A others have said, the internet is the main thing that has killed the LHS (and many other small retail stores.) When hobby stores setup websites, one could get a lot of pictures and information about the products; much more than you could ever get from a printed catalog that dedicated a few square inches (or less) for each product. This is not as good as being able to see a plane up close for yourself, but it's the next best thing.
Tower Hobbies was already well established when I started flying 25 years ago. Still, we had a LHS, and bought most of our stuff from them, except for most of the kits we purchased. This LHS allowed the flying club to hold monthly meetings at the shop. This was a good business idea, as they always made a dozen or so sales for modelers who were there for the meeting. Even though Tower had no free shipping back then, Tower's cost of the kits + shipping was always less than the retail price of a kit + sales tax.
Glow fuel sales are one of the big trump cards for the LHS, since mail order/online retailers have to charge high shipping surcharges for hazardous items. Every drop of glow fuel I have ever purchased came from a LHS. Our nearest LHS (a Hobbbytown USA) is about 30' from our home. It's worth the drive for fuel, and for small items that I need ASAP to get a plane ready for the weekend.