Cramer: Nordstrom's Misstep

By
James J. Cramer<br>Commentary from
January 6, 2006, 1:11 AM ET
4 min read

N E W  Y O R K,  July 31, 2000 -- You have to be astonished at the mistakes companies have made in their zeal to get dot-coms in order to cash in on this stock market.

One of the worst mistakes I have come across is the decision by Nordstrom to put some $30 million into Streamline.com, an online grocery delivery system. First, I have never believed in these businesses. I don’t care who is behind them. I don’t care what they think they know. When I lived in Brooklyn Heights, we had delivery from Key Food, a crummy food store down the block. They brought food right to my door. I gave the guy a $5 tip. I didn’t like people coming to my door, though. I didn’t like the mistakes. I didn’t think it was such a hot service.

All the Free Money

That’s a business? Because it’s been automated on the Web, it’s more of a business? Into this morass came Nordstrom. I am sure someone at Nordstrom saw all of the free money that the stock market was creating and said, “Let’s get in.” Why not? Everybody else did.

But most didn’t go in so big. And most didn’t offer incredible deals to sign up that include a $100 gift certificate to Nordstrom. That’s right: If you get someone to sign up, you get a $100 gift card from this retailer, at least in my hometown in New Jersey. That gift certificate assures us that Nordstrom’s bottom line is going to get wrecked if people flock to this service. And if people don’t flock to the service, then Nordstrom will have to put up even more capital to save its investment. expense!

A lose/lose proposition. That’s not how you make money in any business.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. 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.