The percentage of profit a distributor makes on his selling price to retailer is called distributor’s margin. Generally since a distributor does wholesale business, even if his margin is low (2.5-3%), he makes money on volume of business.
Distributors are the middle component of a three-tier distribution chain: producer to distributor to retailer.
The distributor is the middleman. The distributor and the retailer incur their own costs in bringing the product to customers, and both need to recover those costs and earn adequate margins.