IT shipping solutions for their infrastructure. We provide coverage to 174 countries with a 99.98% customs clearance and delivery success rate, even to challenging countries like Brazil and China. Please reach out if you’re interested in learning more, or continue reading to learn more about what VARs are and how their businesses work.

What is a VAR (and How Do They Work)?

VARs maintain relationships with IT industry vendors and distributors so they can help businesses purchase equipment to support their IT infrastructure. Their goal is to enhance the value of 3rd-party products by bundling customized products and services for resale to end-users.

VARs fulfill an important role in the IT distribution channel. Many vendors and distributors don’t have the sales infrastructure to effectively promote their goods. And many end-users don’t have the knowledge of the available products to support their IT needs. VARs, in theory, bridge this gap.

How VARs Benefit OEMs

VARs benefit OEMs by connecting customers with their products. In turn, manufacturers offer special discounts on their products that VARs can pass on to their customers.

Reselling a manufacturer’s products often requires “certified” expertise in the products they offer. For example, Cisco requires resellers to be trained and certified to resell their equipment, and must even demonstrate that they have the infrastructure to adequately support the sale of their products. VARs can increase sales for manufacturers and bring in repeat business.

How VARs Benefit End-Users

Although the value that many VARs provide don’t justify the margins they charge, there are VARs that aren’t just trying to insert themselves into the tech sales channel in order to take a piece of the money. The best VARS can offer value to end-users in the form of:

Lower Overhead

The best VARs recognize that their job is to make it as easy as possible for end-users to get what they need from them. This means meeting their customers where they are and providing them with thoughtful, high touch customer service. At the end of the day, you just want to procure your hardware and software quickly and as cheaply as possible, and the VARs that make this possible can provide operational value here.

Expertise

If your organization is unfamiliar with IT products and purchasing, VARs can possess expertise in the products and services they sell, as it’s their job to understand the latest products and offerings from the OEM. They can help customers understand the features and benefits of the products they sell, and help customers navigate the complexities of the tech sales process. This is a big benefit for small and medium sized businesses but usually not for large multinational corporations.

Customized Solutions

VARs work closely with end-users in order to better understand their business and tech needs. They use their expertise to connect end-users with tech products and services that address those needs.

And they provide customized solutions that encompass multiple services, such as bundling hardware and software packages, customer service, installing equipment on delivery, and managing domestic and international delivery of orders.

Partnerships with OEMs

Because of their relationships with manufacturers, VARs have access to the latest products, conferences, updates, and resources. This allows them to provide end-users with long-term continuity solutions for maintaining infrastructure as their business grows.

Challenges of Working with VARs

Like any business, the quality of VAR will depend upon the specific business that you work with. In other words, some VARs may be less reputable than others.

But in general, there are a few challenges you’re likely to face when working with any VAR:

Conflict of Interest

IT VARs often position themselves in the role of a consultant, offering to help businesses find the best IT solutions for their needs. But they make most of their money from selling products (combined with their value-added services), so their recommendations can be affected by the same influences of any channel sales business model:

• VARs partner with one or a few OEMs, so the products they recommend will be limited to those vendors.

• Even if they’re aware of a better solution available, VARs have less incentive to recommend you towards products that they won’t get a commission from.

• Since they’re making money off the sale, they’re incentivized to sell more expensive products that will make them the most money.

Repeat business is valuable to VARs. So they’re also incentivized to keep customers happy by making the best recommendations possible. But it’s important to understand the factors that can influence a VARs recommendations.

Bottom line: it may be best to work with multiple VARs so you’re presented with more options and competitive prices. And if finding the best tech solutions is your priority (or if you have complex IT needs), you may be better off working with an agnostic IT tech consultant.

Vendor-Specific Expertise

VARs often partner with a few manufacturers. Their expertise may be limited to the specific products and services they sell. And, as mentioned in the previous point, they have little incentive to push you towards better products not provided by their vendors.

In order to fulfill all of their technology needs, end-users often have to work with multiple VARs. Managing orders and shipments from multiple different companies can become complex (as we’ll discuss more later).

