We have three bike shops in a town of about 50K; they all do something else in addition (ski stuff, hockey/skate stuff, and so forth). Two are within spitting distance of one another. And that doesn't count the big box sporting store at the mall. None has a great selection, but they all seem to stay in business.



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The difference with our shops though, is that they're not right in the same shopping center. It would be like someone setting up shop right next to VO2 in Cedar Park (which is a relatively new shop and somewhat isolated from other local shops) and targeting the same customers... I doubt that would be received very well. Down the road would be a different issue.
