Seems like you're contradicting yourself. You're criticizing REI for undercutting the competition then saying they don't offer lower prices?
I just moved from the Washington, D.C. market. REI has been there for more than 20 years, and HTO has been expanding over that time, not contracting. But there was plenty of gear I just couldn't find in D.C.
Now I'm in Bend, and I welcome REI coming. It may not be the perfect climbing store, but then, nothing else in town is either. At least I have the option of ordering online and having them send it to the store for no extra cost. I think the other stores will be able to survive by serving the niches that REI doesn't.