The only problem there is that there may not be enough revenue in the town to support two hobby shops. Something most people don't consider is that retailers get discounts depending on the amount they buy from the wholesaler.

For example, Let's say your LHS is going to put in an order to "XYZ Models". If they buy 1 of each kit they make, and 10 of each accessory, they will pay 50% of the retail price. This means that the kit that retails for $100, they pay $50 for, so they can sell it to you for $80. They give you a discount and they make $30. But, if they buy 2 of each kit, and 20 of each accessory, they get a better deal, like maybe 40%. Now that kit that retails for $100 only cost them $40, so they can either still charge $80, or lower it to $70 and pass the savings on to you. Now remember, they are competing with the big boys like Tower, Hobby Lobby, etc. These guys buy in HUGE quantities at tremendous discounts. That's one reason why their prices are so low.

Now, if you open another hobby shop in town, they will split the amount of business they do, so they will only order half of the stuff they would order otherwise, which means they will pay more, which means YOU will pay more, which means you will probably go through the big mail order companies to get your big ticket items, which means the LHS will buy even less and pay even more until they get to the point where they close their doors and you have NO hobby shop in town.

Aren't economics fun?