So, I think the closing of every GC would not create the vacuum you think it will. "Fred's Hometown House of Guitars" won't suddenly carry 20 really nice basses and have great prices on strings.
Around here there are a lot of little music stores starting to pop up and be successful. I live near Cape Girardeau MO which has a once great store named Shivelbine's that is about dried up with guitar gear. Huge store, maybe 20 guitars and basses alltogether. Lots of percussion and band instruments, pianos and sheet music and whatnot though. Don't think they have an online presence.
Another store opened up last year here in Jackson (same town, other side of freeway) and they are growing steadily and the gear they are carrying keeps getting better and better. Not much Fender and Ibanez, but they got G&L, PRS and Ashdown stuff.
30 miles away over the river in Illinois is a little town with a big store and a lot of Fender and Gibson and Country/Bluegrass stuff galore.
60 miles south in the little town of Dexter with a Big store with a more balanced selection that includes Ibanez, Jackson, PRS as well as Gibson/Fender.
I can name a lot of little Stores in Joplin and the outskirts of Kansas City that are growing too. Most of the better stores in Joplin were wiped out with the big tornado went through. (I was almost in that BTW. I had driven through there and stopped earlier that day) But some little stores came back and those people who worked and managed the previous stores seem to have done quite well after the disaster.
So It does happen, but maybe one of us is living in an area where business works different than the rest of the world.
I agree with you that the prices aren't AS cheap as the big box stores, but I'm happier to support the little guys when they have what I need.