I cannot speak directly about LQS but I'm well versed in the subject you're discussing. And one of the primary reasons that smaller businesses were adversely affected was not the advent of Internet shopping but a failure to embrace the Internet as a viable way of commerce. Mom and Pop shops weren't the only companies that were impacted. That's one of the prevailing reasons that Martha Stewart's company is no longer in her hands.
I believe it's a significant stretch to lay the blame on online shopping for the demise of fabric mills. The tax advantages and cost efficiency of operating elsewhere are a bigger contributor than the person shopping in their jammies.