Retailers still haven’t caught up to millennials.

Last month I wrote up my annual tirade about the National Retail Federation holiday sales forecast. The NRF’s track record – it uses a deeply flawed methodology – is terrible. The group makes a silly prediction, I make fun of it, they call me a Grinch, a good time is had by all.

Except for the retailers.

Retail stores are on the front lines of an industry undergoing enormous and wrenching change amid huge shifts in consumer behavior. The simple complaint that online retailers are stealing sales from brick-and-mortar stores is unsatisfying. Online shopping may be convenient, offer an endless array of products, make price comparison easy, provide fast and cheap or even free delivery and so on. Yet despite these advantages, online sales amount to but 10 percent of all retail sales.

What is really going on?

American society has undergone a titanic secular transformation. Retail stores are the first to suffer the effects of this economic disruption. Generational change is affecting how consumers behave; not just how America shops, but for what, and for how much and even why.

Two broad economic trends set the backdrop: too much retail and too little gain in wages. America has built way too many stores and malls. Second, wages adjusted for inflation have been little changed for three decades; this has squeezed the middle class, especially when it comes to discretionary spending.

But the behavioral changes taking place are for all retailers, and not just for those occupying real estate. This also has implications for shoppers, landlords, lenders and workers. Let’s consider these secular shifts:

MILLENNIALS VS. BOOMERS

For most of their lives, baby boomers were the biggest demographic age cohort in U.S. history. The generation born in the years after World War II had an enormous impact on the development of U.S. retail, from specialty stores and malls to big-box stores and discounters.

Alas, the prime spending years of the boomers are now behind them. They have purchased their homes and vacation properties, furnished them, bought SUVs and luxury cars. Now in their 60s and 70s, thousands of them retire every day. Their next big purchases are more likely to be travel or health care.

The new shopping kings are the millennials. Millennials passed the boomers in numbers last year, although they are a smaller share of the total U.S. population than boomers were at their peak. This demographic, still in their prime spending years, is coveted by advertisers. Yet retailers still don’t seem to understand how this group behaves as consumers.

EXPERIENCES VS. MATERIALISM

The fall of materialism and the emergence of the experience economy explain some of retail’s woes. Credit or blame millennials, along with an assist from technology.

Why collect CDs or DVDs when you can stream anything you want? Who needs to pay for a car, auto insurance and parking when Uber and Lyft can take you anywhere you want to go? Why buy a house, which requires a mortgage and a traditional paycheck, when you have a gig?

That raises all sorts of questions for that icon of American retailing, the shopping mall. Many of them have been repainted and renovated, but the business model is still the same: People drive to the mall, park the car, spend a few hours buying stuff, take their packages home. It isn’t all that different from the way it was in the 1970s or ’80s. Sure, the food court has been updated to be hipper and healthier. But the mall as a social center where you could escape parental oversight and meet other kids isn’t what it was. Teenagers and those in their 20s and 30s simply do not engage in “sport shopping” or “retail therapy” to the same degree as their parents. Retailers stuck in that paradigm have not done especially well.

SERVICE VS. PRODUCTS

What does this experience economy look like? On Long Island’s North Shore, where I live, local towns have been changing. From Huntington to Glen Cove to Port Washington to Great Neck, it has been out with retail stores, and in with services businesses. Gone are the antique shops, toy stores and clothing boutiques. In their place are inventory-free services: hot yoga, dance instruction, tutors/test prep, massage, spin classes, karate, nail salons and (my personal favorite) Korean foot massage.

This isn’t unique to my backyard; similar changes are taking place in cities as varied as Sarasota, Florida; Chicago, and San Francisco.

PRIVATE EQUITY AS RETAIL LANDLORDS

Private-equity funds have become involved in retail as developers and landlords. In an era of low interest rates, a business model predicated on higher, steady returns is an attractive use of capital.

But what works on a spreadsheet for distressed businesses doesn’t always translate into the commercial real estate space. Storefront businesses are limited to the rent they can afford based on the revenue they generate. Lease renewals with increases of as much as 100 percent from new private equity-funded landlords do not work. If the rent increase can’t be supported by revenues, retailers fold the tent up.

It is too easy to blame retail’s woes on Amazon.com and other online merchants. The broader picture has to take in the enormous changes in how consumers behave. The sooner the retail industry figures this out, the better.