i'd say they are a little of both, but ultimately they are killing themselves. store owners are in charge of who they hire to be their 'face', and sounds like the people you interact with are pulling the store down around them...
of course the internet is an easy, cheap, and fast way to go, but theres nothing compared to chatting with the old guy behind the desk who has 45 years of shutter clicking in his past. but i have a total opposite feeling about my local photo stores. i live in rural alberta, but have 2 watsons foto sources in hour in either direction from my town. everytime i go, i get incredibly helpful staff, very knowledgeable and friendly, seemingly like-minded photography enthusiasts...