I have a wonderfu lLHBS less than two miles from me. They are attached to a wonderful brewery. The people are great and knowledgable at both. The difference is the beer is worth the money and LHBS isn't.
I went into the LHBS to buy 1/2" silicone tubing the other day. $3.60 a linear foot. I don't care if that guy has a family to support, his mark up is rediculous and I refuse to be fleeced! In case you haven't shopped for 1/2" silicone tubing before, that's $1.10 a linear foot difference than I find at bargainfittings.com. I occasionally buy grain there and dry yeast once in a while but at their prices I wouldn't be able to brew nearly as much beer.
First, I will concede that I know nothing about the LHBS you speak of. It may be lousy for other reasons, however; let's focus on the example you gave: Let's say you needed 10 ft of tubing. That's a difference of $11, right? Looks like your online resource has flat rate shipping of $5 to CO, so you've actually only saved $6, and you'll have to wait 2-3 business days for it.
Your LHBS has already rolled his cost of shipping into his price. He can't possibly compete with the discounted shipping costs of an online retailer,and he's not moving the same volume either. If he sold them at the same price as the online retailers, he would very quickly go out of business. If he's smart though, he can provide added value that the online guys can't. You get someone to actually talk to. Ask questions. Compare notes, contribute to the local hobbyist community, etc...
I'm sorry, but I just don't see your example of "ridiculous markup" having much merit. This is normal markup for an LHBS, he's not getting rich off of his silicone tubing, that much is for certain. You say in one breath that they are wonderful and knowledgable, but then you accuse them of trying to "Fleece" their very small market of savvy customers with this pricing plan on tubing. I don't get it.
No one will dispute that you can find lower prices from an online retailer. Price and value are two very different things though. I'm not saying that online retailers are bad and that you shouldn't use them, but I do think your example is oversensationalized. I'm not just picking on you either...this is widespread consumer mentality. Most people these days unfortunately would make the same choice. I don't envy the guy that's trying to make it as an LHBS...not in this day and age.
My argument is that when lowest cost purchasing is done as a reflex, you may be missing out, and you're certainly contributing to the ultimate demise of Main st. Ma and Pa businesses.