Price is pretty much everything these days! To me, I am loyal to my dollar, and will rarely get attached to a specific seller, (there are some exceptions, but really needs to be over the top service for me). I do appreciate you asking what you can do better, shows great initiative, and a willingness to listen to your customers, (also drum up business because I did spend time on your website looking around!).
You are specifically in a very hard, competitive, dog eat dog online world. I am looking at getting something in .40 and I have searched everything all over Canada, and I have also looked at price of ammunition. Your $300 for free shipping is great and an advantage also not an unreasonable amount needed to qualify. However, I go to this place usually to do many purchases. Now it is a 4 hour round trip drive for me, and while they do have an online presence and do ship product, I would say they went the opposite direction as you and mainly do in store purchases as emailing them, and even calling them SUCKS (as posted in other threads).
http://www.thegundealer.net/inventory.php?Category=317
HAND GUN AMMO
Make Cal Grain/shot/Description Price Per Box Price Per Case
Winchester 45 Auto 230gr Full Metal Jacket $39.99 per box $299.99 per 500
Winchester 40 S&W 165gr Full Metal Jacket $29.99 per box $229.00 per 500
Winchester 9mm 115gr Full Metal Jacket $24.99 per box $159.99 per 500
Winchester 9mm (USA9MMVP) 115gr Full Metal Jacket $39.99 per box $299.99 per 1000rds
American Eagle 9mm (AE9DP) 115gr Full Metal Jacket $39.99 per box $299.99 per 1000rds
American Eagle 45 Auto 230gr Full Metal Jacket $39.99 per box $299.99 per 500
American Eagle 40 S&W 180 Full Metal Jacket $29.99 per box $219.99 per 500
American Eagle 357 mag 158 Jacketed Soft Point $39.99per box $329.99 per 500
American Eagle 38 Special 185 Lead Round Nose $28.99 per box $229.99 per 500
American Eagle 9mm 124g, 115g Full Metal Jacket. $19.99 per 50 $159.99 per 500
CCI Blaser 9mm 115gr Full Metal Jacket $19.99 per 50 $299.99 per 1000
So basically, you are $35 more expensive, HOWEVER, if they were to ship, I am positive you are cheaper. And for me to drive to go get this ammo, it would require gas, so you are technically right on, but I don't drive down there just for the ammo. So what would it take for me to buy it from you (hypothetical as I don't own one yet) would need to be around $425 free ship. And I think once shipping is applied, I doubt there is much (if any) margin for you.
Now you wrote about what can you do to move this. I know you understand that sitting on inventory costs money, also as some have said here there seems to be less interest in the .40. I'm guessing blow this one out at cost or below, keep small inventory for people who add on when buying something else, and focus on stealing the market with .45 and 9mm, but again make sure you can beat most others! figure out how to be able to be lower than everyone ( pre orders to get a bigger volume discount? or just super bulk? I am not sure how as I am not the most familiar in these types of buying power with this product). To get me, you need to be the clear winner of being the cheapest! Thanks for asking, really does show a willingness to become a great seller!