Between me and the next new phone I’ve been dreaming of is two brick walls, one car (or bike if I’m feeling adventurous), a few miles of city roadway, and one likely-irritated cashier. Or exactly one Kozmo delivery courier, if this were still 1999. Looking back at the legacy of Kozmo.com there was a few expensive and ambitious lessons learned. These and lessons from the dot-com collapse can are felt throughout the current startup and on-demand delivery ecosystems.
Kozmo started out of an apartment in New York City when one twenty-something, Joseph Park, wanted a book faster than the Internet was willing to deliver and without the hassle of visiting a store. After getting a website together and a few messengers to handle deliveries, the idea began to gather traction. People did want things faster, but did they want to pay more? Park didn’t want to gamble on the customers’ desire to pay more for their goods, so Kozmo provided free delivery of purchased goods with no minimum purchase cost. This tactic left little room for profit and sustainability, but Kozmo made up some revenue on movie rentals.
e-Dreams, the documentary on the rise and fall of Kozmo, depicts the struggles early on to find cash on hand to pay employees. The company reported losses of $26 million on only $3.5 million in revenue in 1999. But Park managed these payroll issues and collected $100 million in additional funding, led by Amazon, by mid 2000.
One of the things that Park did excellently was his marketing and public relations. "FREE LUNCH” sells itself, but Kozmo had a totally different momentum. It was a no brainer for the young company to partner with Starbucks to get their rental drop boxes into the large chain of stores. Kozmo was one of the first brands promoted in Starbucks stores, but the deal came at a hefty price tag which cut into an already thin profit margin.
Kozmo filed for IPO in March of 2000, just a month before the stock market crashed. Aggressive growth was the answer to overcome the thin margins, and Kozmo had rolled out to 11 markets by April of 2000. At the height of the growth, Kozmo totaled over 3,000 employees and a distribution center in Tennessee. Joseph Park and his co-founder stepped down in July, and Gerry Burdo, the CFO at the time, took over as CEO. Gerry changed the business model and signed a deal with Universal to purchase movies directly in September. Three of the eleven markets were profitable in December. The growth was difficult to manage, and service in Houston and San Diego was cancelled at the start of 2001. Kozmo shut it’s doors in April 2001, and employees were notified when the doors were locked that morning.
About half of startups shut down after the Kozmo dot-com bubble, and after the dust settled Park said, "Internet stocks are momentum plays… so you had to create the momentum.” That would have been an exciting couple of years and could have been the kick-off for same day delivery.
