Earlier quoted context omitted.
Competition limits how much they could raise prices, automation and efficiency increases are needed to compete.
Who is more efficient than Amazon/Walmart/Target/Home Depot/Staples/Costco/etc? They set the bottom price, and if they are earning 2%-4% profit margins, then their costs increases will have to end up in either prices increases or them no longer selling the product. The funny thing is that it is Amazon coming along and greatly increasing demand for labor (in conjunction with reduced supply of that type of labor) that…
They're not (depending on the product).
My wife used to work in Halloween costume design for a wholesaler (and some of her costumes did end up in Target and Walmart, which was cool to see), and the retailers' margins on those were at least 50%.
As I said, the margin does depend heavily on the product, but do not assume that across-the-board average margins are anywhere near that razor-thin.