Because new construction would cost a lot more money than gutting and renovating an existing location.
My guess is that while this place was packed and loved by many, somebody ran the numbers and determined that the money it brought in, minus the operation costs, was less than they could make with a gift shop selling non-perishables and staffed with fewer cast.
There was a time when TDO used to treat some of the retail space like an attraction/draw but that time has long past. I mean, look at Main Street. There used to be the penny arcade and the magic shop and the movie theater - back when it was more like the Disneyland one still is.
Now, I think every square foot probably has to justify itself in profit or risk being replaced as soon as they get around to pulling the trigger. Isn't that how we ended up with a sunglass hut in Adventureland?