Distributor

Distributors are the middle tier of a three-tier channel: vendor → distributor → reseller → end customer. They earn thin margins on high volume, provide logistics and credit terms to downstream resellers, and act as a force multiplier for vendors who can't economically manage thousands of small reseller relationships directly.

What a Distributor Actually Does

A distributor's job is breadth, logistics, and credit:

• Breadth — Aggregates products from hundreds of vendors into a single catalog resellers can shop.
• Logistics — Handles inventory (in hardware), license fulfillment (in software), and order processing.
• Credit — Extends net-30 or net-60 terms to resellers who couldn't get them directly from the vendor.
• Enablement — Runs training, certification, and demand-generation programs across many vendor lines.

In return, distributors take a margin (typically 3–7% in hardware, higher in software) and may earn additional rebates and MDF from the vendor for hitting volume tiers.

Distributors in Hardware vs Software

Distribution is a legacy of physical hardware — Ingram Micro, TD Synnex, and Arrow Electronics each ship billions of dollars of product per quarter. In software, the role looks different:

• Cloud distributors (Pax8, TD Synnex's Stellr, Ingram Micro Cloud) aggregate cloud software subscriptions for MSP resellers. They handle provisioning, monthly billing reconciliation, and consolidated invoicing across dozens of software products.
• Marketplace distributors (AppDirect, Sherweb) operate cloud marketplaces where MSPs and VARs can spin up customer subscriptions on demand.
• For most direct-sale software vendors, true distributors are absent — the vendor sells directly to resellers without a middle tier.

Distributor vs VAR vs Reseller

• Distributor — Sells to other resellers in volume. Thin margin, high turnover. Almost never customer-facing.
• Reseller — Sells to end customers. Earns commission or markup. Limited services attached.
• VAR (Value-Added Reseller) — Sells to end customers and bundles meaningful services. Highest margin per deal.

Real Example: Pax8 in the MSP Channel

Pax8 is the dominant cloud distributor for the MSP channel in North America. Microsoft 365, Acronis, Bitdefender, Datto, and 200+ other software vendors flow through Pax8 to ~40,000 MSPs. An MSP that wants to resell Microsoft 365 doesn't sign a contract with Microsoft directly — they sign with Pax8, who handles provisioning, monthly billing in their currency, support escalations, and consolidated invoicing across every software line they resell. Pax8 takes a small distribution margin; the MSP keeps the rest of the markup they charge their customer.

Should Your MSP Buy Through a Distributor?

A cloud distributor is worth considering when:

• You resell many vendors and don't want to manage a separate contract, invoice, and renewal with each one.
• You need international reach — distributors handle local invoicing, tax, and currency.
• You want one consolidated monthly bill across the recurring software subscriptions you pass through to clients.

For a smaller MSP reselling only a handful of products, buying direct from each vendor is simpler and preserves more margin than routing everything through a distributor.