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Shark Tank star Daymond John: This is how Macy's can compete with Amazon

Shark Tank star investor Daymond John turned $40 worth of fabric into a $6 billion urban clothing brand. Now the retail and branding guru has a solution for Macy's precipitous decline: Turn Macy's into a gamified destination.

Legacy retail brands have been losing sales to the speed and convenience of e-commerce, a space being redefined by Amazon.

"Macy's can become the Disney World of retail if they are just willing to change the game," said John, speaking with CNBC from the iCONIC conference in New York City on Wednesday.

"First of all, they have one of the most iconic names in the world, and I think they are in one of the most iconic places in the world, and I think they can come up and be a Disneyland."

To do that, Macy's needs to turn its flagship New York City store on 34th Street into a place where people go to have fun. Then it needs to make sure that it gets the word out about how fun it is at its headquarters.

"You have a physical location; bodies are going to be there. Then content has to be produced out of that location about how people are having the most amazing time in the world in that location," says John. "That has to be spread all over the globe."

"People want to go someplace where there is a lifestyle and there is something where they are going to FEEL a different way." -Daymond John, Shark Tank star and founder of FUBU

As the story of the experience spreads, Macy's would be able to charge more for its products because of the reputation surrounding the brand.

"Then you have to be able to upsell people on being a member of that location, even if they are in Japan or Taiwan or India and you want that to be a destination," John said.

To maintain the mystique and cache of arriving at the destination, Macy's should provide goods and experiences that are specific to that location.

"When they get there, they are going to get things there that they can't see anyplace else in the world, and then you are going to have a different version of that to sell to people through social media and product integration and things of that nature," John said. "Movies should be shot there."

As e-commerce becomes increasingly prevalent, retail stores with a physical location — and the associated costs — need to give consumers a feeling when they get to the store. If there isn't the additional value of an exciting experience, then customers will default to Amazon, he said.

"People are getting more impatient with time," John said, explaining that if a customer can order what they need from their couch, they will.

"People want to go someplace where there is a lifestyle and there is something where they are going to FEEL a different way. If not, I can just have the product shipped to my house and I don't even have to go to the store."

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Disclaimer: CNBC owns the exclusive off-network cable rights to "Shark Tank."