No, it's not. It increases usability and therefore also value. The flaw in the above is the implicit assumption that 1. only people that already own Bitcoins will spend them and 2. They won't replace them. Both 1 and 2 are incorrect.
Why?
1. There are people who don't have Bitcoin who will purchase them to purchase items
2. There are people who already own Bitcoin and use these for a purchase, who will (immediately) replace these coins by exchanging fiat.