That wouldn't have been the shop in Wheeling, IL, by any chance? If so, I was there, today, and I know something of the rationale behind the changes. I don't think its as bad as you make out. The RC section is about the same size it has been for the last four years, at least. The railroad section is a little smaller, the books have been moved, as have the tools (the selection there has been reduced), and the paints and related items. The selection of paints and finishing supplies has also been changed and slightly reduced. Aftermarket stuff has been reduced—it was taking up lots of space and not selling very well.
Behind the counter space has also been reduced.
They actually are carrying more variety of kits than they used—but they are being more selective about what they stock, too. The biggest change is the increased space devoted to die-cast models. These now occupy four eisles and one wall section that used to be devoted to plastic kits. That is the biggest change.
The new owner (I've spent a fair amount of time talking with him) is trying to be very careful in managing his market strategy as the market changes. RC is, and has been, a mainstay of that particular shop for over fifteen years—yet they still have a very good selection of kits, and staff well able to advise the prospective buyer. They also intend to compete on the web, which will help them maintain a kit orientation.
Yes, they used to carry almost anything that you could want—but carrying that kind of inventory just isn't practical. In truth, they began scaling that approach back at least ten years ago, under the previous owner (I've also spent a fair amount of time talking to him about the business.)
IMHO, it is still one of the finest hobby shops anywhere, any time. It is my LHS—and I have to drive for nearly an hour and a half to get there, non-rush hour. Rush hour time is a minimum of two hours. I'm just glad they've managed to stay in business!