My LGS has kept prices low for both Ammunition and Firearms. They mark up the prices to correspond to the costs they currently obtain the product at, while still making a small profit.
Case in point: I recently bought the Springfield Armory Saint Victor 300BO pistol there for $949. Springfield has it listed MSRP (as well as the 5.56 Victor version) at $1049 ($100 more than at LSG). Cheaper Than Dirt is selling the Victor 5.56 pistol for $1995 which they claim is "our low price"
. That's $1046 more than I paid at my LGS (since I assume CTD would sell the 300BO for the same price). Now that's gouging IMO!
Now as a disclaimer, I'm a very good customer of my LGS, but they don't discount firearms for me (or anyone). But for every gun I buy, my buddy throws in a "free" box of high end 9mm ammo (I have well over 500 rounds in the past year, did I mention I buy a lot of firearms there?
). They only sell 1 box of each caliber ammunition per customer. There's no compromise, but he did allow me to buy his last 2 boxes of 6.5 Carcano, because as he put it "who's gonna come in looking for 6.5 Carcano, it's not like there's a run on it or anything
).