Only math/physics/CS papers are put on arxiv. These are a small fraction of the total academic and industrial research output. In my own field, earth science, there is an arxiv-clone (eartharxiv.org) that is a few months old. I bet the majority of earth scientists (and certainly 90% of geologists) have never heard of arxiv.

Furthermore, many people just put pre-prints on arxiv etc. and don't update after peer review. Peer review is painful at best and quite flawed but the median paper is actually better after it, and many papers rightly don't make it through. Having open-access curated journals makes a lot of this better.