The managers reaction makes me feel sick. I'd expect her to be instantly sacked!
I think it's wrong of the shop assistance but she's in her 50's and used to a different convention. It's easy to talk about sacking someone, but as a manager, I know it's not that easy. Sometimes the worker really needs the job and we just try to placate the customers - although he could have done it better, I would acknowledge the seriousness, apologise and offer her a discount or something, not make light of it.
But I can't imagine that sales clerks smacking kids was condoned in her time either. Brat or not, old or not, she had NO right laying a hand on that child. I work in retail management too and in my LOB that kind of offense would be an instant termination. You don't put your company at risk like that.
I can easily imagine it being done in her time. To me, the image of a 50 year old lady smacking a toddler lightly on the bottom for misbehaving isn't that serious an offense - it doesn't hurt the toddler physically. I would be angry if it was my child because me and my husband has a no corporal punishment philosophy, but if this was an old family friend, I wouldn't even say anything to her directly, and if it was a stranger like in this case, I would tell her off but I wouldn't think about hitting her or getting her sacked.
If the manager managed to placate the mother after she came back, there would be no risk to the company, but the manager handled the situation poorly.