E's and other comments are spot on,...low margins on items are offset (or can be) by other items in your total purchase. Even then, if you only buy the low margin TV or other gizmo whose price is designed to get you in the door, how many of those are they selling? Many times it is large numbers,...
Remember WinZip? It's pricing model is legendary,...started out at $15-$25 if memory serves and is not too far north of that even today. Low margin however, the volume is HUGE and people keep coming back.
What would you rather sell,...huge volume and low margin, or higher margin and far lower volumes? The choice is a NO-brainer (assuming margins in the example ensure sustainability of both offerings).
Besides, I believe "the truth will generally out...", many items with overly/artificially high margins are generally exposed as having them over time. Consumers become less willing to pay them and demand higher discounts (and also shop for alternatives) particularly when the actual value added by those (or sometimes little value) who take those higher profits just because they are selling those items, not because of value delivered. This is particularly true when educated consumers require little except someone to take an order and give a competitive price.
|