 | |
| Industry | Retail |
|---|---|
| Founded | 1998 |
| Defunct | 2001 |
| Fate | Liquidation |
| Headquarters | New York City,United States |
Key people | Joseph Park Yong Kang |
| Products | Online store, delivery service |
Kozmo.com was aventure capital–funded online company that promised free one-hour delivery of "videos, games, DVDs, music, mags, books, food, basics and more"[1] andStarbucks coffee in several major cities in theUnited States. It was founded in March 1998 by young investment bankersJoseph Park and Yong Kang inNew York City, and was out of business by April 2001. The company is often cited as an example of thedot-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 awarehouse club.[3] The Kozmo.com website is offline as of July 2023.
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 said 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.[5] The company countered in part that, in their target markets, savings due to not needing to rent space for retail stores would exceed delivery costs.
Kozmo.com's headquarters was in New York City. According to documents filed with theSecurities 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 includedFlatiron,Oak andChase[7] and $60 million fromAmazon.com in 2000.[8] It had entered a five-year co-marketing agreement withStarbucks in February 2000, in which it agreed to pay Starbucks $150 million ($259 million in 2024) 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 (~$25.3 million in 2024). In July 2000, at the height of its business, the company operated inAtlanta,Chicago,Houston,San Francisco,Seattle,Portland,Boston,New York,Washington, D.C.,San Diego, andLos Angeles.[4] Kozmo filed anIPO withCredit Suisse First Boston, but never went public.[11]
The company was the subject of an April 2000 report byMSNBC.com reportersBrock N. Meeks and Elliot Zaret claiming that Kozmo wasredlining sections of the cities it served that were populated primarily byAfrican Americans. Kozmo denied that race played any part in its decision on what zip codes to deliver to, saying it chose market areas based primarily on Internet penetration rates.[12] The Equal Rights Center (ERC), theWashington, 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 thedot-com bubble, laying off its staff of 1,100 employees and shutting down in April 2001.[15][16] Employees at many of the company's 18 locations 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.[citation needed]
The documentary filme-Dreams, released in June2001, depicts the growth and fate of the company. In April 2005, formerCTO Chris Siragusa launchedMaxDelivery, a Kozmo-like service in downtownManhattan 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-foundAskville in 2006, which is now part ofAmazon.com. Park left Amazon.com in June 2009 to become president ofBibleGateway.com, which is owned byZondervan, a Christian publisher that is a unit ofHarperCollins (which is owned byNews Corp.).[19]
Yong Kang, former co-founder, returned to Wall Street, and as of June 2008 listed his occupation as investment banking atLehman Brothers (nowBarclays Capital).[20]
Some grocery-store delivery chains offering online ordering with same-day delivery survived the dot-com bust, and in the 2010s various competingsame-day delivery services started in larger U.S. cities.
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