These discussions are some of the most interesting.
The problem is complex.
Wal-Mart gets a lot of blame for small town demise but the demise started long before Wal-Mart came to the scene and many of the small town wounds are self-inflicted. Let me also say that I am _not_ a fan of Wal-Mart and go out of my way to avoid shopping there.
Let's look at the town square. The local store fronts in this area really don't pay any better than Wal-Mart does yet their prices are substantially higher. If the employees that work in the town square can not afford to buy in the stores where they work then right off the bat we have a structural economic problem. I'm not a fan of the government setting wages but if you don't pay your people then they can't participate in the economy. Not all business owners have a new Cadillac parked in front of their gated brick house but there are a few like that. Are the stores open when people have time to shop? A good while back an older lady opened a boutique type shop to sell expensive touristy crap. She was complaining about how business was slow. Her hours? 9-5 Mon through Fri. When do the tourists come through town? Mainly on the weekends. There's your sign! When is Wal-Mart most crowded? During the evenings and on weekends when people are off work. Can you even start? Some local governments have so much red tape that it's nigh impossible to start. The town square buildings may be priceless monuments that are not allowed to be modified in any way and must look exactly the way they did 100 years ago. Oh and because of their immense value you will pay immense property taxes so the the city can continue to live beyond its means.
Who do you support? The local auto parts store has a lot of knowledge but they now sell mostly Chinese and imported parts. I suspect they don't get much of a deal on their wholsale pricing. One example: I needed a roller bearing and they had the china one. If I wanted the domestic one they had to order it and it would cost more than double. The chain store in the big town had Timken domestic for not much more than the China one at the local guy. Do I support the local guy or the American manufacturer? Unfortunately I don't have enough income to pay double on everything I buy.
Who gets it right? We have a local hardware store that is affiliated with True Value. They have an incredible selection of stuff in there. Everything from coffee makers to guns to nuts and bolts and garden seeds. Their prices are usually equal and frequently less than big box and no trouble whatsoever getting someone to help you. I patronize them as often as possible. We are also blessed with a welding shop/farm supply store and by farm supplies I mean hardware. Need a big piece of Acme thread? got it! Odd ball hydraulic adapter? got it! Clockwise shredder blades? On the shelf! They get a lot of my business too.
As for grocery stores there are a couple local options. I hope you like canned food and cheap frozen pizzas though. If you are into baking or cooking you have to go to the city for supplies (actually the hardware store has jars and lids). Our big grocery chain is HEB. They have every kind of spice, seasoning and cooking ingredient, in bulk. They also have every kind of concoction and ingredient for making homeopathic remedies if you're into that sort of thing. Their store brands are top notch.
As for young people leaving a big part of the problem, ironically, is high cost of living in some of these small towns. I've watched numerous old houses sit empty for year after year with a real estate sign in the yard because they are way over priced. You check the listings with the local realtor and find that all the houses are way overpriced. In order to afford the "neat" old house (which is uninsulated, drafty and needs a new roof) you will have to have both husband and wife working jobs in the big city. Not all the old towns are like that but the ones that have any kind of name recognition usually are. Young people have to choose to either live with their parents or move somewhere else.
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