How are they not doomed to go out of business?
People, especially the professionals, want the complete experience, from hardware to support and everything in between. Can you provide the level of support they provide while being cheaper than them?
> With zero overhead I can sell everything they make cheaper.
Chinese brands do this all the time with Apple. They copy the Apple iPhone designs wholesale including the UI themes, make it cheaper, and yet Apple makes more money than all of them combined.
Some people want the "real deal". In fashion, that's because some consumers are superficial and vain and want to signal their wealth by getting the official stuff instead of using their wealth for something worthwhile. But for a case like System76, some consumers might care about funding the company that is doing the innovation that they appreciate…
At any rate, your question applies to all open-source software — how is it not doomed to be unfunded or go out of business? It's much easier to distribute software than to compete with a hardware company!
I'd rather buy from the company pushing the envelope rather than some obvious company just trying to make a quick buck.
The Pursa i3 is a fully open source 3d printer with countless clones available but still the creators company is the most popular source to get it from.
It takes a lot of knowledge + time + connections to make the whole products worth it. And remember that they will always have the advantage that the knowledge of hardware and firmware is in house, while you rely on their updates