It goes like this:
- VMWare appoint distributor
- DDR carry VMWare inventory (if hardware), or software at cost from VMWare
- DDR sell/distribute hardware and software to clients (cost + margin)
That margin is what matters. It must pay for distribution (physical delivery if hardware), then the rest is profit.
DDR usually have PBT at 4% of revenues, meaning that margin covers costs and adds to PBT.
Margin = revenue minus cost of inventory to generate revenue.
Think of it as commission if you like, but that's not how the P&L displays it.
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