Not really surprising, but sad nonetheless.
A friend that is an even more voracious reader than myself, if such a thing is possible, is taking a literature class at the moment. The professor is a fan of sci-fi and fantasy, and the final piece of reading for the class will be Neil Gaiman's "American Gods."
The professor asked the class which of them read, or were readers. Less than half of the class responded in the affirmative. When asked to name their favorite short stories, a portion of students named television shows or movies. One named Cinderella but was speaking of the Disney animated movie, not the story which involved impromptu foot surgery in someone's attempt to make a shoe fit. That story was apparently unknown to them.
The city I live in is not large by Lower '48 standards, but we do have several options for books. We have a large Barnes & Noble which was built in the last several years and is rather nice. We also have a combination used/new book store named Gulliver's Books which handles special orders in prompt fashion if you cannot find what you're looking for on the shelves. Despite initial moanings about how the big chain book store would crush them, I think they're doing better for its presence, at least when it comes to used books. For many years I nearly had the sci-fi/fantasy used book section memorized, due to the low influx of new used books. That situation has changed now, thanks to B&N. It also forced Gulliver's to step up their game in the new book department as well.
We also have a non-profit used book store called Forget-Me-Not Books, which helps to fund local literacy programs. While not a true competitor to either of the previously mentioned stores, they do provide another option.
The sci-fi/fantasy section at our local Fred Meyer's stores used to be good as well, but of late they have been nearly half-overrun by Laurell K. Hamilton clones. One can only tolerate so many leather-wearing female half-vampire/half-succubus/half-werewolf/half-witch/half-druid kickers of evil arse. Can't have them be whole anything, it wouldn't be edgy then, don'tcha know?
I still manage to pick up some decent sci-fi/fantasy there from the uncontaminated half of the shelves, especially when they have one of their "Buy Two Paperbacks, Get One Free!" sales, which occur quite frequently.
If the market demands it, someone will step in to fill the book store niche in that town. It just might be in a form other than that of the chain stores.