I see this as a matter of basic economics. Take the low price of the department store bike and factor in the profits in each step of the procurement, manufacturing, assembly, distribution and retail processes. How much can be left over for the assembly? Skilled mechanics don't work for minimum wage.
I am with Indolent58 about the long term value proposition of better kids' bikes. They are not all that expensive, give much more enjoyment and seem to last forever. Our first kid had a 20" GT Dyno which has been passed on to our second. The third has a 16" Specialized Hotrock which I will give away to a needy child when he outgrows it and graduates to the Dyno.