(For case discussion in 15.823 on April 9, 2001 with Yong Kang, President & Co-Founder, Kozmo.com)
“Think about all the errands you run on a regular basis, to the video store, the bookstore, the convenience store, the office supply store.… We eliminate all those errands. Being part of your lifestyle is what Kozmo is, where you depend on us for all your various basic needs.” - Joseph Park Co-Founder, Kozmo.com
The Company
Kozmo.com delivers videos, DVDs, CDs, books, and convenience items (snacks, magazines, toiletries, household products, flowers, beers etc.) to consumers within an hour, with no delivery charge and no order minimum. The service is currently available in nine cities (Atlanta, Boston, Chicago, Los Angeles, New York, San Francisco, Seattle, Portland and Washington D.C. -see Exhibit 1 and 2 for web page, dates launched and investors). Kozmo plans to be in more than 35 cities in the U.S. by the end of 2002. In 1999, the number of customers registered on the web site grew at a compounded monthly rate of approximately 30%. But the total number of users has remained steady in 2000.
Joseph Park and Yong Kang left their jobs on Wall Street to found Kozmo in 1997, when Joe first ordered a book from Amazon.com and found that it did not fulfill his desire to have the book on the same day. Joe and Yong had been friends since they were roommates as undergraduates at New York University. With a handful of bike couriers delivering goods ordered online by New Yorkers, Kozmo has grown into an army of "Kozmonauts" that serves major cities. In 1999 Kozmo hired several experienced executives from AT&T, Coca-Cola, FedEx, and UPS to round out its senior management team (see Exhibit 3).
In 1999, Kozmo lost $27 million on $3.5 million in revenues, with delivery costs running at $3.3 million. It revenues for financial year 2000 were $30m with a net loss of $120m with delivery costs of $35 m. Its customer acquisition cost has gone down