This is the real reason Walmart is struggling

Strapped consumers. A strong dollar. An incomplete turnaround plan.

OK, these factors are probably part of the reason Walmart (WMT) is underperforming on sales and profit both, with the stock down about 3% on the latest, disappointing earnings news.

But Walmart faces a bigger problem that shareholders and company executives may not have come to terms with yet: American shoppers are losing interest in what traditional department stores sell. “People no longer waste money just to show the stuff they have,” says Sarah Quinlan of Mastercard Advisors. “We’d rather have an experience. This is how we will continue to spend going forward.”

Walmart remains a prodigious retailer, with nearly $500 billion in annual sales, making it America’s biggest company. It’s certainly not going away. But growth is painfully slow and could very well stay that way. Same-store sales in the U.S. grew just 1.1% compared with 2014, which is less than inflation and income growth during the same period of time (both were around 2%).

This weak performance comes at a time when consumers are gaining purchasing power and ought to be spending more. Median household income is still lower than it was a decade ago, but it's been improving lately. And other trends are making shoppers more optimistic. Gas prices are about $1 per gallon lower than they were a year ago, freeing roughly $1,000 a year for the typical household. U.S. employers have created nearly 3 million new jobs during the last 12 months, enhancing job security. If Walmart can only boost sales 1% during a consumer boom, imagine how it’s likely to weather the next recession.

Walmart isn’t the only underperforming retailer. Macy’s (M), Kohl’s (KSS) and J.C. Penney (JCP) all reported sales below expectations recently. Retail sales are up a scant 1.9% so far in 2015, compared with last year. Real growth in retail sales, after accounting for inflation, is effectively 0.

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Consumers are saving more and using extra income to pay down debt, but they’re also shifting purchase preferences in ways that could be lasting. As Yahoo Finance has previously reported, Americans are spending less on teen apparel, electronics other than smartphones, and general department store merchandise, including much of what Walmart sells. But they’re spending more on air travel, hotels, restaurants, jewelry and furniture. For the most part, Walmart isn’t positioned where the growth in spending is.

Demographic and economic trends, meanwhile, are working against Walmart. More people are moving from suburbs to cities, giving up the basements and spare bedrooms where they used to stash bulk purchases from a superstore. Baby boomers, who essentially made Walmart, will soon be downsizing their homes as they streamline for retirement. Household formation among the next generation of home owners remains weak, as young people grapple with student debt and put off big spending decisions.

Walmart has a logical plan to improve its numbers: improve the quality of its stores, sell more groceries and local offerings, and compete more aggressively against online giant Amazon (AMZN). But most of those initiatives rely on consumers spending more for the same kind of merchandise they bought in the past. Don’t be surprised if consumers spend on something else.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.