To Joes point, even the procurement buying power of big box can't offset what the internet guys are able to do for margins. With a streamlined distribution strategy, they have less capital in both fixed and variable costs of the brick and mortar stores. Eliminating lease/rent, utilities, wages, inventory, etc., e-commerce is crushing it. Hell, they can even deal with the returns processing and have better revenue and margins.
Amazon is also now firmly planted in vessels giving them improved buying power and cargo space between Asian and US ports. They have invested in an air fleet which will assist them in controlling their distribution and costs domestically.
With the throughput of the mega distribution centers, they have tremendous automation and picking which is improving speed, safety, accuracy and ultimately, customer service.
They can offer the same product at a lower cost to the consumer yet make a higher margin. Our convenience starved society has paved the way and those adopting to Omni channel or pure e-commerce are capitalizing on it.