TenchiMuyo81, I live in Minnesota..that would be quite a commute!
I recently picked up a holiday job at Toys'R'Us of all places this past year. I was really, really surprised at how they get some good service out of their employees.
Now, they take pretty good care of their employees too, probably a lot better than a local hobby store could or does. They get health benefits, dental, and paid vacation and 401k if they stick around long enough. I was impressed.
I've worked for other smaller game stores (Games by James up here for one) that in the past 10 years started offering SEP IRA plans to their employees, as well as health insurance. They retain some really good employees that way.
It takes money to make money. And yah, for some places it's not economically feasable, but it's not impossible either.
I think hobby stores can make it, but they have to try. And also, they maybe need to reinvent themselves a little.
I've thought a lot about this, and keep terrifying my wife with the thought of opening my own business some day. I think it can be done, and here are some of the ideas I had around it, let me know if I'm insane or not:
1. Get people into your store any way possible to start. Have a grand opening sale. Have doughnuts!
2. Hook your regulars in. Discount cards for local clubs. Contact you local CubScouts/BoyScouts/Brownies/GirlScouts troop and offer up either some kind of small sponsership or do a 'make and take' kind of deal like Revell used to have (do they still do that?).
3. Also have an internet site that you can sell from. This is one thing ToysRUs does that works pretty well for them. You can place your orders online and pick them up at a local store if you want, or have them shipped. It might make your inventory a little tough at xmas, but nobody said it was going to be easy.
4. Keep it Simple Stupid. Don't over extend yourself and realize that according to statistics, many businesses fail.
5. Listen to your customers. If they want something you don't carry, offer to find it for them or special order it.
6. Have quality products, at reasonable prices.
7. Treat your regulars well. More than once I've gotten a 'freebie' from my local Comic Book store as I probably spend a couple of grand a year there. Do they have to do that? Nope. But do I feel like I matter to the owner? yep.
That's just off the top of my head...
It's not easy, but it's not rocket science either.