Urban slackers, rejoice.
Starting Tuesday, nearly half a million city residents can get movies, music, junk food and other convenience-store items from their computer to the door in an hour.
Kozmo.com, brainchild of a 28-year-old former Goldman, Sachs & Co. executive, will launch its service in Chicago to about 425,000 residents from roughly Pulaski Road to Lake Michigan and between Montrose Avenue and Division Street. Other sections of the city and suburbs are expected to be added into the service “in the near future,” said John Hughes, general manager of Chicago operations for Kozmo.
The service started in New York, where the company is based, and has other operations in Boston, Washington, San Francisco, Seattle and Los Angeles.
Also Monday, Amazon.com Inc. said it reached a three-year deal with the Internet delivery service to distribute customer orders in less than an hour. A start date was not announced. Amazon, meanwhile, confirmed it has invested $60 million in Kozmo.com. Rumors are circulating that Kozmo intends to go public soon, but company executives in New York declined to confirm this.
The 2-year-old company, co-founded by ex-Goldman Sachs investment banker Joseph C. Park, has won praise for assembling an impressive distribution network and getting repeat business, industry analysts said. About 75 percent of people who try Kozmo come back and buy again, Hughes said.
Eventually, say analysts who follow on-line retailing, the company will have to fatten margins by raising prices or finding major retailers, such as department stores, to sell their higher margin goods through the free-to-consumers service.
“They’re going to eventually have to charge higher prices, and they’ll need to … strike deals with other retailers,” said Evie Black Dykema, on-line retailing analyst with Forrester Research in Boston.
Through its different business model, the company hopes to avoid the fate of on-line grocer Peapod Inc. of Skokie, which is mired in financial woes and announced just last week that its top executive had resigned after being hospitalized for exhaustion.
Kozmo’s “cost per delivery is higher and its revenue is lower” than Peapod’s, said Dykema, pointing up the need to join with other businesses that will pay for their customers’ instant gratification.
As about 100 Kozmo workers started ramping up the service Monday in Chicago, shelves at its Lincoln Park warehouse began filling with diapers, rental videos, pantyhose and other convenience items.
New-release rentals cost $4, a 24-pack of Huggies diapers costs $9.49 and a half gallon of milk sells for $2.59. Those prices are considerably higher than at discount retailers and some grocers, but comparable to convenience stores. At Kozmo, the delivery service is worked into the prices, so customers can order even one item and not pay a delivery fee.
Some wet, nasty weather and a call from a friend in New York who had already used the service was all it took for Kelly Wisecarver, 39, to log on last weekend to participate in a test run. She ordered a $4 video rental, “Dog Park.”
“I ordered it at 4:05 and it was there by 4:24. It was almost weird it was so fast. I didn’t even have time to pop the popcorn,” said Wisecarver, marketing director for Sutton Place Hotel downtown.
While “Dog Park” didn’t rate four stars with Wisecarver, the service was something she said she would use again.
“I just started with the video. With all these new services available on the Internet, it’s really intriguing, but I don’t want to go crazy with it. Now that I’ve ordered something and it went well, I’ll probably go back and add on next time,” said Wisecarver, who tacked a $2 tip onto her order. Next day, she dropped off the video at one of the 50 special Kozmo.com drop-boxes. For $1 more, she could have ordered the Kozmonauts, as company workers call themselves, to come and pick it back up for return.
“We figure we’ve got three to six minutes to assemble an order,” said Hughes, a former distribution company owner. At Kozmo, distribution center shelves are stocked by computer code that lets workers move quickly to each product, stuffing them in special aprons to keep hands free. That leaves a generous delivery-time window for drivers and bikers to get orders to customers, Hughes said.
Workers–even managers–wear brightly colored uniforms and undergo extensive customer-service training. Putting substantial resources into building such a business model means the company is looking to expand its offerings, starting with business-to-business agreements with brick-and-mortar businesses such as Starbucks. Locally, the company hopes to offer delicacy items from popular restaurants such as Ann Sather.
Rental drop-boxes are available at deli counters, coffee shops and office buildings within the service area. Active Endeavors, Bar Louie, Boudin’s Bakery, and the Coffee & Tea Exchange are some of the participating retailers.
KOZMO.COM
Kozmo.com, a company that provides free Internet-to-door delivery of entertainment and convenience items, opens in Chicago on Tuesday.
WEB SITE
www.kozmo.com
MARKETS
Founded in 1997, Kozmo.com currently operates in New York, Boston, Washington, San Francisco, Seattle and Los Angeles.
ITEMS DELIVERED
Videos, DVDs, games, specialty foods, magazines, books, CDs, over-the-counter medications and other items such as shampoo and hairspray.
HOURS
Orders can be placed daily between 10 a.m. and midnight.
DELIVERY AREA
Currently the company is delivering to ZIP codes 60610, 60613, 60614, 60618, 60647 and 60657, which include the following neighborhoods: Buena Park, Bucktown*, DePaul, Gold Coast*, Lakeview, Lincoln Park, Logan Sqaure, Near North*, Old Town, River North, Roscoe Village, St. Bens, Wicker Park* and Wrigleyville.
* Delivery not available in all areas.
Source: Kozmo.com
Chicago Tribune
