ARMS isn't a failure. It was well received among critics and fans and it sold well.
The only fighting games that have sold more than it this gen are Tekken and Smash Ultimate so it's far from a failure.
Besides Tekken and Smash, there's actually a bunch of fighting games that have sold more as well. That still doesn't make ARMS a failure though.
Best selling fighting games in the 8th generation (excluding WWE 2K and EA Sports UFC):
1. Super Smash Bros. Ultimate: 15.71 million (link)
2. Mortal Kombat X: 10.5 million (link)
3. Tekken 7: 5 million (link)
4. Dragon Ball: Xenoverse: 5 million (link)
5. Dragon Ball: Xenoverse 2: 5 million (link)
6. Street Fighter V (excluding Arcade Edition): 4.1 million (link)
7. Dragon Ball: FighterZ: 4 million (link)
8. Naruto Shippuden: Ultimate Ninja Storm 4: 3 million (link)
9. ARMS: 2.1 million
10. Mortal Kombat 11: 1.8 million digital sales in 1 week (link)
Including physical sales, MK11 is of course over 2.1 mill as well as it's currently 2019's 2nd best selling game in the US (link).
Injustice 2 shipped 1.5 mill in 3 months (link) so that may be over 2.1 mill as well.