First came adventurous explorers, hippies, and whoever else who was looking for rural Thai experience. They obviously loved the place, so the word spread and more people got interested in visiting the unique, picture-friendly community.
Meanwhile, locals found beneficial all this attention from travelers. They encouraged the trade by adding souvenirs to the standard set of goods and expanded the snack section of their food stalls. Shrewd entrepreneurs set up hassle-free transportation for day visitors from Bangkok. And sure enough - travelers came.
Fast forward a few decades to the present day, and you can book a packaged half- or full-day trip to Damnoen Saduak from every hotel in Bangkok. Endless souvenirs replaced everything else on the shelves, and the only Thai people who visit the market nowadays are the ones who work there. Have you been to Disneyland? This is how the market feels. There is nothing authentic about it anymore. It's there to serve travelers.