To have a business that does more than just sustain itself, the investor needs somewhere between 35% and 50% margin average, depending on the business. Some businesses work on higher margins, lower than 35% and you need very high volume and low shrinkage to cover your fixed costs.
This is not to make a profit, this is to cover your fixed costs and just break even.
Consider things like shipping. when I had my company I had a graduated scale on shipping. You pay all (or part) of the shipping up to 5 items, over 5 I will cover the cost of shipping...depending on the value and margin some places want thousands of items before they will cover shipping. I had one supplier that never covered shipping, but he had great prices too...
So, let's say shipping is $20. The item shipped is $500, and the retailer will sell (on average) one of them month, but may sell 3 a month, or none...at what point would you purchase 5 at a time to just get free shipping? How many would you keep in stock so you would always have one available for sale?
most business models today focus on about a 20% profit margin on most items due to internet sales and people being able to know what a fair price is. As state many times a 10-15 % markup on NORMAL STOCKED items in a gun store is about average where special order or custom will carry a heavier markup or a pay before its ordered to make sure they dont get stuck. Most of the gun community knows what a firearm is actually worth before buying. Where a gun store is able to survive today is based on many factors that the internet/wholesale cannot touch
#1 (the most important) a place to visit, hang out, tell war stories and generally bs. no one at walmart cares about your sweet new firearm.
#2 the ability to look before you buy and the first hand knowledge of the owner if its a good store.
#3 if its a well stocked busy store the prices are inline anyways or people would shop elsewhere.
#4 repeat business****** how many people own just one???
#5 ammunition accessory's and gunsmithing.
#6 TRANSFER FEES (most dealers make almost as much on a transfer fee than they would off the gun)
With gunbroker and all the other auction sites out there for a gun store to be competitive they cannot rely on firearms alone to stay in business