It’s not a reasonable bottom end because you can sell a viable kids bike for far less, and many people even in a wealthy nation like the US simply don’t have hundreds of dollars to spend on a bike that will quickly become too small to use.

I agree with you that used is a better value, but Walmart will sell you a kid’a bike for a quarter of that price that is perfectly fit for many use cases. It will weigh more, be less durable and serviceable but if you’re looking for something that will be used to go around your 1/5 of a mile street a few times a week (a common kids bike use case) it’s fine.

The cost structure of an LBS isn't the same as Wal-Mart. You can't compare pricing equitably because the latter has a disproportionate influence over their suppliers. Also physical hard goods aren't the same as electronics. Their material inputs are always increasing in cost. Compare to prices these things sold for 40 years ago. A $50 kids bike in 1980 should by rights cost $160 today and they were never even that cheap back then. That Wal-Mart can sell a bike shaped object for $50 without any apparent concern for inflationary pressure is more indicative of significant compromises on build quality. The bicycle industry has an issue with ridiculous gouging on the mid/high end but the bottom end is reasonable if you don't set unrealistic expectations.

It would be much better for society overall to buy and sell secondhand, high quality, serviceable bikes than for everybody to buy a junk bike which is later trashed.