As a customer (I am not affilated with dive shop, nor will I ever) to several LDS and a few online retailer it comes down to customer service, and pricing of equipment. Get some really nice folks that are not paid on commission, I can tell when someone is paid on commission and someone that is not.
I hate to say this but get some really nice, and good looking women in the store. This hobby is dominanted by guys. What guy on this board is not impressed by a women that is in diving. Also don't hire people that are very opinionated, I have been told to only buy Scubapro because everything else is junk and I will die if I don't dive Scubapro. I have a bad taste Scubapro because of people like this, I have rented Scubapro, and I think they are just as good as Oceanic, Mares, Aeries, Dive Rite, Hollis, and Atomic.
Sell equipment below MSRP, but don't make it sound like you are only doing this for them, just this one time. Most of the people that are "just looking" are really getting an idea of how much equipment cost, and then they have to figure out what they can afford. (Don't tell someone that is just looking, "I'll knock 10% off if you buy this today, go ahead show the MSRP (list price) and then show your everyday price for the equipment. This is why most buy online, because they feel like they are getting a better deal online. If you don't provide your best offer up front, then you will lose to the online retailers. Keep track of the online retailers pricing for the equipment you also sale. I think every dive shop should have online retailers booked marked and have the same equipment prices in the system for comparison (You might even want to list LP prices on your display.)
Display equipment from several vendors, for example; instead of stocking the high ends regs ($600, $800, $1,000+) from one vendor, you stock more of the low to medium regs ($100 - $600) from several vendors. I pesonally will buy a $500 dollar reg, that is just as good as a $1,200 dollar reg anyday of the week. Do you think a titanium reg or a reg made from some exotic metal is better than the same reg made from brass, I don't think so. Try to match the equipment with the persons style of diving do you want to sell a high end reg, to a college student that just finished his/her OW certification, don't count on it. When I was shopping for my tech regs, a dive shop was trying to sell me $700 regs/each, but I found a compariable reg for $400 that in my mind is better than the $700, and the sad thing about it the dive shop also carries the same brand of reg that I currently have, but I never knew he carried the brand until after I got it.
Someone has said this but also provide a club membership with discount on equipment (below what you have listed in the store, which should be below the MSRP), free air, discount on Nitrox, and TriMix. Another optionis provide a sticker for free air or nitrox for one year. My main LDS does this, and I save a ton on air and nitrox fills.
Get online, supply manufactures that allow online sales, or push the manufactures to allow you to sell online. Most of the online retailers gets more hits (people that are "just looking") in an hour than most dive shops see walk-ins the whole year. This was basically stated in the OP. We will live in the age of the internet, we even carry in the internet in our hands. Some people would go crazy if it was not for the internet.
The economy is in a tuff time, people are getting laid off, daily living cost are increasing. The first thing most people cut back on are their hobbies, and travel. As a company that caters to a hobby, you have to make sacrifices also. I personally have 3 different hobbies and scuba is one of them, but I am getting completely out of the other 2 and focusing on scuba. I am thinking of selling my custom motorcycle, to pay off my credit card, and possibly buy a rebreather.