The Trouble With Trans World

The Web throws a wrench into some businesses that work.
Publish date:

Let's say you run a small retailer. Business is bad. No, business is terrible. You can't sell anything. Do you:

  • File Chapter 11 and start over, or
  • Buy a really good URL with your last remaining dollars, and go public.

Yeah, B. You are a genius. You could be a I-banker.

Look, I am a card-carrying Netizen. But just 'cause a company has a Web site doesn't mean that you will come and shop there. And given the power of the new search engines I see out there, the ones that zero in on the lowest priced items, unless you have a Web site that drives its own traffic, I think you might be a dead man.

I feel compelled to write this story, because I have been so bullish on the Net that I want to try to re-establish some credibility. I simply don't believe that a shipping and handling model, one that makes money on shipping, handling and potential advertising, is going to work. And I don't believe that the Net can save a company that may be foundering. It's just not that simple.

Some things are commodities. We don't know they are commodities until someone sorts them and tells us they are commodities. That's what the new, more powerful, more thoughtful search engines do. A really good, catchy URL will soon become a commodity, as everything involving the word "buy" and a product name seems to be linked to a site. Soon, there will be no way to distinguish yourself if you haven't already. And I can't imagine the advertising is going to flow to these sites when the rates for






are so cheap.

The toughest situation is the bricks-and-mortar retailer who has a profitable business, not faced with any credit risk, that is under assault from the Web. Take

Trans World Entertainment

(TWMC) - Get Report


Pre-Net, I would want to buy this sucker so badly. It is the premier retailer of music in the mall. (




-- good names). Now, however, such a rep is the kiss of death. Its high-profile, dug-in mall position makes it the quintessential bricks-and-mortar retail play, with all of the negative connotations. Against Trans World on the one hand is

(AMZN) - Get Report

, and on the other is the music downloading craze. The


(VO) - Get Report

deal yesterday shows you that we are getting very close to something big happening on the download side. Sounds like Scylla and Charybdis to me.

Right now Trans World has a Web site. I only know that because I saw the TWMC guy in the greenroom at


. The Web site, though, has the least catchy URL I have seen for a publicly traded company: That just rolls off the keyboard doesn't it? (Even TWMC would be better but that is somebody else's.)

Trans World is a $700-million-in-revenues company with a $340 million market cap that is making very good money. It has a ton of cash. But I won't buy it, because if I were running Trans World, I don't know what I would do. I can't close the business, it makes money. That's plain stupid.

However, a company with a good URL and no earnings or sales could be worth more than my company. Maybe 10 times more. That company would have a currency and cash from an IPO that it could use to build its position with all of the portals that drive traffic. I could cut my prices on my Web site so that the search engines drive traffic to me. Then, though, I ruin my margins and destroy my current walk-in trade. (Why go to the store when you can save money by going to our site?) I can't do a spinoff of my Web site as it has little traffic and an uncatchy name.

So, oddly, the worst merchandisers with the best URLs have the edge on me. The best merchandisers with the best URLs? They just can't be beaten. Fortunately, I don't run Trans World. Fortunately I just have to pick stocks. That's why I own Amazon and I don't own Trans World.

Enough said.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Yahoo!, AOL and, although positions can 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