I can add a little to this since I am seeing it happen in real time. Another factor, besides what has been mentioned, is that many players have dropped out. Around 2005, you could get the old console and cart based stuff at many places beyond the specialty stores. Yodobashi Camera, Bic Camera, Sofmap, Book Off, the stuff was everywhere. Moving into the latter part of 2005, everyone seemed to liquidate at the same time. There was absolutely nothing gradual about it. I remember going into Book Off and getting Steam Hearts on the Saturn for 500 yen. A still sealed copy of Samurai Shodown 2 for the Neo fetched the same price from Sofmap. It was crazy. But like I said, they all seemed to do it suddenly, at the same time. Stuff from the PS1 era forward is still available at a lot of those places, but if you find some carts they are thrown together in a bin.
While I am sure the internet is one of the biggest factors, I would like to toss out another theory. I think Mandarake is trying to corner the market. I can't prove it, but I am sure that games in showcases at places like Trader are finding their way to ManD's. I keep seeing too many games with the same condition issues "moving around" to be a coincidence. Oh, and then there is this:
http://www.mandarake.co.jp/company/recruit/em_sahra.html
That was completed, if I remember correctly the end of last year or so. It doesn't specifically mention games, but it says toys, comics, anime, and other collector's items. It wouldn't surprise if they are moving games out of there as well.
There is a great video on that page. The narrator, at the very end, mentions "games" as an area of specialty (she lists all the usual stuff, and games are at the end).
I love the employee testimonials! "I work for lunch! The food in the employee cafe is excellent."
