I worked for a Home Center. Black & Decker, Makita, etc...make the bulk of the profit. A 14.4V DeWalt drill was sold for $221 around the year 2000. The store itself, Builder's Square, paid $207 making a profit of $14. I know this for a fact because I worked there and could actually see the store's cost on the computer for each and every item in the store. Tool stores don't mark up their products 40% or more.
Now, in 2014, the profit isn't much better, but the volume of drills that they sell is more, a lot more.
For what it's worth Art, I used to think the same thing, until I had a short stint there 15 years ago.
Another example: Costco had a pair of Calvin Klein jeans that they bought for about $22 (it may have been $24) and sold each one for a $1 profit. How could they do that?
They sold over 20 million pairs of those jeans in their many stores throughout the world, making a very good profit on the sheer volume of their sales. I got that directly from a Costco employee while we discussed their store policy of no more than a 15% mark-up on everything sold in their stores (there were 2 or 3 exceptions with jewelry being one of them). A tv that they sell for $400 has a maximum profit of $60 (15%) that Costco makes, but it's usually less. The volume that they sell is huge.
We buy their gas and save 4% at the pump every time that we use it. Every February we get a check of about $250 back ($265 last year). Their price is already lower than any gas station around, and then with an additional 4% more off for our business membership, we can't beat it...even though gas is still toooooo high, in my humble opinion.
Sorry, I know my post wasn't mainly about gas, but I just thought it was worth pointing out.