Kozmo.com: Relic of the Dot.Bomb Bust
I've been staying with a relative in New Jersey for most of the week because of a leak in my East Side apartment.I brought three things with me -- clean underwear, my laptop, and e-dreams, one of my favorite documentaries of all time.
I've been watching "e-dreams" every night (no cable), trying to decipher where it all went wrong for Kozmo.com.
E-dreams chronicles the rise and fall of Kozmo.com, the beloved e-tailer that delivered ice cream and movies to New Yorkers in under an hour.
I was in college when Kozmo first arrived on the scene, and had buddies who ordered from them at 2 in the morning so like many of my generation, Kozmo's story is woven into the fabric of my yester-years, synonomous with the dot.com/Y2K ebullience of living in an era defined by how many points the NASDAQ was up on a given day.
One writer sums up why Kozmo enjoys such a massive posthumous market:
Kozmo.com best summarizes our recent, irretrievably lost decade of innocence because, for an all-too-brief, vanishing moment in time, convenience really was the main obsession in most urban American's lives. Not war, or terror, or the economy, or Condeleeza Rice, or Al Franken, or even the melting polar ice caps or growing ozone holes. For better or worse, the name "Kozmo" encapsulates our lost innocence...Kozmo.com was an online convenience store promising delivery-on-demand service. "We are a brand-new online delivery service that marries all the advantages of online shopping with the instant gratification consumers demand today," went its mission statement.
Kozmo promoted an irresistible business model -- it promised to deliver small goods free of charge.
The company raised about $280 million including $60 million from Amazon.com.
The business model was heavily criticized by business analysts, who pointed out that one-hour point-to-point delivery of small objects is extremely expensive and there was no way Kozmo could make a profit as long as it refused to charge delivery fees.
Duh.
Kozmo.com was a hail mary.
You expect to make money charging half the pot heads and trust-fund babies in Manhattan $3 a movie?
And yet, there was something undeniably alluring about Kozmo.com, whether it was their arrogant 27 year old CEO, magnetic brand logo, or plain naivete I don't know.
Did you know that over at Chromebags.com, you can pick up a Kozmo bike bag for the not inconsderable sum of $60 (marked down from $90).
The early history of Kozmo is lore business aficionados like myself just cannot get enough of.
Here is one former Kozmo.com employee remembering the glory days:
"The idea for the company was hatched in founder Joseph Park's small, gritty apartment on 12th Street in the EastVillage. Joe and his roommate had a major case of the munchies one night and thought it would be cool if there was a delivery service for snack food. The whole Kozmo concept came from one really bad attack of the munchies."It should've been evident Kozmo was a disaster in the making when they couldn't get the utility bills paid on time.
Or when the ubiquitous bike messengers were working weeks on end without a paycheck.
Like WebVan, pets.com, and eToys.com, Kozmo lead the investment community to think that platforming off the Internet was all a business needed to score a nose-bleed market capitalization.
In e-dreams, we are taken on a roller coaster ride through an entrepreneur's vision and its contrapuntal relationship with the insatiable demands of corporate America.
When the market tanked in the spring of 2000, the honeymoon was over for Kozmo.com
The tech meltdown in April wiped out 2 trillion dollars worth of assets.
Kozmo.com is imbricated in the middle of all this, transforming from a ten employee squad operating out of a decrepit Greenwich Village warehouse to a 1,100 man arsenal covering ten major US cities.
At its acme, the company was able to collect $280 miilion dollars in venture capital and form a strategic alliance with Starbucks, in and of itself an incredible business concept (Kozmo promised to pay the latter 150 million over a 5 year period so they could place rental drop-boxes in the coffee chain's outlets) .
In the end, sadly, Kozmo.com was out the door as fast as the Seinfield character that spawned its name.
In April 2001, all the remaining employees were laid off and company assets were liquidated.
Kozmo.com's IPO -- intended to raise US$150 million through CSFB -- was withdrawn.
Ultimately, the story about CEO hubris, contingency plans missing in action, and IPO fever, "e dreams" reminds us of how ludicrous the Internet company craze was to begin with.
At the end of the day, profits are what matter most.
Not just a shitload of servers with a good bandwith connection.
It was rumored that Amazon.com would buy Kozmo and try to utilize its same day delivery piece, but Amazon finally decided to let its investment go out of business.
I'm not the only one who thinks that if Kozmo.com had focused just on its NYC operations, the company would still be in business today.
Because it tried to scale out its operations into areas that were more widespread and less populated than NY, it incurred more expenses and cannabilized its business model.
The infrastructure was there, but suscriber growth never caught up.
The market crash forced the startup to focus on profitability.
The implementation of a delivery surcharge didn't go well with customers.
And the rest is nostalgia.
Toay, a service just like Kozmo has resuscitated here in NY -- its called MaxDelivery.com
But Kozmo was a relic of its time.
And you cannot bring time back.
The 90s was a wild era of indefatigable optimism where everyone felt the future was becoming the present.
And where is former Kozmo.com CEO Joe Park today?
He just finished Harvard Business School, according to Forbes.
Here's the irony.
Park's experience and the Kozmo flameout will be both more expensive and useful than that MBA.
Not to mention that in 10 years they'll be reams of business-school case studies analyzing the strange phenomena of the late 90s and Kozmo.coms' implosion will be right there on page 1.
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