Hong Kong based member, free shipping, I doubt this is a drop shipping operation, but who knows.
Looking at the feedback against Their DSR, I would suggest that they aren't really worried about that level of negs, as their DSR is very high, so their trading capacity within eBay isn't under any threat at all.
Looking at the negs, not a single response to any of them either. Their listings suggest that they are a very caring supplier, very open to communication to ensure complete satisfaction. However, the arrogance that they seem to be treating the unhappy customers who are leaving negs seems to defy all of that, but looking at the numbers, that's not slowing down their sales whatsoever.
How are they doing it for the price?
Well unless it's a sales funnel where they are effectively converting customers into profits on other items, I have no idea.
In regards to the prices, as Frank has said. Realistically, the true value in any product is the best price that the market will sustain at any given time.