There are many reasons why range could be bad.
The documented ranges are theoretical and obviously real world differs widely.
This device works in the 2.4Ghz band in which many other devices operate. Have a read of the section "Interference in 2.4 GHz" of this article here: http://www.macworld.com/article/1140685/networking-hardware/wifi-spectrumbands.html
To answer your question "Can you please explain why the range is so bad ?" you would need to provide a spectrum analysis of the 2.4Ghz band and provide the channels you are operating on.
Either way the answer would be interference. You could try changing the channel to find one that has less interference.
To get the advertised range you would need to remove all other 2.4Ghz noise. You could use an external antenna and increase the gain but the module you have has a fixed antenna. You would need to buy another module. Saying that, the S2 modules are old. You should consider the S2C modules and if you are in the US or Australia you can also use the Pro modules which have higher power output.
The newer S2C modules also have a very basic channel scan functionality which can show you how busy each channel is.