Shipping and Logistics

Shipping and logistics is a particularly problematic challenge of working with VARs. 

VARs make most of their money from selling products and services, not shipping and logistics. They often don’t have the expertise to properly navigate shipping processes and ensure timely delivery. And many don’t have the global reach to fulfill international shipments, much less to navigate the complexities of shipping internationally to different countries. 

Some VARs will offer shipping services in order to maintain or increase a customer's business. But it’s usually not in a customer's best interest to rely on VARs for shipping - especially internationally. 

In the next section, we’ll expand on why you shouldn’t rely on VARs for shipping, and why strategically combining VARs with a shipping and logistics service (like FGX) is beneficial.

Why You Shouldn’t Rely on VARs to Handle Logistics and Fulfillment 

Successfully shipping IT equipment — particularly for international shipments — requires familiarity with all of the relevant logistical, customs, legal, and financial requirements..

As previously stated, the VAR business model is centered around selling products and services, and they generally lack the expertise required for successfully shipping equipment globally.

Many businesses agree to let VARs handle shipping and logistics, only to be frustrated by delivery delays, ballooning costs, and even lost products.

In this section, we’ll break down 5 reasons why VARs aren’t your best option for shipping, and how using FGX as a shipping and logistics solution provider can avoid these issues.

1. VARs Aren’t Optimized for Logistics

VARs may offer to handle shipping and logistics to provide more value to their customers. However, most VARs aren’t optimized for successful logistics outcomes (unless they use FGX to power their global logistics offering, but even then you may pay higher costs due to a markup that isn’t in our control.) 

They don’t have a time tested shipping process, and try to cobble together a shipping solution for a specific customer. This can lead to many issues, such as:

• No clear timeline for when shipments will arrive

• Shipments get stuck on route or delayed for months

• Shipments never arrive at their destination

• Ballooning costs that arise from dealing with shipping issues and unexpected expenses (for example, the VAR may improperly estimate import taxes)

A VAR’s top priority—by far—is to sell products, and everything else is secondary, such as order fulfillment. Many of our clients come to us after dealing with difficulties that arise from shipping through a VAR — either because they need us to resolve a specific issue or they’re just generally unhappy with the execution.

Working with FGX at the outset can help you avoid these shipping and logistics nightmares. We’ve overseen thousands of domestic and international IT shipments, and are intimately familiar with every aspect of the process. This enables us to:

• Provide accurate options, quotes, and timelines  on a shipment-by-shipment basis

• Provide you with logistical flexibility to cater to your project’s specific requirements, such as phased deliveries from a local depot

• Ensure your shipment meets compliance requirements to avoid seizure by customs (and helping you navigate the retrieval process if it does)

• Avoid delays through proper planning and intimate knowledge of the shipping process

• Prepare all of the necessary documents

• Perform all of the necessary compliance work

• Fund duties and taxes

• And more…

2. Limited Global Reach

While VARs can often handle domestic shipping with a domestic distributor, international shipping is often a problem.

Many VARs have internal policies preventing them from shipping to certain international locations, due to their agreements with their OEMs. They may be forced to refer you to an in-market reseller or another VAR, all of which increases the costs and complexity of your purchase (an issue we’ll discuss in greater depth later).

Even if they say that they can handle your international shipping needs, they may not have a proven track record of shipping to your destination. Since each country has its own rules and compliance policies for imported deliveries, you should only work with shipping vendors with an established record of successful IT hardware shipments to your destination.

But as described earlier, VARs are sales organizations that aren’t optimized for shipping and logistics. Some VARs attempt to handle international shipments for their customers, only to realize they’re not equipped with the expertise or infrastructure to properly navigate the complexities of international shipping.

In fact, many VARs reach out to us for assistance after struggling with a client’s international delivery. Many of our existing VAR partners will contact us prior to even selling a hardware solution, so we can help them plan the shipping part if the customer decides to proceed. 

