Value-added resellers (VARs) must stay informed of industry trends and best practices to keep their clients and grow.
But that’s easier said than done, right?
Especially, when you are hemmed in from all sides with challenges.
VARs face multiple challenges today
- Work With Low Margins
- Cope With Too Many Products
- Work With Rapid Tech Changes
- Processify To Keep Your Sanity
- Come to Terms With Continuous Training
- Deal With Inventory Or Drop It
- Invest In Stock Or Drop Ship
- Wrestle With Price Nightmares
- Promote Products
- Face Competition in E-commerce
#1. Work With Low Margins
Products can’t be sold above MSRP.
This limits your profit margins. Even if you buy things at wholesale, you can only add a fixed margin.
#2. Cope With Too Many Products
IT distributors have million-product portfolios./p>
For example, Ingram Micro, has over 1.6 Million SKUs, from 650+ companies over 25 categories and 500+ subcategories.
That’s just one distributor.
Now imagine working with multiple wholesalers.
Your product inventory simply balloons.
#3. Work With Rapid Tech Changes
The speed of change in technology affects practically every sector that uses IT.
Sometimes within weeks, technology becomes obsolete.
Technology changes cause prices to fluctuate. This ripples down to all that you have to manage.
- Change prices of millions of products
- Discount obsolete products
- Intimate suppliers and take a hit in profits
- Track products
#4. Processify To Keep Your Sanity
IT resellers must keep up with the latest technologies and products due to the industry’s dynamic nature. Skip it and face losses.
Keeping up with a million products is tiring. Updating product information regularly is worse.
If these processes aren’t tightly integrated with the vendor’s product data flow, it affects your quotes and can lead to significant losses.
#5. Come to Terms With Continuous Training
The VAR business is demanding, with a large product range and sophisticated operations.
Admin, sales, and customer retention demand highly experienced and trained people.
Sales people must know their products well. Manual methods are time-consuming and costly due to the staff overheads.
#6. Deal With Inventory Or Drop It
Constant technology improvements and product redundancies make stocking a ticking bomb.
Not retaining inventory increases your supplier dependence. And you’ll have to rely on your suppliers to fulfil orders.
In this situation, real-time inventory data can make or break your firm.
#7. Invest In Stock Or Drop Ship
If a VAR decides to hold stock, the investment is substantial, especially for high-ticket products like servers.
A reseller can stock fast-moving items and dropship hybrid orders.
A hybrid approach is when a reseller stocks fast-moving products and offers a dropship catalogue.
A VAR can readily carry 20 popular products, but not 100,000.
This allows VARs to ship popular products faster than distributors. Inventory requires more cash and is riskier than dropshipping.
A hybrid drop shipping strategy is worth trying if the VAR knows his business.
#8. Wrestle With Price Nightmares
A VAR works with many distributors, who compete fiercely. Multiple distributors price the same goods differently.
Without a technology that combines catalogues and delivers a one-window view of price and inventory from many distributors, it can be impossible to compare and choose the best client price.
#9. Be Nimble
Distributors offer bargains and promotions due to severe competition.
These deals are where VARs make their money due to low margins. A VAR has to see these discounts to choose a distributor.
#10. Face Competition in E-commerce
VARs compete with Amazon, Newegg, and e-tailers for the same customers.
Few VARs offer ecommerce, which is crucial.
Unless they change, e-tailers and marketplaces could kill their business.
Conclusion
VARs, like any other business, need to grow too.
The challenges they face are real.
So the question is how do they grow despite the challenges?
One way is to Partner with MSPs to add services, as explained below.
There are other opportunities to grow recurring revenues which we shall also explore in a separate article.
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