I can tell you for a fact you're way off on the big stuff. MOST dive stores work on a 30-40% margin, if they are lucky. I was in the grocery business for 11 years and know that grocery stores works on a 20-30% margin. People walk down the aisle picking what they want, no trying it on, how does it work, let me think about it. They stand in line to pay for it and then bag it themselves at the end. Virtually no returns and problems. AND the grocery business is considered a low margin business. I agree that dive stores make a large margin on small stuff-they have too. Buy one bolt at a hardware store, the margin is huge, but that's what it costs to keep the doors open. I can also tell you that I have been involved with product that go into Target and WalMart that have margins of 80-90%.
Get in the game and you will see owning a dive store is not a get rich scheme.
Margin vs. markup are two totally different things. I used markup, sorry. 50 buck wholesale sold at 100 bucks is a 100% markup, the margin is squat in comparison, cost of the good alone knocks it to 50%. I worked grocery for a couple years, 1.5-3.0 or less margin at the company I worked, but to a person who was clueless about business the numbers sounded huge, heck, we'd do 12-14K the day before easter just in the produce department but the reality is they didn't really make all that much because you can only markup yams so much to make them something that actually draws hundreds of people into your store. I figure any dive shop that works on a 30-40% margin overall is really keeping on top of things.
Perhaps I'm using the wrong terminology, but I think we're coming from the same place. The typical retailer HAS to have a decent markup to cover the cost of doing business.