Ah, maybe there is a disparity what what people think of when they say "magic shop."
When I talk about a magic shop, I envision a person whose profession or expertise is the transactions of magical items. The inventory of this person may be quite limited; however, he's the niche person who knows how to get ahold of items. He's also the person who usually buys magic items from the players. He's got a line on who can make what, and if he's in a large city, his contacts may help a lot.
For example, a local temple in a big city which can raise dead adventurers may occassionally receive payment in the form a magic item. The temple doesn't think it would look good if they opened a store to sell the magic items, so they quietly let the merchant know what their inventory is. The merchant doesn't actually have the magic item "in hand" but he can get it if a buyer comes along.
When I hear some other people talk about a magic shop, I get the imperssion they think it's a store with every single item in the DMG. I think even the most ardent magic shop defender doesn't believe that there is something like "Aisle 4, vorpal swords and scimitars" where there are hundreds of vorpal weapons to choose from.
Large magic shops start running into other problems -- if it costs 70,000 gold and the risk of getting caught to break into a magic store, thieves are going to look at a store with 50,000 gold in inventory much differently than if it has 800,000 gold in inventory. Once you start concentrating magic items, it's going to attract attention.
One thing that the town population and wealth indicators don't take into account is many adventurers, who may not have a base of operation, or whose base of operation is far away. These are the main people who would buy magic items.
I suppose there could be a campaign with few adventurers. But I have a hard time believing that any world with decently leveled NPCs (level 9+), who are generally rulers or perhaps the ruler's general and court wizard, and/or decently leveled monsters (CR10+) would not have adventurers.
If there are powerful monsters but no powerful humans, then why haven't these monsters overrun the realm?
The risk for adventurers needs to be fairly high (else it's so lucrative everyone would take up arms... even a paltry return of 100 gold is a fortune for a commoner), which means that the mortality rate is going to be non-trivial.
For every level 9 NPC, there were probably a lot who died instead. Given all these adventurers running around (who aren't yet dead), they need to sell their excess magic items somewhere.
There are those who think that NPC crafters wouldn't want to spend their xp to create items. The xp cost to make a 1000 gold item (1/25) is 40 xp, of which 500 gold is profit.
Let's say you've done some adventuring, and you decided to get out while you were still alive. Now you're going to settle down -- you don't really need your powers anymore, after all you retired. Sure you don't want to go back down to 1st level, but giving up some xp to net some gold isn't too bad.
If a 6th level wizard who stops halfway through his level retires, he can give up 2500xp before losing his level. That's 62,500 gold worth of items he can craft. That's about 25 +1 longswords or 31 rings of protection.
Do you think most retired people would be willing to spend a little xp at 12.5 gold per xp point, especially if it didn't drop them a level? Even giving up 100xp to get 1250 gold profit seems like an easy choice, especially given what 1250 gold gets you.
If he's willing to go down to being barely 5th level, that's 7500xp he can give up, or 187,500 gold worth of stuff he can craft.
When you look at these numbers, it's hard to tell PCs who have arrived in a big city that "oh, there is no one interested in crafting a +1 ring of protection for you."
The other problematic thing is that magic items rarely get destroyed. And yet the going price is supposedly the DMG price. This means there must be some demand out there, or the huge glut of magic items should cause the price to come down (which causes other problems so I don't think that's a viable solution).
Anyways, these are some of the things my players have brought up (there are more... trust me... but this post is getting long as it is).
Again, I repeat, I would prefer not to have magic item stores in my campaign; but I want to tell my players a plausible reason, instead of just saying "that's just the way it is; it's not realistic but deal with it." (I suppose if it were important enough, I might do that; but I don't feel strongly enough about magic stores to fiat that.)