Online retailer and delivery service Kozmo.com announced on April 11 that it was closing down and laying off its 1,100 employees. The announcement came after Kozmo failed to merge with the privately-owned Camarillo, CA based grocery delivery company, PDQuick, which would have provided new financing for the fledging business.
Kozmo was launched in New York in 1997 with the promise of free door-to-door delivery of products ranging from everyday necessities, books, movie rentals, and CDs, to high-end electronics and luxury gifts. A pair of former college roommates got the idea for the company during a night spent craving videos and snacks and wishing there was a business that would deliver these items to their door.
Shortly thereafter, the vision was transformed into a growing company with operations in nine markets, including New York, Boston, and Washington, DC. But after a promising start and $250 million in private funding, Kozmo found that delivery and warehousing costs were too high and was forced to downsize its operation.
Despite its initial philosophy, Kozmo began charging delivery fees on orders under $30. The company searched for a way to become profitable, introducing fancier items like gourmet food and home electronics to attract upscale customers, with the hope was that these clients would purchase more expensive products.
Though the company never succeeded in becoming profitable, Kozmo's shutdown surprised many students at Tufts. "It's an outrage. I used Kozmo.com for everything, even condoms when I was in a jam," freshmen Ilia Papas said.
"College kids are really lazy, so it was perfect. If you wanted to rent a DVD or something but didn't want to move, they'd bring it to you. If food delivery is so successful, then I don't see why a company that delivers everything is not," Papas said.
But freshman Jason Kurien said he would have expected the company to fail. "I've never seen any of my friends use this service, which would mean it's not that popular. It just seems like a great idea for lazy people, and it's so hard and way too costly to be able to coordinate on-time deliveries to thousands of people," Kurien said.
According to Kurien, Kozmo might have thrived if it had operated at a smaller scale. "I think it would actually work if it only serviced specific colleges where it's easy to coordinate deliveries, but it would definitely not work at all nationwide," he said.
Some attribute Kozmo's downfall to the recent weakening of the US economy. Economic markets, such as the Internet and technology sector, that were prosperous only a few years ago now face financial difficulties.
Economics teaching assistant Andy Eggers said that investors loss of faith in online companies led to Kozmo's failure.
"I think that the real story is the changing attitudes of venture capitalists and other investors," he said.
"For a while, people were throwing their money at any business with a website, but when it becomes clear that sales are not going to be growing at the rate that deluded analysts had been talking about, you're better off with your money in a savings account," he said.
