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.