The article I quoted claims 1% is the _gross_ margin, in which case my argument is valid. I now think that is incorrect, as other high-ranking Google results claim it is the _net_ margin.
It doesn't have to be strictly cheaper, as it also adds convenience. Not having to wait at the checkout will be worth something to customers, possibly quite a lot in the case of a shop targeting richer customers.
So, it would require a $10 item to break even on a €0.10 tag.