A distributor is one who buys products from a manufacturer, warehouses them, then sells them to retailers or to end-use customers. A distributorship agreement is a contract made between an individual or entity (the “distributor”) and the manufacturer, setting out the terms under which the distributor may sell the products. Products are purchased from the manufacturer at a low cost, then sold to retailers or consumers at a higher cost to cover the distributor’s costs and earn a profit.

The distributor is considered an independent selling agent. This means that the distributor has permission to sell the product as specified in the contract, but is not entitled to use the trade name as part of its business. The distributorship agreement may also specify that the distributor is bound to sell the supplier’s products exclusively, meaning it cannot sell similar products from another supplier. Large-scale distributors are often referred to as “wholesalers.”