So mom and pop stores never compete with on line retailers?
95% of the time they don't. The exception would be industries with fixed prices (video games come to mind), B&M/online combos like wal-mart, and obviously things like groceries which aren't very feasible to sell online.
Bulk equals lower prices. Online stores can sell to customers around the world while B&M's can only sell to people willing to travel to their store. Online stores are therefore able to purchase goods in a greater bulk and therefore sell their products at a lower price.
I'm really amazed this is difficult for you to grasp