Kozmo.com

From Wikipedia, the free encyclopedia

Kozmo.com



Fate	Liquidation


Founded	1998
Defunct	2001
Location	New York
Industry	Retail
Products	Online store, delivery service
Key people	Joseph Park Yong Kang

Kozmo.com was a venture-capital-driven online company that promised free one-hour delivery of anything from DVD rentals to Starbucks coffee in the United States. It was founded by young investment bankers Joseph Park and Yong Kang in March 1998 in New York City. The company is often referred to as an example of the dot-com excess.^[1] The documentary film e-Dreams (2001) portrays the fate of the company.

Kozmo had a business model that promised to deliver small goods free of charge, typically by using bicycle messengers. The model was criticized by some business analysts, who pointed out that one-hour point-to-point delivery of small objects is extremely expensive and were skeptical that Kozmo could make a profit as long as it refused to charge delivery fees. The company countered in part that, in their target markets, savings due to not needing to rent space for retail stores would exceed the costs of delivery.

Its headquarters were located in New York City. The company raised about $250 million, including $60 million from Amazon.com.^[2] It entered a five-year co-marketing agreement with Starbucks in February 2000, in which it agreed to pay Starbucks $150 million to promote its services inside the company's coffee shops. Kozmo.com ended its deal in March 2001 after paying out $15 million. In July 2000, at the height of its business, the company operated in Atlanta, Chicago, Houston, San Francisco, Seattle, Portland, Boston, New York, Washington, San Diego and Los Angeles.^[3]

While popular with college students and young professionals^[4], the company failed soon after the collapse of the dot-com bubble, laying off its staff of 1,100 employees and shutting down in April 2001. 18 locations nationwide and their Memphis distribution center were liquidated by a veteran entertainment wholesaler from Florida. Kozmo had filed an IPO with Credit Suisse First Boston before the layoffs, but it never went public. According to documents filed with the Securities and Exchange Commission, in 1999 the company had revenue of $3.5 million, with a resulting net loss of $26.3 million.^[5]

The company was the subject of an investigative probe by msnbc.com reporters Brock N. Meeks and Elliot Zaret. The msnbc.com piece, which relied on interviews, open source documents and computer-assisted reporting techniques, suggested that Kozmo was redlining sections of the cities it served that were populated primarily by African Americans. Kozmo denied that race played any part in its decision on what zip codes to deliver to, claiming they choose market areas based primarily on Internet penetration rates. However, Meeks and Zaret noted in their article: Kozmo's critics point out an obvious irony: since Kozmo has a centralized delivery strategy, even if the company were to extend service to an area where the Internet penetration was so low that no one ordered anything, the company wouldn't be out any money for merely offering service there. And if people did order things, Kozmo would profit. Kozmo's defenders responded that Kozmo's approach allowed the struggling young company to target profitable delivery routes and serve multiple customers on a single run, rather than losing money sending deliveries to single customers in areas where Internet penetration was low.^[6] Based on the msnbc.com investigation the company was the subject of lawsuit brought by the Equal Rights Center, a Washington, DC-based civil rights group.

In April 2005, former CTO Chris Siragusa launched a similar service in downtown Manhattan specializing in the delivery of food, wine, DVDs and essentials called MaxDelivery. MaxDelivery is still in business with expansion plans in 2007.