From the post that re-ignited this thread, about the cost of the starter set that had Lionchief + on it, that is a higher end set, and even back in the good old days those cost a lot more, the sets with the more detailed engines, operating cars, etc cost more than the scout sets (which were not particularly cheap back then either). The other thing is that some places that sell starter sets are not really a high volume train store or even a train store per se, there is a local place that focuses on RC stuff and a couple of other things that has a couple of sets for sale, and they are full price. Place like that for whatever reason figures they are going to maintain the full margin on the item and are willing to have it sitting in inventory, which doesn't make a lot of sense, but a lot of small business owners don't necessarily seem to understand the cost of inventory.
Without rehashing old thoughts, a modern day hobby store faces a lot of issues, they are a brick and mortar competing against online retailers who don't have the brick and mortar (though, they do of course have warehouses all over the place, shipping, warehouse workers, so it isn't as 'cheap' as people think), and more importantly, because of a law designed to 'encourage' the internet almost 30 years ago, Congress let internet retailers not have to collect sales taxes unless the operation had physical presence in the state the customer lived in, which is kind of idiotic to have these days IMO, the internet isn't going to die nor are internet retailers if they have to collect tax, and doing so is easy even for small businesses, it call can be done electronically and cheaply, including sending the tax in to the states (many if not most states pass on the local tax back to the localities that have it). That is likely to end soon, even Amazon for their own stuff has thrown in the towel and is collecting it (sellers on Amazon not Amazon itself have their own policy).
Hobby shops have never been huge margin businesses, and having family in another one (construction as a gc), it comes down to nickels and dimes with costs, and also comes down to quite frankly your reputation and how you serve your clients. The contractor who when a potential customer calls gives them the idea that they are doing the customer a favor, the contractor who when scheduling a client to see what their job entails says "I can fit you in in three weeks", or who is slow to respond to questions about a job underway or doesn't call back, is going to end up out of business. The hobby shop that is open at the owner's convenience, 8-4 Monday to Friday and maybe a couple of hours on Saturday, isn't going to do well on the convenience thing (If I hear one more business owner tell me "I want to work regular hours, too", when you talk about them not being convenient, will laugh in their face, businesses exist to serve customers, not the other way around). Likewise the hobby store owner who can't be 'bothered' by customer questions, who treats the hobby shop as a club for he and his buddies/'serious modellers" isn't going to do well. yes, customers can be aweful, yes there is the guy who complains about the lack of LHS but then when they have one, goes there, looks at a product, gets them to show it to them, test run it, but then goes to the dirt cheapest price on the net, the person who comes in and thinks that their buying a pack of balsa wood makes them the world's best customer, but that is the price of doing business,you suffer the fools to keep the good people. You won't make it with the attitudes I have seen, lot of hoby shop owners for whatever reasons remind me of the old, bitter people I often see at train shows, and it is a turn off (and yeah, I have heard on here the justification for the attitudes, the terrible customers, the kids who destroy everything, etc, and my response is whether justified or not, acting like that is going to turn off good customers whatever pleasure it gives them to act like that).
The big box store,Walmart and Home depot, is an interesting one, because I think it also gives a clue as to how stores can survive. They won't be able to compete on price, because of the sheer size of these companies and how much power they have over suppliers (Walmart has been credited with being one of the single biggest forces that caused jobs to be outsourced, they were such a big customer that they could dictate prices, something few stores could do). However, I have seen where it works. There is a hardware store in a nearby town I love, it is really an old fashioned hardware store, they sell a little of everything from lawn and garden supplies, to plumbing, electrical, paint, etc, and while they don't have the selection of a home depot, they often have what I need. They are open when it is convenient to me, full hours on Saturday and Sunday, and they also have stuff home depot wouldn't carry. Their prices are not as cheap as home depot, but for example I needed a couple of 1/2 copper pipe pieces, and the price was about a buck a pipe more expensive than home depot would be, more than worth not having to go to HD, which can be a pain. Likewise, I bought some threaded rod at the hardware store and goofed, I got some stainless steel ones mixed with the galvanized ones, and they noticed it and asked me, at HD they would have rang it up and not told me, wouldn't care. Small stores could also have internet ordering (I believe this is one of the benefits with ACE and True Value co-op membership), where you order it then pick it up at the store, again not rocket science these days.
One way train stores could compete with the internet is how hardware stores have survived, they could put together a co-op like ACE or True Value, which allows a lot of little stores to have the purchasing power of a bigger big box store. By doing that they could negotiate better prices with Lionel or MTH or whoever, and be able to offer more competitive prices as a result, as the independent hardware stores do with their co-ops. It will never be easy for a brick and mortar independent hobby shop to compete with the net on price, but the advantage net businesses have is eroding with sales taxes and also as the cost of shipping goes up, as it already has. They have the advantage in personal service and being there as a resource, it won't help the type I have seen who complain about the 'death of the LHS' but are the type who refuse to pay anything but a rock bottom price, they want the LHS as their personal showroom then order from the cheapest supplier (then take the engine to the store expecting them to fix it if it is broken), but others will respond, my local hardware store does great business because they have learned that, and they also seem from experience to be able to deal with the grumpy men (and women) types who complain their prices are too high, they can do better at Home Depot or Lowest, yet want red carpet service and information but don't buy anything, firmly telling them they have the right to shop where they want to and good day.
(stacked to the rafters too 
) and he was a really personable friendly guy. Anything he didn't have, well he just pulled that catalog right out from under the desk "I can have that for next Monday for you."
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) the impact of current battery technology advances to have a commercial impact on model railroading. 
