I'm glad that your local quilt shop is looking into what is working for other quilt stores especially the M*.
I think that people's local quilt stores can stay competitive with both on-line and large fabric/craft stores. One of the biggest things is customer service - to get to know the customer, greet the customer, be glad that they are in your store, and find out how you can help your customer be it reasonably priced classes, ordering a specific type of fabric or assisting them in their quilting.