While we’re always happy to help our VAR partners and can still ensure successful delivery, this is often not the ideal arrangement. For FGX to deliver the best business outcomes, it’s much better for us to communicate directly with the end-user. There are certain facts and information that we can only obtain from working directly with an end-user that allows us to reduce costs in a shipment, such as taxes and duties. We know what questions to ask (and how to ask them) in order to get the information required to plan and execute a seamless shipping process for your specific scenario. But relaying these questions (and their answers) through another party will often result in a suboptimal outcome. But, there are times in which the end-user wants to have everything managed through a VAR and in those situations, we’re happy to oblige.

For a seamless shipping process and to produce the best business outcomes, end-users will benefit from working with FGX directly so we can plan and manage the shipping process with the VARs on your behalf. In fact, many of our VAR partners will refer their clients directly to us so that they can focus on the hardware and software sales and FGX the logistics. We have the infrastructure and expertise to deliver to over 170 countries, and have a 100% success rate for shipments over the past five years.

3. Sub-Optimal Shipping Processes

When a VAR handles shipping for a customer, they do so through one of two means:

1. Handling it internally

2. Outsourcing to another shipping partner

As discussed earlier, VARs don’t typically have the expertise or infrastructure to handle shipping for customers (particularly international shipping). Since it’s not a service they regularly perform, any shipping process they employ will be strung together ad hoc for a specific client, resulting in issues that delay shipments and increase costs.

VARs also won’t use direct airfreight to transport your shipments. They’ll often use hub-and-spoke shipping processes via vendors like FedEx, DHL, USPS, etc. This means that your IT products are being shipped with many other deliveries, which increases delivery time and the chances that deliveries get lost or damaged.

When outsourcing shipments, VARs employ 3rd-party companies to handle your shipments — such as other VARs and IOR (Importer of Record) brokerage services. Like we mentioned earlier, VARs will also reach out to FGX to help provide their clients with optimized, global logistics solutions for the hardware they sell.

The quality of service that 3rd-parties provide depends upon the company itself (which you have no control over, as the VAR is the main contractor that chooses the subcontractor). And adding 3rd-party companies increases the complexity of your fulfillment process. For example, if a delivery issue arises and you want information about the status of your shipment, you’ll have to contact the VAR, then they’ll have to contact the other company, then the VAR will have to relay the information back to you.

FGX is a global IT logistics company that handles B2B shipments door-to-door. Unlike VARs, we provide:

• Optimized shipping options: We take into account dozens of factors to provide you with the most cost effective options. There is no one size fits all in global IT logistics – even within the same client, different types of shipments call for different solutions. But, across the board, to keep shipping cost effective, we work to reduce your duty exposure, make sure that you’re eligible for importer of record & tax reclamation, and more. 

Further, at FGX we provide our clients with detailed, line-by-line quotes. So, you can see exactly what you’re paying for and the benefit of the service. 

• Feasibility and compliance checks: We do thorough feasibility checks and compliance checks before accepting a shipment. Other logistics providers won’t do this, as they lack the expertise and it requires overhead, and what happens is a shipment gets stuck in customs or the duty exposure or tax is significantly higher than expected. At FGX, before shipping, we check to make sure that your shipment is properly vetted to clear customs. This involves verifying import compliance, export compliance, product compliance, and that all relevant permits and licenses have been attained.
  
  

• Direct air freight shipments: We don’t risk delays or compromised shipments by working with a hub-and-spoke logistics model. We ship only through direct air freight. Plus, for last-mile delivery your goods are delivered   Your goods are delivered by a dedicated shipment, not as part of a delivery route with other stops/shipments.
  
  

• Low-variance timelines: You will receive shipping timelines that are given within days, not months. This helps you better plan your operations around your arriving IT equipment.
  
  

• Dedicated customs clearance: Your shipments will go through a formal customs clearance, as opposed to a bulk or courier clearance. This helps ensure a faster clearance into your destination country.
  
