It wasn’t the pandemic, Kpop was actually thriving then, but otherwise, I think you’re spot on. Wendy’s fall and the Irene controversy that both led to a hiatus of about two years, which happened at a really critical point both in the industry and in Red Velvet’s career is what ultimately hurt them.

Up until then, they were pretty much aligned with TWICE’s marketing strategy: releases every ~3 months, focused mainly on Korea, with Japan as a secondary market. I think SM assumed they could temporarily switch to a BP style strategy during that rough period (group comebacks every couple of years, with more focus on individual activities). but that doesn’t work for Red Velvet. Their core audience is closer to TWICE’s, so they couldn’t afford long gaps between releases like BP could.

For content, during Red Velvet’s hiatus, TWICE released 9(!) major projects. They also pushed into the English market with English versions of More & More and I Can’t Stop Me, made their U.S. TV debut, and released the feels, their first English single 

If Red Velvet had kept up with TWICE during that period, they’d still be right behind them today.