I did reference looking up numbers for a regional chain - net profit was 2.3% - this is still > 4x higher than 0.5%. I don't doubt some operate (for a while) at a sub 1% profit, but have to imagine those end up closing down eventually. Per the article I linked to, there was reference to smaller operations that focus on 'upscale' services may be north of 5% net profits (but are likely doing less volume overall).
Lidl likely is 'winning' there (if indeed there's legacy union component to their pricing). They also scaled back their expansion plans. The one by us is moderately large, and newer ones (and future planned ones) are (and will be ) smaller.
Within a 3 mile radius, we have a Walmart, Lidl, Aldi, Target, Wegmans, Lowes, Food Lion, Harris Teeter, Lowes, and Harris Teeter (yes, 2 Lowes and 2 Harris Teeters). This is in North Carolina - some of these are regional chains. The Lowes and HT have historically been some of the consistently highest prices for anything, and I'm honestly baffled how people can afford to shop there regularly.
Yes, perhaps keeping a bit more money 'local' (vs that money going out of state) might be a 'good thing', somehow, but it's hard for me to justify it. Perhaps, if there's real benefit, they need to do some better PR. Or perhaps they have, and everyone else 'gets it', and I've just not heard it?
I wanted a bag of frozen cherries. Local HT - 'name brand' was $5.25. HT store brand was ~$4.25. Walmart store brand was ~$3. Target store brand was $1.89. (same sizes for all - all late 2019 prices from memory). I have a hard time justifying spending 100% more for generic brand stuff. Cheeses, milk, bread, cereals, eggs, meats - our local HT is almost always at least 50% more than the Lidl or Target or Walmart. Maybe these disparities aren't as great in other regions, and this will shake itself out eventually?
EDIT: found some HT numbers from a few years ago that indicated their net profit was closer to 3.6%. They also have a profit sharing program, which may account for aiming for a higher profit percent.