If you plan to start a video game store do you buy the merchandise directly from developers such as Insomniac or SquareEnix or are there video game distributors

No, The developers only write the game code. The Publishers are the ones who make the physical disk. The publishers send the disks to factories (usually in japan), which make thousands of carbon copies (along with the cases and manuals) and then sell them to buyers in bulk. So if you want to start a video game company you would have to probably get legal consent from the publisher (they own the game's name), a software retailer's license, and just order the actual games from the manufacturer.