Well, apparently Zero 2 still
sold more in Japan, despite being a weaker port and having competition from the Saturn SKU. I wonder if Alpha 3's popularity mostly comes from the West then?
Street Fighter started dying after Capcom flooded the market with Fighting games.
Between Zero 2 and Zero 3, Capcom released:
Xmen vs Street Fighter
Zero 2 Alpha
Marvel Super Heroes vs. Street Fighter
Rival Schools: United By Fate
Super Gem Fighter Mini Mix
Street Fighter III: New Generation
Vampire Savior
Jojo's Bizarre Adventure
Red Earth
Marvel vs. Capcom: Clash of Super Heroes
Street Fighter EX
Street Fighter EX2
Street Fighter III: 2nd Impact - Giant Attack
Vampire Savior 2
Vampire Hunter 2
And that's just Capcom alone between Z2 and Z3 (my dates might be slightly off on some at the start and end, but close enough)! Add in SNK and the other companies releasing many titles a year, and the market was headed for a crash, or at least some serious fatigue.
I believe this is the primary reason for the Street Fighter III series failure to make much of a splash, it was just dropped into a massive glut of fighting games.
Capcom eventually blamed Street Fighter III's failure on it being too complicated and not enough of the Street Fighter II cast, eventually leading to the hideous 3D SF2 retread that was SF4, which was IMO more successful primarily because it arrived in a fighter staved market.