Distributor
A distributor sits between a vendor and its resellers, buying products in volume and supplying a network of resellers who sell to end customers. It adds a layer to the channel that handles logistics, credit, billing and reseller recruitment on the vendor's behalf.
The two-tier channel
In a one-tier channel the vendor contracts with each reseller directly. In a two-tier channel the vendor contracts with a handful of distributors, and each distributor manages hundreds of resellers. The vendor trades margin for the ability to reach a market it could never administer account by account.
What a distributor actually provides
Credit is the underrated one: distributors extend payment terms to resellers and carry the default risk, which the vendor would otherwise hold across hundreds of small companies. They also aggregate billing, provide first-line technical and sales support to resellers, run reseller recruitment and training, and in software increasingly operate the provisioning platform through which licences are activated.
Geographic reach is the other draw. A distributor already established in a region brings local language support, local invoicing and local reseller relationships from day one.
The cost of the extra layer
Every tier takes margin, so two-tier structures leave the vendor with less per sale. They also put more distance between the vendor and the end customer: the vendor may not know who its users are, cannot easily gather product feedback, and depends on the distributor for accurate reporting on what is selling and where.
Relevance to SaaS
Distribution was built for physical goods and perpetual licences, and much of its original purpose disappears when software is delivered over the internet and billed monthly. Cloud marketplaces now perform a similar aggregation function with far less overhead. For most B2B SaaS companies, distribution is not a relevant motion at all, and the equivalent scale in the partner ecosystem comes from marketplaces and affiliate networks instead.