OEMs make products for others to repackage and sell without expensive retail packaging and customer service. Value Added Resellers (VARs) add value before reselling goods. OEM products are used at different levels of an industry, and VARs offer creative marketing choices. OEM hardware and software have different product numbers than retail packages, but the reseller and retail versions work essentially the same. The public can purchase OEM hardware and software at substantial savings, but some products have shorter warranties. A VAR typically offers their own warranty on the items they sell.
An original equipment manufacturer (OEM) refers to companies that make products for others to repackage and sell. Retailers purchase products from these companies in bulk, without the expensive retail packaging and customer service that comes with individually sold units. The product itself is essentially the same as the more expensive, retail packaged versions. OEM products are used in many industries, but are perhaps most prevalent in electronics.
How these products are used
Typically, OEM product resellers add something of value before reselling the goods. A seller who does this is known as a Value Added Reseller (VAR). A VAR could create components, subsystems or systems from parts made by other manufacturers. These products offer VARs a wide range of creative marketing choices, which help smaller retailers stay competitive in a market.
Multiple VARs working together
OEM products can be used at different levels of an industry. For example, suppose a fictitious company, “Head Music,” makes popular sound cards, but wants to market a Digital Versatile Disc (DVD) drive. By not making DVD drives themselves, they contract with another company to supply them with drives. “Head Music” receives bulk DVD drives manufactured, puts its logo on the players, then bundles them with its own sound cards and repackages them as “Head Music DVD Drive and Sound Card”.
Taking it a step further, another company can act as a secondary VAR and use Head Music’s bundle of sound cards and DVDs to build Personal Computer (PC) systems for sale. They contact Head Music and enter into a deal to buy DVD and sound card combos in bulk. Head Music now acts as an OEM for this new company.
They ship packages to the PC company, which acts as the VAR, without expensive retail packaging and at a significant savings. The PC company installs the packages in their PCs, along with other products such as motherboards and hard drives. The operating system (OS) also usually comes from a different manufacturer, such as a version of an operating system from Microsoft®. When the VAR is done, they offer a PC with branded components and software at a competitive price.
Product labeling and traceability
OEM hardware and software often have different product numbers than retail packages, although manufacturers and resellers still track these products internally. The reseller and retail versions of the software work essentially the same. There can be some differences, however, such as a software program tied to a particular component of a computer, allowing it to be used only with that pre-built system and no other computers.
Warranties and Customer Service
The public can often purchase OEM hardware and software at substantial savings. Hard drives are prime examples of these products, purchased in an anti-static package without the box, cables, and manual. Warranty is generally the same, with software drivers, digital manuals and additional support available online when not provided with the product itself.
Some products, however, have shorter warranties. This is true for some computer processors, for example, where the retail version has a three-year warranty, but the OEM version only includes a one-year or 90-day warranty. Manufacturers provide support and warranty details with the products, which should be read by anyone considering using them. A VAR using these products typically offers their own warranty on the items they sell, rather than manufacturer coverage.
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