OEM is the abbreviated form of “original equipment manufacturer.” In other words, it is a company that creates products, then passes them on to vendors who buy them in bulk, repackage them under their own labels or stores. There are OEM manufacturers in every industry, including food and clothes, though the most common OEM product is electronics.
The OEM products are more affordable, since they are stripped of the costs associated with marketing and other retail packaging. Given that, the resellers can afford to pass on more values to the consumers. These value added resellers (VAR) can offer sub systems or systems reconstructed from quality OEM parts. Others can offer components. These marketing strategies allow small companies to remain competitive against mega-brands with millions more in capital and corporate muscle.
How does the OEM process work? A company may order a product—say, DVD players—from an OEM manufacturer specializing specifically in that kind of electronic device. They order in bulk, and then when the product arrives, they place their own logo and sell it as their own brand. An OEM manufacturer can actually sell the identical product to different brands, or make very minor changes (such as color or size). However, the gadget’s technology and overall quality may be the same.
The reseller can also contact another store, say a small chain of electronics in another part of the country, and offer to sell their products – without the fancy boxes and brochures – or even parts of their products. The consumer can get this quality gadget at 30% less than they would something they got from a major brand.