There are three things I would note here.
Firstly, their first XI is probably still strong. But against Alaves, Bale went off injured, Isco wasn't in the 18, ditto Marcelo, ditto Carvajal, Asensio was on the bench...no wonder they are struggling.
Secondly, it's going to be psychologically damaging to any squad to sell your main player, and then replace him with absolutely no-one. Yes, they signed players, but the big players at the club, especially a club like Real where they clearly have so much power, are going to be pretty disillusioned to see Ronaldo leave, and no major player come in. I assumed when they sold him so early (and perhaps they assumed this too) that they would sign someone like Hazard or Neymar. It seems a thoroughly bizarre decision to sell Ronaldo, and for your major signing in the same window to be an 18 year-old from Brazil who has barely played senior football, and never played in Europe.
Thirdly, they weren't a particularly good side last season. The CL win papered over the quite considerable cracks. They were rubbish in the league, and completely out of contention by Christmas. They didn't actually play that well in the CL, and were quite lucky to win it. Of course, it was still a great achievement, but they were nowhere near being the best team in Europe last season in reality, and winning the CL has disguised the fact that the entire team needed rebuilding. Instead, they've sold probably their best player, let Kovacic go out on loan, and bought no-one of note, certainly no attacking player that is ready to start regularly.