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.
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.
