I took a run at having a store in the Philadelphia area from late 2000 and it lasted not quite 4 years to 2004. Many issues, some of which have only gotten worse.
I’m going to say it was never really profitable. I could not afford to have any employees. Many weeks I couldn’t pay myself. I would just take $20 out of the register to put gas in my car or whatever. It was a constant struggle to pay the bills, especially toward the end. I was always behind. In the end i probably wasted $30,000 and my wife at the time paid just about all our bills.
I’m also going to say that in a way I’m glad I tried. I had the opportunity, it was a learning experience and if I hadn’t tried I probably would have been beating myself up over it for many years,
First, homebrewing is a niche. If you own a pizza shop a very large percentage of the population will be your customer. If you own a homebrew shop, its an infinitesimally smaller percentage.
Second, you have very tough online competition from companies who can offer lower prices because they buy in much larger quantities than you can and get enormous discounts you can’t get. Often times you are buying things for what they are selling them for. And they offer free shipping.
Speaking of shipping - Third, your cost of getting goods shipped to you is increased, Freight shipping by the pallet is probably at least double today what it was then.
I can’t speak to declining participation but I know the availability of beer everywhere isn’t helping.
As others have said, many of us don’t have a local shop anymore. Many have tried, most have failed.