[messengers] Burnouts rejoice, Kozmo.com's progeny lives on

Date: 21 Apr 2011 13:09:18 +0200
From: Joe Hendry <messvilleto@xxxxxxxxx>


Burnouts rejoice, Kozmo.com's progeny lives on

 

Cnet News, April 20, 2011

 

by Greg Sandoval

 

When Kozmo customers ordered snacks or movies from the
Internet delivery service via their PCs, the goods weren't teleported, ala
"Star Trek." But it almost felt as if they were.

 

In the late 1990s, an orange-clad Kozmo delivery person
would appear at a customer's door typically within an hour after an order was
keyed in. The Kozmo man or woman might have cradled a pint of rocky road ice
cream, an Al Green CD, a box of Junior Mints, or some other convenience item.
The Internet was still new then, and Kozmo's service helped to raise
expectations of how technology might make our lives easier. Who said we
couldn't live like the futuristic cartoon family from "The Jetsons?"

It was not to be. Ten years ago this month, Kozmo collapsed
under its delivery costs. In the wake of the closing, many business experts
concluded that carting small-ticket, low-margin items to people's homes, even
with the help of the Web and sophisticated logistical software, just wasn't
profitable.

 

 

Chris Siragusa disagreed. As Kozmo's former chief technology
officer, Siragusa saw what was right and wrong with the company. He put his
experiences to work at Max Delivery, the New York-based Internet home-delivery
company he founded in 2005.

Sirgusa's 35 delivery people whisk fresh meat, produce,
dairy, household items, wine and spirits, over-the-counter medicines, DVDs, and
local gourmet and specialty foods to customers' front doors. Like Kozmo, the
company guarantees delivery within an hour.

Of the many differences between the two companies, the most
important are that Max Delivery is still around after five years and is
profitable, according to Siragusa.

To accomplish that, Max Delivery took a much more methodical
approach to building a home-delivery business than Kozmo. Even among the big
spending Internet companies of the dot-com age, Kozmo stood out with its go-go
expansion strategy. Back then, profits took a back seat to snatching market
share.

 

 

"Kozmo was an amazing idea," Siragusa told CNET.
"The problem was they were victims of the times. Back then it was about
how fast you can grow your company. When you're trying to do that, the
efficiencies of operating a business get sacrificed. We're taking a different
tack. We can take our time and make the company as efficient as possible."

 

 

Efficiency isn't what Kozmo was known for. Two years after
Joseph Park and Yong Kang founded the company, an inexperienced management team
was overseeing complex delivery operations in nearly a dozen major U.S. cities, including New
 York, San Francisco, and Chicago. Kozmo's
leadership was so determined to build market share that it refused to require a
delivery charge or set a minimum purchase amount, even when the policy led to
big losses.

 

 

Because of that, it wasn't unusual for Kozmo to spend $7
delivering a 50-cent box of candy.

 

Max Delivery's warehouse shelves are similar to those at a
grocery store. The cost-conscious company isn't interested in expensive
automated picking and packing systems.

(Credit: Chiekh Amala Diallo)

 

 

In contrast, after four years Max Delivery still only
operates in Manhattan
and only in the lower half of the island. Siragusa's company didn't have
Kozmo's treasure trove of venture capital money and was forced to keep a close
eye on the bottom line.

To receive free delivery from Max Delivery, customers must
order a minimum of $75. Smaller orders require a $2.95 delivery fee.

 

 

Siragusa wouldn't disclose many details of his company's
financial performance but said Max Delivery has grown by 20 percent every year.

 

 

To help reduce costs, he has worked on perfecting logistical
software that helps bundle orders from the same areas so delivery people can
make multiple stops. It also helps pinpoint the most efficient routes for
delivery people to take. Max Delivery's software also must take the weight of
an order into account. All orders are delivered by bicycle.

"I have to meet very aggressive weight and volume
requirements to make sure people travel safe," Siragusa said. "It's
an interesting problem to solve from a computer-science perspective."

 

 

Siragusa is not alone in continuing to believe in home
delivery. Peapod was one of the companies that competed in the sector during
the dot-com boom and it's one of the few to have survived. Like Kozmo, other
Web delivery services such as Webvan and Urbanfetch were forced to close down.

 

 

And just how big the home-delivery market can become is
still unclear. Certainly, the sector never fulfilled the lofty predictions that
some analysts made back in 1999. More recently, Amazon, which invested $60
million into Kozmo in 2000, was expected to expand an experimental
free-of-charge home-delivery service called AmazonTote, but abruptly shut the
service down last month.

 

 

Amazon still operates AmazonFresh, which delivers groceries
to homes in the Seattle
area.

 

 

To Siragusa, what's important is that he continues to grow
his company and expand his business carefully. He hopes to some day soon
operate in other areas of Manhattan and possibly
Brooklyn.

 

 

So, will Max Delivery's customers be similar to Kozmo's old
clientele, who the media accused of being burnouts and stoner couch potatoes?
(Someone once told me that Kozmo should incorporate a marijuana leaf in the
company logo).

 

 

"I'm not going to lie and say we don't have that
customer," Siragusa said. "But our core customers typically are just
busy New York
professionals."

 

 

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