I have been really surprised when reading this thread... My perspective and outlook is completely different.
Over here in England, I remember there being a model shop on just about every street corner (at least thats how I remember it) and toy shops all stocked a healthy amount of models too.
I think they began to die out soon after space invaders showed up - they either closed up or evolved, usually specializing in model railways, radio control cars, or selling more toys, or branching out into sporting goods.
By the time I was 17-18-19, I was having to drive miles to pick up a 1/72 military vehicle, and once Esci was no longer on the shelves, that was pretty much it for me. It was either swap to more expensive larger scale models or quit - so I quit.
All I can say is, thank god for the cold war! And the internet.
It looks to me like while we were all playing play stations, those guys on the other side of the curtain kept the tradition alive, especially in small scale. When I see the stuff being made in Eastern Europe by short run, I just can't believe it, my dreams have come true!!!
And then there is the internet... It is the real saviour of the hobby. I can actually order a model direct from Poland -- how amazing is that? And to think I used to get the hump having to drive to the next town.
And I can't recal people standing around talking in a model shop since about 1979... but here we are, having a chat, from the comfort of our own homes, and we are spread all over the world.
So in many ways, the situation has never been so healthy. Technology has advance, production costs are actually down... I mean, when it comes to injection moulding, the introduction of modern computers has got to have made things quicker and less labour intensive. We may not get the models for any less, but if it means there is more profit in models, then there will be more available, and they have to sell less.
It's not my main business, but the wife and I opened an internet shop a few months back.. just becase I can. More and more people are shopping online, and if you have the space for stock, it's easy to do. You can run it in your spare time from home, it doesn't have to be a full time job (although your website is open 24hrs a day!). Meanwhile, square footage, especially on the high street is just stupid money... When I look around now, all I'm seeing is cafes, wine bars and boutiques... even estate agents and travel agents are shutting up shop and going online. It's just the way of the world. If you don't have products that customers have to try on or taste, then there is no need to have a physical presense in the real world.
So if hobby shops are closing down in America, I wouldn't see it as a symptom of the decline of the hobby, I'd just see it as the decline of the highstreet store and the rise of the internet shop.
However, getting young people involved in the hobby so that it will continue, does seem to be a problem.