Truth be told, I don't know if I have ever had an experience at an LGS that was particularly good. Most that I have been to simply did not have what I was looking for or wanted more for it than I could buy it for elsewhere.
Now, about economics and the LGS. To a degree, it is surprising the LGS has survived as well as it has to the present day. Across almost all of retail the mom and pop business model (stores with an owner that owns one or two locations) has been in decline since the 1950's. This is due to a variety of factors, some benign (better transportation leading to economies of scale, etc) and some less so (a shrinking middle class and a race to the bottom on price that puts most of the competitive advantage in the hands of large corporations). But by and large the main street of America that you would have seen in 1950, dotted with small stores, was replaced by the mall and chain store by 2000. But this trend seems to have been weaker for firearms. Partly this is due to large stores not selling firearms (Target for example has shunned them almost from the beginning), partly due to the differing economics involved (the race to the bottom in retail was always connected to declining American manufacturing and the importation of lower quality but lower priced goods from Asia, something which is far less of a factor with firearms due to federal regulations [As such, ironically, firearms are a good example of how regulation can protect and develop manufacturing in the US]), and partly because there is some cultural aspect to the LGS that makes them competitive in areas besides price.
One other limitation of the LGS was very apparent in the last 2 years. When the ammo shortage started to thaw it was always big box stores that got it back first. Presumably this reflects greater buying power and priority for orders, but no LGS I went to had decent ammo selection until very recently, while big box stores had been there for some time.