Independent retailers placed cardboard, chipboard or blinds over windows in an attempt to mock up what Holmfirth might resemble if shoppers and tourists go elsewhere.
Although Holmfirth has shop vacancy rates below the national average, traders fear that a proposed Tesco about half-a-mile from the centre could damage trade.
The issue has split opinions and led to angry exchanges.
One resident, Tim Radcliffe, called the boarding-up protest “pathetic” on a website supporting the Tesco plans.
Traders defended their campaign and claimed other towns had suffered as a result of the growth in out-of-town shopping.
Tesco has said there was a great deal of support among local residents for their plans to build a supermarket on the site of the former Midlothian Garage on New Mill Road.
Tesco says the store will create about 175 jobs, both full and part-time.
Plans to build a Tesco store on the same site were withdrawn in 2009 after a campaign in which residents claimed it would affect the town’s character and cause traffic congestion.
Today traders said around 20 shops were boarding-up - though not closing - their stores for one or two days.
Caroline Anstey, owner of the Imagine toy shop, said: “This is to demonstrate what the town could look like if the planning application is successful.
“We are not against supermarkets or Tesco, we are just against it being out-of-town.
“Mary Portas said there should be no more out-of-town supermarkets unless they are signed off by central government. I totally agree with that.”
She claimed Huddersfield town centre had been badly affected by similar developments.
Mrs Anstey believes that locals would be more supportive of a Tesco store in the centre of Holmfirth.
“I just don’t think building something so far out of town is the answer. Maybe they should build a smaller store, in the centre. That could work.”
Reports commissioned by Tesco suggest that Holmfirth has “vitality” and “viability” as a shopping destination but that many residents do their weekly food shop in nearby Meltham, or in Huddersfield, which is 10km away.
Mrs Anstey said that Holmfirth’s traders “have got a lot going” for them but the recession was taking its toll.
“People come into the shop and say ‘don’t let Tesco ruin it’. I think Tesco’s latest trading figures show there may be a bit of disenchantment with the big companies.”
Fellow trader Andrew Bray, a greengrocer, has seen many small shops close in the 37 years he has been in the town.
He said: “This protest is not just about Tesco, it is about out-of-town shopping. The people have got together to make a point about what happens when there are no shops left. We are bringing the issue to the fore and having a public debate.”
Mr Bray admitted to being “anti-Tesco”, adding: “We could do with a Waitrose.”
Supporters of the plans have placed their views on a website sponsored by the supermarket giant.
George Senior, 70, said: “As a resident of Holmfirth I would very much welcome a new supermarket. It would provide more competition, more choice and better value.”
Resident Tim Radcliffe said the town’s facilities had “gone backwards” in the 31 years he has lived in Holmfirth.
The plans have been submitted to Kirklees Council but a decision is not expected before March.