  

• All-risks insurance: It’s uncommon for IT shipment to get meaningful coverage – which we mean coverage that actually reimburses them if something doesn’t clear customs or gets damaged in the delivery process. But our all-risks insurance gives you peace of mind over your IT shipment.

4. Limited Commercial Options

Many businesses choose to work with multiple VARs for many reasons.

• They may want to negotiate with multiple VARs for better pricing.

• VARs often have a limited catalog, as they only work with a few vendors. To fulfill all of their equipment needs, businesses will have to source different products from different VARs.

But working with multiple VARs can quickly become a logistical nightmare, as it forces you to track multiple purchases and shipments with multiple companies. This problem is exacerbated if you choose to ship through the VAR, as they may outsource shipping to 3rd-party companies and in-region shipping entities — creating even more points of contact. 

For example, imagine you buy from three VARs and ask them to ship to Brazil. You must now manage and keep track of three different vendors with three different shipments, departing from three different locations, and arriving in three different time windows. You have to keep track of the issues that arise with each shipment, and play phone tag with several companies to get updates on the status of your delivery.

Working with a logistics partner like FGX enables you to consolidate all of your orders. Instead of the process described above, you can have the VARs ship all of your equipment to FGX. From there, we can:

• Store all of your equipment in one location

• Break down your shipments into batches

• Schedule deliveries as you desire

• Handle shipping and last-mile delivery

FGX enables you to convert complex international purchases into a single consolidated process, reducing the bloat and inefficiency of managing multiple shipments. And you can centralize the entire process through a single point of contact.

Use FGX as Your Holistic Shipping and Logistics Partner

As we’ve discussed, buying from a VAR and strategically outsourcing shipping to FGX provides you with a seamless logistics and shipping process. 

But beyond complementing VARs, FGX is a global IT logistics company that provides a holistic consulting and execution service for shipping IT products. Before recommending our services, we take time to understand your goals and help you understand the best shipping options available to you on our supply-chain.

We then help you execute your logistics plan, providing services that include:

• Acting as the IOR for your shipment, or helping you act as the IOR for your shipment.

• Product valuation

• Product compliance

• Assessing and paying any fees/import duties/taxes on your behalf

• Handling any unexpected complications that arise during shipments, like customs clearance

• Handling all relevant paperwork, permits, and licenses (including encryption permits for firewalls, routes to electronical conformity documents for PDUs, and all country-specific licenses and permits)

• Assigning international trade codes

• Obtaining permits and licenses (e.g. HKTID permits in Hong Kong or wireless permits in India)

• Insuring your shipments

When multinational enterprises work with FGX, they gain access to a best-in-class, seamless, global IT shipping experience for their IT hardware. Please reach out if you’re interested in learning more.

Frequently Asked Questions

What’s the difference between a reseller and a VAR?

A reseller focuses exclusively on sales and distribution. A value-added reseller provides goes a step further to provide extra value in the form of:

• Customized solutions to your specific IT needs

• Hardware and software product bundles

• Third-party products

• Consultation

• Installation services

• IT services

• Service contracts

• Extended warranties

• Ongoing support

• Technical support

• Professional services

• Sales support

• And more…

How do VARs make money?

VARs make money from the sale of products and the value-added services they provide. VARs buy products from OEMs, then sell those products (at a markup) bundled with add-on services based on the customer’s requirements. This includes hardware; software; other intangible products like warranty and support; and rendered services like remote hands installation.

What are some examples of Value Added Resellers?

There are many IT VARs that resell technology products (such as cybersecurity SaaS products, cloud computing products, and more) with additional services. These include companies such as CDW, Globenet International, Alt, Softchoice, Servers Direct, and more.

But the VAR business model extends to other industries as well. Car dealerships buy and resell cars in addition to value-added services, such as extended warranties, service contracts, and custom parts.

What’s the Difference Between a VAR and an MSP?

A VAR partners with technology vendors and sells technology solutions with value-added services. An MSP (Managed Service Provider) is a company that manages a customer's IT infrastructure and systems remotely. 

Acting as an MSP is one of the value-added services that a VAR can provide.