Failure of Kozmo

E-commerce has brought a lot of benefits. This can be seen that many companies have started their business from physical system to online system. In fact, not every company is successfully moving their business plan to online system. Therefore, Companies need to plan and consider the factors that will affect their plan to moving their business to e-commerce system.



Here is the example of the FAILURE of e-commerce:

kozmo.com was a online company which organized in 1997 by Joseph Park and Yong Kang in New York City . kozmo.com is convenient as it provided many items and products from snack food to DVD. One of its competitive advantage and also where Kozmo.com well known of its delivery system. Kozmo.com will deliver small item by free of charge.Moreover, Kozmo.com promises that they will deliver the product which the consumer orders within an hour. It has attracted many college students which came from middle class base.

Kozmo.com realized that target on the college students does not bring much profit after 4 years. Therefore, it decided to change their targeted group who make up of 76% of his business to people who would likely to order expensive products. Kozmo started to duplicate their categories to 5 main products which are meals, entertainment, drug shop, gift shop and grocery in order to attract customers who are less Internet-savvy. Other than that, Kozmo.com joint with other restaurants to delivered their food as to launch their new plan of ‘ready to eat gourmet meals’.

In April 2001, Kozmo.com FAILED after the collapse of the dot-com bubble. It shutting down the business and laid off its 1100 employees. According to the document of Securities and Exchange Commission, Kozmo.com had made a profit of $3.5 in 1999 but with a net loss of $26.3 million at the end.

The REASONS that Kozmo failed:

BEFORE change their plan:

Costly
Kozmo deliver a small item on free basis. Although it can attract consumer, it is costly as the transportation fee may not be covered. Kozmo has realized this and finally initiated a $10 minimum charge but it also cannot stop it from shutting down its company

Home Delivery System
Although Kozmo delivery system is attractive, but it has been proven that home delivery system is hard to make profit. Example: Webvanalaaa.

AFTER change their plan:

Change Plan
This is the 1 main reason of failure of the Kozmo.com which it changing their target from college student who make up of 76% of his business to upscale consumer.


Restaurant-delivery Service
Kozmo will have to compete over many restaurants that provided delivery service which offered more choice (food) in New York City.

Besides using a success example, a failure example also indicate a good lesson for us to learn. From this Kozmo.dom, we can learn that planning is an important starting point to conduct the business in e-commerce. We must look and think at the several aspect or results instead on just rely on one competitive advantage. Delivery system can be a competitive advantage but it also can make your business going to a downturn in this case.