Kozmo.com

An example of an E-commerce failure and its causes~

“You could order anything from snacks to movies at any time and have them delivered direct to your door within 1 hour with no delivery charge!”

This was a great idea that founded by young investment bankers, Joseph Part and Yong Kang in March 1998 in New York City. Kozmo.com was a venture-capital-driven online company that promised free one-hour delivery of anything from DVD rentals to Starbucks Coffee in the United States.
Kozmo promoted an incredible business model; it promised to deliver small good free of charge, typically by using bicycle messengers. The idea was great but ultimately a little too good to be true. One of the basic problems with its business model was offering a costly home-delivery service for free, even on very small orders on which it was impossible to turn a profit.
Moreover, Kozmo’s greatest error with their customers occurred when they stopped catering to their main client base of middle class college-students. This was done so that they could target more upscale client who would order expensive products. This was a misguided decision making because the college student customer is made up 76% of its business.
A simple idea turns into a multi-million dollar company in a few years. Kozmo.com’s aura helped it raises more than $250 million, but the company was unable to generate enough revenue to cover costs. In 1999, it had $3.5million in revenue, compared $26.4 million in net losses.
Not surprisingly, the company failed soon after the collapse of the dot-com bubble, laying off its staff of 1,100 employee and shutting down in April 2001.