I worked on quite a few so-called "department store" bikes, in decades past. I don't think things have changed all that profoundly. A department store bike would start its life with some minor manufacturing flaws such as loose brakes and poorly adjusted bearings. If you took care of maintenance from the git-go, your bike could last for quite a long time, and a department store bike that had deteriorated could be brought back into reliable use with just a bit of TLC.

A bike shop bike might have been made with as many flaws, but the shop took care of them before the sale. If the dealer is your re-work department, then you really don't know if you're making a quality product or not.

Still, when I see a cheap bike in dilapidated condition, I wonder if the problem is the bike, or that the owner doesn't have a place to store it indoors, or the means to repair it, such as workspace, tools, motivation, knowledge, etc.

The main reason that I eschew the cheapest bikes is that, given the same amount of time and effort, I'd rather maintain a nice bike than a cheap one. There are some subtle differences: Even without getting into the stratosphere of high performance bikes, a "nice" bike will tend to have more corrosion resistant materials, formed more precisely, so that it's easier to keep them adjusted. For instance, the bearings in a lot of those old department store bikes could not be adjusted to perfection, because the parts weren't perfectly smooth or concentric. You could still get them adjusted to the point where the bike would probably last forever under typical urban use, but it just wasn't as satisfying.