Your comment points to the solution: that of increasing retailer specialization, and the need for local stores to focus on items that are not easily purchased through mail order.
The corner grocery in an urban neighborhood doesn't compete on price with the supermarket 10 blocks away. It competes on convenience.
I'm not saying the idea works, but there is more to it than just mapping all existing old school retail establishments into a search engine.
That brings up an interesting idea of dynamic pricing based on pain (distance). Sort of the anti-hipmunk model. The app could offer close retailers extra profit because they are the most convenient to the customer OR the customer can opt to pay less by walking more.
The corner grocery in an urban neighborhood doesn't compete on price with the supermarket 10 blocks away. It competes on convenience.
I'm not saying the idea works, but there is more to it than just mapping all existing old school retail establishments into a search engine.