Originally Posted by bjoerges

Many LBS's can't help but gouge, as you put it, on price. For most products in a lot of industries, the retailer's cost of a product is close (if not exactly) half of it's MSRP. There are a few things where there is a bigger markup (and those tend to be on high volume necessities). So for example, you are coming in to buy a tool that the MSRP is $30 and the retailer has it marked $30. They paid a distributor ~$15 each for 5 of them to sell. An online merchant buys 500 of them directly from the manufacturer for $9 each then mark it $14.95 on their website. The LBS can't price match down to $14.95 because they lose money on paper even before factoring business costs like rent, wages, utilities, credit card processing... A very good retail business has a 10% profit margin, meaning 50% of sales is direct costs, 40% of sales is overhead, and 10% goes to profit.

If such a business were to sell you the tool that has a bottom line cost of $27 for $15, that means they lose $12. They have to sell the remaining 4 at full retail price just to break even on the 5 tools that they had in the first place.

Our shop runs into this issue slightly with some odd-ball items like Clif Bars. The best price we can get is about $0.80/each and then we sell them at $1.39. A half-mile down the road there is a Trader Joe's that has them for $0.89/each!