Kozmo.com

Kozmo.com was a venture-capital-funded online company that promised free one-hour delivery of "videos, games, DVDs, music, mags, books, food, basics & more"[1] and Starbucks coffee in several major cities in the United States. It was founded in March 1998 by young investment bankers Joseph Park and Yong Kang in New York City, and was out of business by April 2001. The company is often referred to as an example of the dot-com bubble.[2] In January 2013, the brand was bought by Yummy.com and announced that they would relaunch soon. In March 2018, Kozmo was relaunched as a warehouse club.[3] The Kozmo.com website is offline as of July 2023.

Kozmo.com
IndustryRetail
Founded1998
Defunct2001
FateLiquidation
HeadquartersNew York City, United States
Key people
Joseph Park
Yong Kang
ProductsOnline store, delivery service

Model

Kozmo had a business model built around the delivery of small purchased goods within an hour by bicycle, car, truck, or public transportation for no delivery fee.[4] 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 had refused to charge delivery fees.[5] 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.

History

Kozmo.com's headquarters was located in New York City. 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.[6] The company had raised probably about $250 million, including $28 million from a group of investors in 1999 which included Flatiron, Oak and Chase[7] and $60 million from Amazon.com in 2000.[8] It had entered a five-year co-marketing agreement with Starbucks in February 2000, in which it agreed to pay Starbucks $150 million (~$228 million in 2021) to promote its services inside the company's coffee shops.[9] This included up to 500 Starbucks locations to host drop-boxes in-store for video returns.[10] Kozmo.com ended its deal in March 2001 after paying out $15 million (~$22.3 million in 2021). In July 2000, at the height of its business, the company operated in Atlanta, Chicago, Houston, San Francisco, Seattle, Portland, Boston, New York, Washington, D.C., San Diego and Los Angeles.[4] Kozmo had filed an IPO with Credit Suisse First Boston, but it never went public.[11]

The company was the subject of an April 2000 report by MSNBC.com reporters Brock Meeks and Elliot Zaret claiming 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, asserting that they choose market areas based primarily on Internet penetration rates.[12] The Equal Rights Center (ERC), the Washington, DC-based civil rights group referenced in the article, pursued the company about the allegations. Later in the year, the ERC announced a joint initiative with Kozmo and stated that "Kozmo's initial service area was not motivated by racial discrimination," and Kozmo committed $125,000 toward increased Internet availability for underserved communities.[13]

While popular with college students and young professionals,[14] the company failed soon after the burst of the dot-com bubble, laying off its staff of 1,100 employees and shutting down in April 2001.[15][16] Employees of the company in many of their 18 locations nationwide found out about the shutdown only after arriving to work their scheduled shifts, and finding the doors locked. Those locations, as well as their Memphis distribution center, were soon liquidated by a veteran entertainment wholesaler from Florida.

Post-Kozmo

The documentary film e-Dreams, released in June 2001, depicts the growth and fate of the company. In April 2005, former CTO Chris Siragusa launched MaxDelivery, a Kozmo-like service in downtown Manhattan specializing in the delivery of food, wine, DVDs and essentials, and is still in business as of November, 2018.[17][18]

Joseph Park, former co-founder and CEO, went on to co-found Askville in 2006, which is now part of Amazon.com. Park left Amazon.com in June 2009 to become president of BibleGateway.com, which is owned by Zondervan, a Christian publisher that is a unit of HarperCollins (which is owned by News Corp.).[19]

Yong Kang, former co-founder, returned to Wall Street, and as of June 2008 listed his occupation as investment banking at Lehman Brothers (now Barclays Capital).[20]

Some grocery-store delivery chains offering online ordering with same-day delivery survived the dot-com bust, and in the 2010s various competing same-day delivery services started in larger U.S. cities.

See also

References
  1. "Kozmo.com Splash page". Kozmo.com. Archived from the original on 2000-04-08. Retrieved 2010-07-10.
  2. Wahlgren, Eric (March 20, 2001). "Legacies of the Dot-Com Revolution". Business Week. Archived from the original on April 5, 2001. Retrieved 2007-07-17.
  3. Melton, James (March 23, 2018). "Online grocery pioneer Kozmo.com returns as a warehouse club". Retrieved 2018-04-05.
  4. Wu, John C. (November 1, 2001). "Anatomy of a Dot-Com". Supply Chain Management Review. Archived from the original on August 21, 2004. Retrieved 2007-07-17.
  5. Dukcevich, Davide (June 22, 2000). "Kozmo.com Pedaling To The Precipice?". Forbes. Retrieved 2010-04-16.
  6. "Kozmo Com Inc SEC filing · S-1 · On 3/20/00". SECInfo.com. March 20, 2000. Retrieved 2008-01-07.
  7. "Kozmo.com Receives $28 Million from Flatiron, Oak Investment, Chase Capital and Others". Business Wire, Press Release. October 13, 1999. Retrieved 2010-03-11.
  8. Greenspan, Sharon (March 20, 2000). "Press Release: Amazon.com Announces Investment..." Amazon.com. Archived from the original on November 3, 2017. Retrieved 2007-07-17.
  9. Wilcox, Joe (February 14, 2000). "Kozmo.com sees more sales in Starbucks deal". News.com. Retrieved April 16, 2010.
  10. "Kozmo.com will pay Starbucks $150M". February 14, 2000. Retrieved April 29, 2015.
  11. Sandoval, Greg (February 29, 2000). "Kozmo may deliver itself to the public". News.com. Retrieved 2010-04-16.
  12. Zaret, Eliot; Meeks, Brock (April 11, 2000). "Kozmo's digital dividing lines". MSNBC.com. Archived from the original on December 17, 2000. Retrieved 2010-03-11.
  13. "Kozmo.com and Equal Rights Center Announce Initiative to Bridge the Digital Divide". Business Wire. December 5, 2000. Archived from the original on 2012-10-18. Retrieved 2010-03-11.
  14. Casselman, Ben (April 17, 2001). "Kozmo.com Website Goes Out of Business". Columbia Spectator. Archived from the original on 2011-07-08. Retrieved 2007-07-17.
  15. Sandoval, Greg (April 11, 2001). "Kozmo to shut down, lay off 1,100". News.com. Retrieved 2010-04-16.
  16. "Kozmo.com Ceases Operations, Fires Entire 1,100-Person Staf". hive4media.com. April 12, 2001. Archived from the original on April 20, 2001. Retrieved September 23, 2019.
  17. Cantrell, Amanda (September 14, 2005) "Rebirth of Kozmo.com, kind of". CNN, CNNMoney.com. Retrieved 2010-04-16.
  18. Metz, Rachel (July 13, 2005). "Diapers Revive Dead Dot-Com". Wired. Archived from the original on 2012-11-05. Retrieved 2016-12-16.{{cite magazine}}: CS1 maint: bot: original URL status unknown (link)
  19. Engleman, Eric (September 29, 2009). "Kozmo.com founder Park leaves Amazon for Bible Gateway". TechFlash. Retrieved 2010-04-28.
  20. Henricks, Mark (May 29, 2008). "Where are they now: Kozmo.com". The Industry Standard. Archived from the original on June 1, 2008.
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