Kozmo (. com)
(For case discussion in 12-15. 823 upon April being unfaithful, 2001
with Yong Kang, President & Co-Founder, Kozmo. com)
" Think about all the errands you operate on a regular basis, to the video store, the bookstore, the convenience store, work supply retail outlet. вЂ¦ We eliminate all of the errands. Staying part of yourself is what Kozmo is, where you depend on all of us for all your several basic requirements. вЂќ
- Joseph Playground
Co-Founder, Kozmo. com
Kozmo. com delivers video tutorials, DVDs, Compact disks, books, and convenience products (snacks, magazines, toiletries, home products, blossoms, beers and so forth ) to consumers during an hour, without delivery impose and no purchase minimum. The service happens to be available in eight cities (Atlanta, Boston, Chicago, il, Los Angeles, Ny, San Francisco, Detroit, Portland and Washington M. C. -see Exhibit 1 and 2 for website, dates released and investors). Kozmo ideas to be in more than thirty five cities in the U. S i9000. by the end of 2002. In 1999, the number of consumers registered on the internet site grew at a compounded month-to-month rate of around 30%. But the total number of users has remained steady in 2000.
Joseph Area and Yong Kang kept their jobs on Wall Street to discovered Kozmo in 1997, the moment Joe initially ordered an e book from Amazon online. com and located that it would not fulfill his desire to have the book on a single day. Later on and Yong had been friends since they had been roommates while undergraduates at New York College or university. With a number of bike couriers delivering merchandise ordered on the web by New Yorkers, Kozmo is continuing to grow into an army of " Kozmonauts" that serves major cities. It happened in 1999 Kozmo hired several skilled executives from AT& Capital t, Coca-Cola, FedEx, and UPS to round out its senior management crew (see Demonstrate 3).
In 1999, Kozmo lost $27 million upon $3. your five million in revenues, with delivery costs running at $3. three or more million. It revenues intended for financial year 2000 had been $30m which has a net loss in $120m with delivery costs of $35 m. The customer acquisition cost went down considerably from $72 per buyer in early 99 to around $50 in late 2000. Current customer acquisition costs are at $25 per customer. From a model of totally revenues caused by B2C clientele in 2150, Kozmo expects revenue diversification вЂ“- 75% from merchants, 25% from its B2B procedures and 2% from advertising and marketing вЂ“ in 2001 to assist its total gross margins. Current B2B categories happen to be in the areas of Office Products (consumables, application, printer carts, digital cameras), Travel and also logistics regarding distributors, suppliers etc . The organization closed a $28 , 000, 000 first circular with Flatiron Partners in 1999. It has likewise raised more than $130 , 000, 000 from institutional investors which include Chase Capital Partners and Softbank Undertakings. In 03 2000 Amazon online. com put in $60 million in Kozmo. com to become the largest stakeholder in Kozmo with a 31% stake on the fully crammed basis (including warrants). As part of the deal, Amazon. com has struck a nonexclusive, three-year alliance to provide its clients a one-hour delivery option, powered simply by Kozmo. com. The company had filed to look public at the end of May 2000 (See Demonstrate 3 for selected parts of its S-1 filing with SEC) to get an expected valuation of $1. two - $1. 5 billion.
" Convenience stores command a premium intended for providing fast access to last-minute purchases, so why charge a deduction for the supreme convenience of residence delivery? " - Evie Black Dykema, an expert with Forrester Research. The business withdrew the IPO that kicks off in august 2000 and has been clipping its labor force (refer to optional studying " Kozmo postpones IPO, lays off 24 employeesвЂќ in Demonstrate 4). Kozmo. com shut down its Houston and San Diego operations in 2001, citing lack of demand. Kozmo has announced 3 layoff's trimming around 10% of the workforce and has been capable of considerably lean its working and purchase costs. Kozmo's product pricing compares about food items, video tutorials, drugs and other items analyzes well with convenience stores and discount...