Three things department stores must do: Ex-Saks CEO

Department stores are seeing an epic fall in holiday sales as consumers defect to online shopping.

The issue recently caught the attention of the St. Louis Federal Reserve, which found department store sales are at their lowest level in nearly 25 years. And, MasterCard is reporting department store sales were flat year over year during the Black Friday weekend, while online sales rose by double digits.

However, one of the retail industry's biggest insiders sees ways to bring shoppers back.

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You have to win by incorporating in-store and moblie shopping, former Saks Chairman and CEO Steve Sadove told CNBC. In other words, department stores must be able to offer consumers a solid omnichannel experience.

"A lot of companies are innovating right now but they have to do it faster. ... They have to invest in the store base and they have to invest in the technology, " Sadove said on "Fast Money" last week.

Retailers like Amazon, which recently announced plans for drone delivery and launching its own fleet of trucks, are "setting the tone," Sadove said. "You have got to be able to do what Amazon does in terms of delivering the shopping experience, and that is what the consumer expects."

People shop in the Manhattan Mall in New York City.
Getty Images
People shop in the Manhattan Mall in New York City.

Department stores must also become more serious competitors to fast-fashion retailers H&M and Zara, said Sadove, who also sits on J.C. Penney's board of directors.

"You've got to shorten the supply chain and adjust to the consumer's taste. You can't buy for an entire half a year," he added.

Finally, department stores need to bring in new experiences so shoppers view them more as destinations, according to Sadove. Getting shoppers to stick around with the new in-store experiences is also key, he added.

"You see online companies like Warby Parker opening up inside a Nordstrom. That's where the innovation is coming," said Sadove.

Earlier this summer, the hip eyeglass maker unveiled plans to open up pop-up stores on a limited basis in several Nordstrom locations as well as online.