Well the history of GC is in the article John attached so I won't get into all that, but they are the biggest music store in the country and have been around since the 50's.
Some people like the personal approach and attention via smaller crafts stores and others like to immerse themselves to a larger level. Kinda like going to buy hockey skates at Walmart sporting good dept. and seeing maybe 5-10 skates on display or going to a Dicks Sporting Goods and seeing a wall of skates on display. It may not matter to you as an educated adult, but to a young child just getting into the sport which atmosphere is he gonna enjoy more? It's called the "Drool Factor" and I think that's what GC was going for.
That same methodology was used by Harley Davidson. If you went to one of their stores before year 2000 you were greeted by scruffy old tattood guys with oil stained t-shirts and if you did not look like them they would give you the look of "How dare you enter our world". Plus you had about 10 bikes to look at that were used because the only way you could buy a new one was to enter a lottery. Seriously, this is how it was back then. Then sometime around early 2000's the company changed their image. Gone were the dirty t-shirts and out came the boutique stores. Load the floor up with shiny new chromed out bikes and cool looking clothes adorned with Harley emblems galore and now you have the "Drool Factor". Bike sales soared through the roof even though some dealers inflated the prices way over MSRP. They couldn't even keep them on the floors long enough along with all the chrome accessories and T-shirts. Well it worked for a while, but now Harley is going through the same way as GC. Maybe not as bad, but their glory days are no longer.
It's really about different business trends for different times and it's a bigger testament as to where societies shopping trends go. Now online ordering is all the rage. While I do enjoy the convenience of online shopping, it doesn't compare to going into the stores and seeing and touching things. I mean guitar playing is a personal thing, but it's also a hobby and part of what makes a hobby fun is surrounding yourself with the products and people who use them right? Isn't that why were all on this forum? Because we have an interest and want to converse with others who share that interest? Speaking of which, I really should get back to practice. lol.