I still don't quite get how someone making magical clothes with demonic spider spunk makes them so powerful as to become Royalty??
I know this is late, but it does not.
It makes them valuable if the magic is powerful enough. Butt here are requirements to the power other then just using a demonic spider.
Yui can heal and nurture the demonic spiders into a not-so demonic state (so could the families founder), that state and her affect on/interactions with other spirits (they really like her) is brings it to the level that royals say "Not yours, She is ours".
The family was just using the spiders, and have been weakening to the point the king was going to take away their peerage (the nation has 2 types and theirs is dependent on keeping up the level of their products, which they have not, and they already been demoted twice for that deuteriation but still have the pride of their non-demoted status as the first one should be a WTF what happened and how do we fix it) but their pride is keeping them form realizing they have been in danger for a while.
Why do the villains have to be so incompetent?
That is assuming they are the villains of the story, but their issue is not incompetence, but pride and arrogance. Their skill is deteriorating, but they are not exactly facing any real competition. That they are aware of.
Monopolies and labour shortages do not really inspire the best product, just a good enough one that people keep buying as it is their only option.
Though they are kind already of at the point that they are too much of a issue for what they provide. TI is just that until the king makes a move, the rest of the nobles will merely gossip and spread rumors (which does make their situation worse).