Hmm... Well, I am by no means an expert on the niche. But, it seems to me like there will always be some sort of products that people will want. Sure, maybe some of the stuff will be banned, but I don't see how they can kill the whole niche off. Maybe just move more into accessories that have less issues. Is there a way to go after more gov sales?
Maybe having the directory for stores is counter productive? Obliviously you want people to come to you, not other places. Maybe just have that address go straight to your store and forget the directory?
Also... I would make the biz as personalized as possible. Let them know all about you. Maybe start doing articles, or if you can't... then hire some ambitious people to do it for you. Lots of people will do that just for the fun. Go after some trainers or people that will give you some clout. Instructional videos? People have good success with these types of tactics now days. Give people more reasons to go to the site than just selling stuff. To me, that is really the key to standing out.
It may just be that it's a ridiculously slow period. But if the site is technically new, that might also be part of the problem. Even if people that used you in the past click through, then they might still be put off, because they don't know if it's the same people or what. You're probably going to have to work at improving SEO, but I would also work the old-fashioned way, and go out there on forums and other places, and get the word out. Sometimes you can slide by with putting a link in your sig on some forums, and they won't stop you. I do this, and then I tend to answer questions from newbies that nobody else wants to bother with. It gets me in on good terms and then it seems less like I'm just a shark hunting for sales. I think the more you can do to make contact with people on a personal level, the better. And yes, unless you can throw tons of money and compete with the big boys... if you see no advantage to the ads, then drop them. Personally, I just don't think they work for the small guys anymore. You could probably make more sales with just a couple strategic posts on some forums. I get traffic daily from some posts I made years ago. It's like you're letting somebody else do your SEO for you for free.
Technically the site looks fine to me. But as I said, I just think it's a bit cookie cutter right now. It needs to have some human touches added. Also, I guess it's too late, but I might have gone with a domain that's a more generic name, which could have potentially left it more open ended for other types of products.
I tend to be in a similar predicament. Technology is changing in my field and many things are going the way of film cameras. But I think if you can be one of the last guys standing, then there will always be something left. The trick is lasting that long.