He can stand there and complain until he's blue in the face, but he's simply not going to be able to compete head-on with ebay, amazon and any number of big web sites.
Those companies cannot service a bike, or fit you in person. He might want to focus on those two elements.
It seems to me that he doesn't have to floor inventory if he's installing parts that others have carried in. Pure labor when applied correctly is a low-risk, high profit endeavor. A ton of shops just move gear. Very few are any good at service.