Traditional retailers are in a house of pain. The Sports Authority, PacSun and Aeropostale all filed for bankruptcy this year. Retail darlings Macy’s, Target and Kohl’s all reported declining second quarter sales and lowered estimates for the current quarter.

But the Conference Board reported ebullient consumer confidence numbers last week. The survey, which measures consumers’ outlook on the job market, business conditions and their own personal income, rose to a post-recession high.

Plus employment numbers continue to be robust and seem to be the one consistently strong data point holding the Fed to a possible rate increase later this year.

On the other hand, the government’s annual retail sales for August drooped. This much anticipated data point dropped slightly from July.  Consumer purchases, which make up 70% of the U.S. economy, are now on track for a 2.4% increase, slightly less than the July estimate.

So confidence and employment are doing well, but sales aren’t. What gives?

Beneath the government’s headline retail sales number is a tale of two retailers. Department stores and electronics stores are the worst performers and non-store retailers and personal care stores the best.  Much can be gleaned by analyzing these breakdowns.

Sales to non-store retailers, Amazon being the most famous, were up 11% in August. Sales to health and personal care stores rose an impressive 8%, and food services and drinking places (a diplomatic term for bars) enjoyed a 6% increase.

The worst performing categories were gas stations, which suffered a 10% drop due to lower gas prices, department stores which saw a 4.5% drop and electronics stores whose sales dropped 3%.

The Internet, which has turned many a business model upside down is the likely culprit.

With customers able to compare prices online for everything from appliances to clothing, retailers have resorted to matching a competitor’s price. Note two of the weakest categories in retail sales are department stores and electronics stores, retailers whose profit margins are being googled to death.

Lower production costs from global outsourcing have allowed many apparel and electronics manufacturers to lower prices. Yet these lower prices do little to stimulate demand. This leaves them selling the same number of units at a lower price, a calculation that sadly leaves them with declining sales.

The Internet has lowered a huge barrier to entry for many manufacturers. The cost of opening a brick and mortar retail store is no longer necessary for selling goods. Although consumers may be spending more overall on goods, those dollars are dispersed over a wide array of manufacturers.

Call it the democratization of retailing. Sites like Etsy, Zappos and Boden are able to reach any consumer who wishes to part with their cash. Instead of slogging out at the mall, with crowded parking lots and racks full of undesirable merchandise, consumers can click and order from the comfort of their couch and enjoy free shipping to boot.

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