In the IT and technology industry, the phrase ‘reseller’ is used a lot, but what exactly is a reseller, and why are they used?
When talking about information technology, the phrase ‘reseller’ refers to the practice of companies buying stock or software from manufacturers and selling it on to their own customers. You might have also heard the phrase ‘ISV reseller’ which refers to companies who buy from independent software vendors and resell the product on.
Why do companies use resellers?
There are many reasons why companies use resellers, but one of the main draws is the fact that products and software can be made more readily available. If a chain technology store chooses to resell your product, you will be exposed to a potentially much larger client base, and this could have a positive impact on your brand awareness and revenue.
Another reason companies choose to use resellers is to make the buying process easier for the end user. For example, if you go into a computer store to buy a new computer, there’s a high chance you’ll also be looking for accessories and additional software. It’s much easier to purchase it all in one place as opposed to having to make multiple trips and pay several different vendors.
Pricing can also be more competitive amongst resellers, and this can attract more customers and – again – potentially resulting in more sales.
How do resellers work?
There are two ways resellers operate: one-tier distribution and two-tier distribution. One-tier distribution is when the manufacturer or vendor sells directly to a partner or reseller. The reseller then sells directly to the end-user.
Alternatively, two-tier distribution is when the manufacturer sells to a chosen distributor, and they then sell to a reseller who, in turn, sells to the end customer.
When a manufacturer sells their product to a reseller, they do so for below the list price. This means the reseller is essentially buying the product at a discounted rate. The level of the discount can fluctuate greatly, but generally speaking, resellers who purchase the most are entitled to bigger discounts, sometimes as much as 50%.
Types of resellers
In technology, there are many different types of resellers, including virtual internet service providers who utilise internet connectivity from another provider and pass it off under their own branding. Direct market resellers are the ones you’ve likely dealt with the most because they often act as the middleman between customers and providers, be it via B2B channels or B2C marketing.
Do you need a reseller?
Depending on the market you’re in, you might find it beneficial to work with resellers to distribute your products, especially if you’re not entirely customer-facing or don’t have the infrastructure to deal with all the issues and hiccups that can arise from retail transactions. If you want to boost your brand awareness and grow your business, reselling could be a good option because it will open you to a whole new audience of people, but you don’t need to interact with them directly. There are many benefits to be had from reselling.