Yes to those who say sales from their stores have declined. The "why" of this that people are inventing is rather interesting though.
I recall about a year and a half ago the large retailers went through a spate of "going out of business" sales, at which sims were packed to bursting with people buying every last item offered at great reductions in price. One of these sales was accompanied by incredible drama over whether one of the wonderful creators had really died or not.
I know people who proudly told me that they had bought entire store inventories at pennies on the dollar. Probably they increased their inventories by hundreds, if not thousands, of pretty high quality products.
I resisted that urge but I did buy a few things. During that time I also learned how to make many of the things that I wanted myself. I've seen most users that I know become pretty picky about what they buy.
Back to the original question though of why retail shops are underperforming while xstreet is apparantly doing better, I will speak as a consumer. As LL makes shopping on their website easier by improving the search functions, merging our inworld and xstreet pocketbooks, and other things, shopping on the web is a more pleasurable experience. As a consumer I now prefer to buy most things on XStreet rather than at in world stores.
To the doomsayers, I have bad news. SLMarketplace is even better. From what I've seen they're making it very professional. I'd recommend that you pay some attention to it and configure your store their as best you can, because it's a pleasure to shop in, and it acts like other webstores in which I shop for things that come by UPS or FedEx.
You can cry about the old days, or try to see the future and adapt to it. That's life in the commercial world.
I'm a marketing professional in my day job and all I can say is that I'd rather try to make my SLMarketplace sales rock than spend alot of time crying over slowdowns in an "in world" store.