I agree to a point. However, I feel there will ALWAYS be niche markets where local stores are not only welcome, they are nearly required.
This is by no means the ONLY place it happens, but I'll use Cave Divnig stores because they are nearby and I've visited them. People doing this kind of diving seem to relish having places they can go and get gear suited TO THEM, and purchase them from someone who has competitive prices, and KNOWS THE GEAR. When a guy calls ahead and says he needs a 1/2" SS Snapbolt, there is not a 3/4" butterfly snap waiting on him. When a traveling diver comes into the store and asks about the current flow in a cave, and three divers who've just finished that dive an hour before give up to the minute info, it's very worthwhile. When you show up for fills, need 260cuft of trimix, 40cuft of oxygen, 40cuft of 50%, and a bottle of Argon, and can get them all filled while the people behind you are laughing and telling stories, it's not the the traditional "Mom and Pop" store.
I see the same potential in online stores. People act like there is some huge mystery to running a successful online business. There isn't. It's the same as running any other successful business. Fair prices, quaity merchendise, and service after the sale. The internet squashes geography. Completely flattens it. It allows a TOP business like ScubaToys to essentially become a LDS to someone even outside the US. It's a great model. As much as I like the model, S.T. is NOT a technical diving center, and thusly has gaps in it for things certain divers would like. Not a big issue as I don't think this is their market. For that, I'll look up Joel at TDL, or other online vendors. Guys like Tobin thrive because of happy customers who recommend his products by word of mouth.
All that said, there is STILL room for the local shop. Because that face to face sale still has value. Being able to try on certain gear has great value. It's AWFULLY hard to pull the trigger on an $2200 drysuit without trying it on first. It's awfully hard to buy $800 worth of regulators without seenig how they breathe. And it's hard heading to a dive site you've never been to without some local knowledge. The sooner LDS's learn to stop competiting at things they do poorly, and learn to leverage what they do well, the better off they will be.
Of course, this is just the opinon of someone who has not RUN a SCUBA business, though I have done other businesses both online, and brick and mortar.