[lotsofpulp]

>Retail/amazon operate at a much higher margin than most people realize.

This statement encompasses the whole business, for which the profit margin is the relevant metric, not gross margin. And it is clear that the standard retail business is not one in which you can earn a lot of money. Just because a specific item sells to a customer for more than what it costs to buy just that specific item from the supplier, does not mean the business's margins are high. There are myriad costs that have to be accounted for, such as spoilage, theft, inventory, transportation, labor, returns, etc.

Some things sell for higher margin, some things sell for lower margins, but at the end of the day, the stores clearly operate at very low margins. Hence why so many go out of business all the time, and all the brick and mortar we have left are the biggest ones with the largest volumes.

[erkt]

That is not what we were talking about though. We were talking about how much discount you can force out of a retailer via price matching which is a function of its Gross Margin. a 25% discount at the register doesn't mean a bottom line 25% subtraction from Net Margin. Those numbers are distantly connected and most operating costs (minus COGS) are fixed.

[lotsofpulp]

That might work for a few customers, for a few products sold at high margins. But mathematically, if the business started giving everyone 25% discounts, and they already only have a 2% profit margin, then it doesn’t pencil out that it could survive.

Bottom line is if a business, and an entire industry in this case, has 2% to 5% profit margins, across 10+ publicly listed businesses, across decades of operation, it means they are selling goods at about as low of a price as possible (averaged over all goods). Some will be high margin, some low margin, some negative margin, but at the end it’s only resulting in a couple percent of profit.