Does the above idea bear similarity to internet sales in that they both try to sell to more people for a lower price? I'm not sure I completely understood the excerpt.
Smith is looking at the socio-economic health of the nation in aggregate. His overall project with The Wealth of Nations is to try and redefine what people thought of as 'wealth.'
Part of his book is a sustained critique of the mercantilist view of national wealth, which thought that increasing the stock of money (in this case, gold & silver bullion) was the measure of increasing national wealth. Wealthy nations had a positive balance of trade and increasing stores of wealth, according to mercantilists.
Smith wants to get away from the idea that money = wealth. In his view, increasing production and increasing wages are the signs of national wealth. So, state intervention into production and trade with the object of increasing the stock of bullion controlled by the state is actually counterproductive in terms of increasing national wealth, according to Smith.
In Smith's view, the state should have a mostly laissez-faire role. Setting high tariffs on imports and intervening in the market actually decrease national productivity and hurt wage levels. By decreasing competition they also allow for profit levels to rise. For both Smith (and David Ricardo later) the key effect of competition was to kill profit margins, whereas competition to increase production would raise wage levels by making the labor market competitive.
I think the linked article and Smith's ideas are both taken from a macro perspective, viewing the economy as a whole. From the national point of view, low profits and high wages and low prices are a good thing. For the individual firm, the opposite is the best: low wages, high profits, high price points.
Smith notes this contradiction between the individual capitalist businessman and the overall capitalist economy later in the same section I quoted above:
"Their superiority over the country gentleman is, not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction, that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always in the interest of the dealers...
"The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order or men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."
