RE: what would you do?
I think you're handling it right on giblet. I wouldn't badmouth the guy or try to drive business away from him - if nothing else for your friends that work there. Don't want to put them out of a job unless they want to leave themselves. How much time does the owner spend there.
I go to a large but family-owned sporting goods store for most of my archery and hunting purchases. The store's overall general manager is always a jerk, trying to push the latest and greatest on me. He told me the yellow jacket target broadhead target I was buying wouldn't last very long and gave me some advice on how to get the arrow out when it started passing most of the way through because it would happen soon(scare tactic). Then he showed me a much more expensive target. The day before, the archery shop manager in the store who I know and respect told me the yellow jacket was a wonderful target. Go figure. Seems like you take the bad with the good most times so hopefully this joker isn't around too much to bother you.
I wouldn't lose much sleep over this string issue unless its a signifigant part of your business. Sounds like you have a quality product. Have you ever considered talking to the folks at Cabelas or Bass Pro, or even larger, selectpro-shops in a broader area. You might want to take it that big, though. I have not idea. Seems like you lose on quality when that happens unless you can do everything yourself or get competent, skilled people to help.