It was undercut by supermarkets. In the transitional years when milk float services were still around, they were the more expensive option.
Refrigeration makes sense as the underlying driver - freshness and locality became less important. Then the supermarkets didn't have the cost of the distribution network, and exercised more centralised buying power on the suppliers.
You're going to the supermarket or having the groceries delivered anyway, so at that point it's easier for most people to have control at purchase time over quantity and expiry dates etc.
Also the usual issues with delivering to apartments and other such living accommodation.
My guess would be the rise of supermarkets. Newsagents, post offices, grocers, sweet shops I suspect have been decimated by supermarkets and more people with cars to get to them.
Refrigeration makes sense as the underlying driver - freshness and locality became less important. Then the supermarkets didn't have the cost of the distribution network, and exercised more centralised buying power on the suppliers.