COGS is not 0. It's $49, plus shipping to customer, plus ebay listing fees, plus ebay selling fees, plus insurance, plus phototagging and insuring each item OR returns for wrong product (which ebay says seller is SOL if they send the correct product and get a different product returned and don't take time to prove what the items are), plus regular returns for actual product defects. Keep in mind that as a seller you also have to compete with the store, and in internet times, other sellers, so you aren't selling for a small discount (say...249 instead of 279) but rather a much larger one (probably in the 100-150 range). The item in question, that rings up for 279 at the store, is going for 139 shipped from amazon right now, so if he is selling for 119, I could easily see the maximum margin in the 15-20 dollar range per item.
This isn't rocket science. The guy is a huge moron.