Kozmo Case Study

Lauren Bewley

GB 459

Fall 2012

Short Case Study

Kozmo.com

Monday, October 29th

Kozmo.com was a venture capital driven online company that promised free one-hour delivery of video games, DVD, music, magazines, books, food and more. It was founded by young investment bankers Joesph Park and Young Kang in March in 1998 in New York City and went out of business by April 2001(Lee, Forrest 2012). Some stated that Kozmo.com was called a dot com boom.

Kozmo.com business model promised to deliver small goods free of charge withing one hour by using bicycle, car, truck, or even public transportation. The Kozmo.com model was criticized and made fun of because no other company understood how Kozmo could make any money since they were giving free shipping. Other companies and the economy stated the way that Kozmo decided to ship was costing Kozmo to much money and they were giving this for free, so it had to be costing someone. Kozmo.com stated that they were covering the free shipping cost by not having to pay rent on the building at that time.

Kozmo.com leadership roles were upper management, and Joesph Park who was CEO and Young Kang. Joesph Park the CEO of Kozmo.com came up with the idea, although Joesph Park even stated he could not handle the fame and riches part that he received from being the CEO of Kozmo.com. Joesph Park also stated he put to much faith in his management team, Joesph Park should have taken more inititave as being the CEO(Lee, Forrest 2004). Joesph Park was buying books off of a website one day and thought to himself I do not want to wait a couple days at the minimum for my book to get here. So in the meantime Joesph Park decided something better and timely, what would American Citizens want, well we want right here and right now, we do not want to wait, so Joesph Park invented Kozmo.com free shipping and delivery in less than an hour. At first for Kozmo.com the leadership and management was low, but so was the sales, Joesph did not consider Kozmo.com to be such a hit in such a fast period of time. But as Kozmo.com sales grew so did the employees, Kozmo.com expanded in six months from six markets and six locations to eleven cities and twenty-two locations(Wu, John C. 2001). Kozmo.com grew from 75,000 customers at the end of the year to 300,000 customers after eighteen months(Wu, John C. 2001). Kozmo.com had more than 2,600 employees and by July of 2000 Kozmo.com had around 400,000 customers in eleven different cities(Wu, John C.2001). Then a huge blow came for Kozmo.com when the stock market crashed and so did Kozmo.com. Kozmo.com canceled their IPO and started laying employees off, the month Kozmo shut down the website, Kozmo laid off the remaining 1,000 employees and began to liquidate(Wu, John C. 2001). Kozmo.com didn't consider this happening, and so by that they ended up going out of business before they could set there feet on the ground. This is why they are called the dot.com boom. Kozmo came in with a boom and out with a boom. Kozmo should have had a better plan, Kozmo should have thought of it's customers first and should of handled their plans better.

Kozmo's SWOT analysis

Strengths for Kozmo was fast delivery and competitive prices. Kozmo.com gave a competitive advantage they came up with something that was new, and would be a hit, but still at good prices. No other company at the time was able to deliver small items in under a hour, and giving the customers free shipping. Kozmo.com prices were very competitive, the prices were not exceeding high considering they could cover their cost for free shipping the prices. Another strength for Kozmo.com was customers understanding and knowing that the product they ordered is in stock. And also you order off the shelf from Kozmo and get one hour delivery to your doorstep. Kozmo did not outsource, they kept everything in house so they could watch and make sure everything went out minute by minute. Kozmo felt better being able to control that aspect of knowing if there was a mess up and how many minutes it was off and were the product might need to be sent. Another strength of Kozmo.com the employees in the warehouse were training in all areas of the field. This can also be an opportunity for Kozmo.com too. Because their employes were versatile, which is very helpful, if an employee is out you do not have to scramble and run around to figure out who you could put into that position with knowing that employee will succeed at their job. Strengths in the transportation department was they had bicycles and could save money on gas in smaller cities. And also the employees could take public transportation which saves on gas too, as long as you knew the route and that it would make it there in the allotted time given. Weaknesses could be transportation too for Kozmo.com, they expected their runners to use bicycles or public transportation which was great but what happens when the runner or employee has to use his/her own vehicle. That cuts back on making money on the product