Two weeks out from Black Friday, the retail sector is looking very gray.
Nordstrom plunged nearly 17 percent in early afternoon trading, on track for its worst day since July 2000. The retailer posted earnings after the close Thursday that missed estimates by 15 cents, on revenue that fell below analyst projections, as well.
"If you look at the Nordstrom numbers, the bricks and mortar comps are down 2 percent but their online sales are actually up 11 percent," Steve Odland, president and CEO of the Committee of Economic Development told told CNBC's "Squawk on the Street." "So you're seeing this seminal shift from bricks and mortar to online, and these retailers are just scrambling to keep up."
Jan Kniffen, CEO of J. Rogers Kniffen Worldwide, echoed Odland's sentiment on CNBC's "Power Lunch."
"Five years ago, if you went to the mall you went to five stores while you were there and visited. Now you go to three," he said Friday. "Why? Because you've already looked on your phone and gone, 'I want that, I want that, I want that.' And you go and buy it. So that is a big problem for traffic."
Stacey Widlitz, founder of SW Retail Advisors, expanded upon Kniffen's comments, saying online retail streamlines shopping in a way that isn't good for brick-and-mortar sales.
"I would argue forcing the consumer online actually hurts sales because you're taking away the impulse purchases," she said on CNBC's "Power Lunch."
Odland, also a former Office Depot CEO, said the fact that inventories are up and sales are down across major retailers is causing a big problem for margins.
"So you're going to see a bloodbath here," he said Friday. "Every retail CEO this morning is looking at this saying, 'OK, it's clearance time,' which means margins are going to get hammered here for the holidays and that's why the whole retail sector is down here this morning."
Joan Payson, a senior retail analyst at Barclays, said retail is facing "a very difficult environment right now."
"I think what we've seen is increasingly a divergence between some of the performance of the discounters, the off-pricers, and even on the lower end, the J.C. Penney's and the Kohl's of the world versus Nordstrom and Macy's," Payson told "Squawk on the Street" Friday. "And it seems as if increasingly there may be a market share shift going on towards the traditional off-price model."
This shift could also lead consumers to fast fashion retailers like H&M and Forever XXI which are still doing well despite the bleak outlook for department stores. However, Odland said these fast fashion retailers should also brace themselves for the "market share scramble."
"They're going to get hammered, too, because you're going to have the clearance coming in from all of the department stores so they're going to feel compelled to lower prices. So you're going to see a wipeout in profitability," he said.
— CNBC's Evelyn Cheng contributed to this report.