NEW YORK (Real Money) -- The best retailers spent money on projects without a quick payoff because they knew if they didn't, they would be destroyed by Amazon (AMZN). The smartest retailers understood that they had to find ways to connect with their customers in more than just superficial ways.
The less-enlightened retailers just kept doing the same old same old, convinced they would be just fine because they thought they had a loyal customer base that could never be poached or dislodged.
Somehow, perhaps because of the weather, maybe because of a decline in government assistance programs like food stamps and long-term unemployment benefits, we have seen unprecedented pressure on the retailers, at a time, when you consider both the employment situation and the home price appreciation numbers, you would expect it to be ho-hum at its worst. It was anything but.
So who stood out? Perhaps the No. 1 company that has invested and invested correctly in its stores and its digital efforts is Williams-Sonoma (WSM). Here's a company that has thought through all of the advantages of bricks and mortar and has exploited them in an explosion of sales. Customers read the catalogues and that sends them into the stores or on line. The website is superb and the style and merchandise in keeping with its customers. Whether it be the red-hot West Elm or the amazing Pottery Barn and its derivatives or just the plain old Williams-Sonoma, this company embodies the definition of proprietary in a way that Amazon will never be able to touch. Its 50% brick-and-mortar sales and 50% online and catalogue business is the perfect ratio.
Second? Nordstrom (JWN). When I pulled up with Blake Nordstrom, president of the chain, back in April, he told me that his company has had to invest billions of dollars in online operations because he felt the legendary Nordstrom customer service had at last been trumped by another retailer: Amazon. I almost fell out of my director's chair when I heard that. The company has built a fabulous Web presence and has also become a growth retailer again by rolling out Norstrom Rack stores, one of the fastest-growing retail divisions in the country.
I wish this company reported at the same time as everyone else, because if it had, you would have realized that Costco (COST) is still delivering terrific numbers, chiefly by offering that same bargain/treasure hunt feeling with lots of loss leaders that make it so you think Amazon's expensive.
Finally, there is Home Depot (HD), which is proving that it understands the need to relate to its community of customers. If you go on line to its amazing Web site you will know exactly what I am talking about. The site, built in conjunction with Salesforce.com (CRM), allows you to connect with the sales people and with other customers to learn more about products. I am calling it crowd-sourced hardware.
And who's not adjusting to this new world, where almost every company is vulnerable to Amazon and to forward-thinking ways of other retailers? Wal-Mart doesn't have it yet, but somehow I think they might think they do. Target (TGT) doesn't have anything, but it knows it and I think the next CEO will address that pronto. PetSmart (PETM) and Dick's (DKS) seem to have lost their way big time and PetSmart has the worst website of any major retailer I follow.
Sometimes you just wonder if it is in the DNA. The challenge seems to come so naturally to Laura Alber at William Sonoma. On the other hand, Gregg Steinhafel, the ousted CEO of Target, seems, in retrospect, to be a one-man wrecking crew for that great institution. He's lucky that Ron Johnson, the defrocked JC Penney (JCP) CEO happened to come along at the same time because otherwise the fingers for the worst retail CEO of the era on so many fronts would, indeed, be pointed in his direction.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long COST.
Editor's Note: This article was originally published at 6:45 a.m. EST on Real Money on May 23.