The Revenge of Bricks-and-Mortar

The implications of the closing of the dot-com financing window are finally reverberating among old-line companies.

Let's oversimplify for a second. If it is true that

Amazon.com

(AMZN) - Get Report

is the template for this industry, the fears of bricks-and-mortar companies may never be realized. Remember, we sold all of those bricks-and-mortar companies because we believed that the capital markets would be forgive the losses of online companies and punish the decline in off-line companies that fight online companies.

These fears made sense. If you invested in the bricks-and-mortar book retailers, you got hosed! Amazon was able to come back to the well over and over and over again. Each time the bricks-and-mortar folk thought that the public would no longer support Amazon, the company turned around and raised another billion.

As long as that cheap financing existed, no companies were safe. For example, I sold my supermarket stocks because I figured that every online delivery service that wanted to would get a billion dollars to destroy America's supermarket business. With

Wal-Mart

(WMT) - Get Report

coming in at the low end and the likes of

Webvan

(WBVN)

,

Urban Fetch

and

Kozmo

coming in at the high end, I figured these folks were doomed.

Turns out that the Webvans, Urban Fetchs and Kozmos look more doomed than the

Safeways

(SWY)

and the

Albertson's

(ABS)

these days. When we lived in Brooklyn Heights, we used to be able to call the nearby supermarket and have them run over what we wanted. They would always pick up anything else along the way too, if we asked politely. And we knew the delivery people too, as we saw them every day on the way to work. It was a real pleasure. But it was no business beyond what these guys got tipped.

As long as the free capital was spewing like gushers in Spindle City, the Kozmos and the Urbans and the Webvans looked like they could figure it all out though. In fact, I figured they could borrow a page from Amazon and lose money on everything they sold until they wiped out the existing supermarkets. Seemed plausible. Who knows how long a financing fad is going to last?

It didn't last long enough. Now it is time for the bricks-and-mortar companies to strike back. And they will. They were seasoned operators to begin with. I figure they can buy the Webvans and close them, or they will be able to buy all of these little delivery services when the venture capitalists tire of financing them. Seems pretty obvious now, just as obvious as it seemed impossible a few months ago.

Ah, I know what you are thinking: Why didn't you tell us this when Webvan was flying? And I have an answer: I didn't know. I had seen so many people bet against Amazon and go out of business doing so, I couldn't risk presuming that son of Amazon would turn out to be more like

Predator II

, a really crummy movie, than like

Lethal Weapon II

, which I liked more than the original film. You just didn't know when the people would run out of an appetite for startups.

The other day some nice guy came by our house with a box of fresh groceries. I signed for it. I asked how they ever expected to make a dime given how high-quality their produce is and how low their prices are. The guy looked at me for a second and said, "We thought we would go public." I couldn't tell which was louder, the sound of the door slamming behind him, or the financing door slamming behind his company.

Sure was goofy while it lasted.

Random musings:

Cory Johnson

wrote

a brilliant piece about "Easy Go" and the other horrors of this market. I particularly like the notion of how some Net companies are going to find their way to profitability. He is right, but they won't do it with growth. They will do it with efficiency and a smaller plan. One more reason to buy bricks-and-mortar types ¿ By the way, if the

iVillages

(IVIL)

of the world think they are about to be profitable, they would be nuts not to LBO their companies now. Why not grab them from the public if the public is going to give the companies away. I am still intrigued by that company, even though I haven't bought any stock yet, if only because when

TheStreet.com

(TSCM)

was coming public, everyone told me they were the kings. Nobody looks like kings now ¿ Beware of bank types telling you that

things are fine. They were saying things were fine when they weren't.

Did you miss

the Fleckenstein-Cramer chat last week? We both had such a good time we want to do it again. I have to admit that I have done many chats, but this one got the most kudos so we thought we would reprise it on Yahoo! tomorrow at 5 p.m. Remember to

register (it's free and easy)!

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Yahoo! and TheStreet.com. Cramer is personally long TheStreet.com as well. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.