If the LDS is slowing passing away, I wonder how much is an issue of price, and how much is an issue of "too few divers to support too few shops". There may be many, many newly-certified divers, but, as someone said, many of them have only a brief fling at the sport; in addition, many others dive only once or twice a year as a sidebar to a non-diving vacation. Neither of those groups finds the need to buy equipment, in part because most diving locales really do provide excellent rental gear. Those renters also avoid the confusion, for almost anyone and new divers in particular, of a jillion different products, each with its own set of very vocal advocates who contend, "If you don't buy Brand Y, you're not getting the best."
Another factor -- at least for those of us who really are spoiled in our ocean diving locales and don't live within easy driving distance to a reef somewhere -- is that this is not a cheap sport. The cost of a long weekend for my bride and me in Cozumel (a direct flight from DFW) is a minimum of $1500, and that's a lot less than most other destinations, and far less than liveaboards. It's no surprise that many divers confine their diving to once a year while on vacation. Who needs their own gear for that level of activity?
So, maybe the matter of LDS viability is more a question of matching number of shops to number of active divers, and then getting the LDS to be a lot more than merely a gear seller and to provide a high level of overall service. In Dallas, we're lucky because Scubatoys, internet-based though it may be, still acts, in person, like a good LDS, and both service and price are excellent. Still, I've also bought at an LDS (Lone Star Scuba) closer to my house, and have always been treated well there.