I wonder if it’s actually for consistency online. The Gadget Shop tried this and for a while we had “TheGadgetShop.com” on the high street. And what happened to them? They went bust. Slippery slope, Waterstone(‘)s.
In seriousness; I think it’s the sort of thing which, as a brand name, doesn’t really matter in the grand scheme of things generally. The name may originate from “the shop founded by Mr Waterstone,” but the change is fairly readily dismissible by rebranding to a similar sounding word meaning “a number of stones next to some water.”
I agree though that if anyone should be grammatically correct, it should be a book shop. Whilst it might not really matter as a brand name, it’s the sort of thing which really pees me off from a language point of view.