Those are good thoughts Bill, but I'm in another little town (on the other side of the Country) of similar size in Population (not including the University students). We are also within easy driving distance of the State Capital (35 Miles), and yet we have at last count FIVE Music Stores that sell and service Instruments. One of those deals mostly in Pianos, Harps and Organs, and electric Keyboards, and one only deals in Electric guitars, Basses, Mandolins and Amplifiers. Are they feeling the pinch of online stores? OF COURSE ! They have to deal with the cost of overhead, ie: rent, insurance, Business Licensing (at the State level only as there is no Municipal requirement for a Retail License, and it is "cheap"), Utilities, Wages and Payroll Taxes etc.. Some are good friends of mine and from time to time I do inquire as to the health of their enterprises. Generally they TRY to be competitive cutting margins as they can, trimming the hours of employees as needed, which is easier when your workforce are mostly students that don't have the free-time to devote "mega-hours" to a second job when their first "job" is getting an education. Staff Rotation is expected and manageable..... they do provide very good customer service and the slightly higher initial investment is offset by the benefits to the customer, both perceived and tangible. Everything in inventory is inspected, defectives returned, all are tuned and properly set-up, so what you hold in your hands when "shopping" reflects the true quality mirrored in the price. After sale service is where the "real" profit is balanced with return customers buying the little bits that support their passion..... for instance the Drums were close to the price you could pay online (with freight), but you spent a small fortune on pedals, sticks and the eight-way adjustable "throne", that lets you make your music. The margin is a bit wider on that stuff. 
As to the "brick and mortar" vs. Online thing..... Guitar Center is the "physical" store of the parent Company of which Musician's Friend is the "online Outlet"..... Same guys, different Business Model. Not that there's anything wrong with that, and if that is what one must do to survive in the Market, Rock On !! Personally though, if I really wanted to drive that 35 miles to cruise through a "store" and be ignored by the overworked under staffed kids in the matching shirts...... I would. But my sanity demands I shop local, and I do whenever possible. 
ETA: No offense intended towards either Company named above. I have and do buy from both of them from time to time, and only use them as a familiar reference for our readers. Your views may differ as it is not common for one to "expect" a bad experience, but there are variables to take into account such as staff levels, number of customers in premise at any particular time, promotions running and such. My experiences have ranged from Good to Exceptional generally with an occasional "disappointing" which reflects more on what kind of day the associate is having as opposed to Corporate Policy.