Hi Ben,
Short answer: URL structure has too small of an impact on Google rankings.
Long answer:
I work in XXXL e-commerce and had similar discussions and eventually tested different approaches. We saw no gain in rankings nor in impressions.
Also, hired some of the world best agencies and consultants to help us out. They came to the same conclusion. We cannot argue the data of our experiments.
- Tested in different categories and in different countries.
There is also, the discussion that having a shorter URL helps in rankings has been addressed by John Mueller in some Google Webmaster Hangouts (currently can't find it), he said that it makes little to no difference. Instead of focusing on changing your internal systems and structures, use that energy and resources to improve user experience and content on the site.
There is a great possibility that your decline in Google traffic is due to other deeper issues. I'd suggest you and your team focus more on competitive analysis and trends on user behavior that trying to change the whole website URL structure.
A neat tip that I've sometimes been given is, check your internal linking. You might probably be linking too much or too little to your best pages.
As you may imagine, this is not a simple issue. There is no clear actionable and probably just one change won't revert that steady decline.
Hope it helps.
Best luck.
Gaston
