Kozmo.com

Online retail with efficient delivery
Amazon Cemetery
GENERAL INFORMATION
Category:
e-Commerce
Started:
1998
BUSINESS FAILURE
Cause:
Unprofitable
Closed:
2001

Description

Kozmo.com was an online retailer that provided quick and efficient delivery of goods such as food items, entertainment (including games, DVDs, magazines, etc.), and other basic products. It was launched in 1988 by investment bankers Yong Kang and Joseph Park and it raised $250M from major companies like Flatiron, Chase, and Amazon (Amazon’s share in the investment being $60M).

Kozmo was largely marketed towards younger generations in their early 20s. As a customer acquisition strategy, Kozmo had a $0 delivery fee and no minimum purchase requirement from their services. Deliveries were mostly handled by bicycle messengers clad in Kozmo gear.

In its heyday, Kozmo had over 3300 employees and delivered to major urban locations in the US including Chicago, Los Angeles, New York, Washington DC, and more.

Ad

No Code MBA White Logo

No Code MBA teaches you how to build powerful apps, websites, and automations using the most popular ‘no-code’ tools. Get 50% off with code FAILORY.

Cause of Failure

When the dot.com bubble burst in 2000, Kozmo struggled to find investors who would fund the venture. This forced Kozmo to include a delivery fee, increase margins, and close down services for certain locations. Kozmo also started focusing on a more well-settled older audience who could afford the additional price. To appeal to the older audience, the company started sending out catalogs and enabled orders through phone. Sadly, it was already too late for Kozmo as it could not sustain itself.

In April 2001, Kozmo had to shut down due to the company’s failure to generate profit. Long before the shutdown, business analysts had been questioning Kozmo’s business plan which seemed to have a lot of flaws. Many believed that Kozmo was bound to fail from the beginning as it was extremely difficult to run an efficient delivery business without any delivery fees.

According to the president and CEO, Gerry Burdo, Kozmo closed down due to market conditions and timing. He believed that more hospitable market conditions could have helped Kozmo succeed and grow.

In 2013, the domain and trademark for Kozmo were bought by Yummy. More recently in 2018, Kozmo was relaunched under new leadership. The new Kozmo focuses on bulk deliveries of groceries with a $5.99 delivery fee for minimum orders of $35. The CEO of Yummy and Kozmo hopes to provide better services to customers by unifying the two solutions. As of 2018, the revamped Kozmo was only available in Los Angeles with plans to expand into other markets in the same year.

References

The All-In-One Newsletter for Startup Founders

Every week, I’ll send you Failory’s latest interviews and articles, curated resources for founders, and updates on how I’m growing the site to $10k/mo. Join other +6,000 startup founders!