It was sad news for late-night hackers and habitual procrastinators in nine metropolitan areas earlier this month, when word came down that a genuine Net curiosity had closed down. Kozmo, the 3-year-old quick-delivery e-commerce vendor, was no more.
A disappointment, maybe — but it was hardly a surprise.
Sure, the idea itself was clever enough. At Kozmo's site, you could order as little as a bag of chips, some ice cream and a can of Coke. Maybe you'd grab a magazine, while you were at it — whatever trivialities struck your fancy. The real kicker, however, was the service. No matter what you ordered, Kozmo would deliver it to your door in under an hour. And what was more: At least initially, the delivery was free.
But a great idea doesn't necessarily make for a great business plan. Toward the end of its life, Kozmo was delivering rented movies and pricey gift items like Palm handhelds. Yet even these couldn't stem the steady hemorrhage of funds from the company's accounts.
On April 11, after three rounds of layoffs, chief executive officer Gerry Burdo announced that the dream was over. Soon after, all 1,100 Kozmo employees would hang up their trademark puffy orange jackets and head home.
Traditional overnight shippers such as UPS and FedEx weren't shy when it came to criticizing the upstart company. None of them believed Kozmo could sustain its business model long enough to become a serious competitor to their services.
The most obvious analogues to what Kozmo was trying to do are the courier companies that provide delivery services to offices in every major city. But for these to remain profitable, they charge fees that most individual consumers would find prohibitive. Door-to-door restaurant delivery services such as Waiters on Wheels, for example, also charge hefty premiums.
Meanwhile, Kozmo was charging nothing. So what were its founders thinking? Perhaps they hoped Kozmo would succeed not strictly by the numbers but rather by the sheer power of an idea whose time had come.
After all, Kozmo represented the dream of e-commerce in a way that few other companies ever could.
Kozmo was instant gratification.
The advent of the Web has seen a dizzying array of information and services placed at our fingertips. And as technology continues to improve, each new development is geared toward faster, more immediate access to information. (E-mail not fast enough for you? Try instant messaging.)
Today, movie schedules, weather reports worldwide, stock quotes, bank balances — all are obtainable almost instantaneously. For a while, even Internet stocks themselves seemed part of the trend, as dot-com IPOs generated unheard-of profits for investors, virtually overnight.
Web surfers have grown accustomed to immediate responses to their mouse clicks, particularly with the growing market penetration of broadband Internet services such as DSL and cable modems. An obvious way to capitalize on this was to tap the consumer shopping experience. Thus, e-commerce was born.
But beneath the surface, most e-commerce vendors aren't much different from traditional mail-order businesses. Companies such as Amazon.com offer durable goods shipped direct to the customer's home—something countless strictly brick-and-mortar outfits have been doing for decades.
When dealing with the average Web surfer, however, one accustomed to immediate feedback, there is a key distinction. It's almost as if they'd started a stopwatch the instant that mouse button was clicked to place the order.
By offering product online, a company is in effect promising its customers lightning-fast fulfillment. Fail to deliver, and that company is history.
One early solution was to partner with an overnight delivery service such as Airborne Express or FedEx. By guaranteeing overnight shipping, the time between the mouse click that initiated a purchase and the moment the product arrived at the consumer's door was reduced to a few hours.
Kozmo merely took this idea to its extreme. One hour, no more, no matter what you ordered.
Yet less-radical shipping schemes already had proved difficult to sustain. Computer retailer Outpost.com, for example, recently scrapped its policy of free overnight shipping on every order.
But for still other e-commerce outfits, though Kozmo's failure may be troubling, it hasn't necessarily been a deterrent. The most interesting example may be Webvan, which built an online business around next-day delivery of groceries.
Like Kozmo, Webvan has fallen upon hard times. CEO George Shaheen resigned on April 13, after a sharp plunge in share values that ended with the company being asked to de-list its stock from the Nasdaq. But instead of backing off from the idea of fast delivery, Webvan is actually ramping up its plans. It's now testing a same-day delivery service in Atlanta.
In Webvan's case, surely part of the motivation has to do with the fact that they're delivering perishable goods. But it's equally likely that they've hit on a key characteristic of their market. Online shoppers crave instant gratification like no others.
Suppose a product ordered from Amazon.com took the traditional four to six weeks to arrive. Would the average online consumer still perceive the site as offering a convenient service? What if the products arrived in a few days, but the total cost including shipping came to twice the usual list price? Would the convenience be worth it?
Webvan seems to know what its cutomers want, but the company's prospects look bleak nonetheless. It's still short a chief executive, and it's due to run out of cash before the end of 2001.
The critical question, then, is: What does all this say about the future of e-commerce?
For a while we've been promised a Holy Grail in the form of converged media. Interactive TV programming, we are told, will eventually allow viewers to order advertised products just by touching the screen, even during the show itself. But will the industry really be able to deliver on these instant-gratification promises?
Another frontier is wireless connectivity. Many vendors are expecting wireless devices soon to account for more commerce transactions than the Web itself. But what's the point in conducting e-commerce transactions on a bus or in a restaurant if doing so offers no real-time benefit — if you can't expect to receive the item you purchased for days or even weeks?
None of these services can become reality unless e-businesses can create a sustainable infrastructure for fast delivery. Instant ordering is a promise. Near-instant delivery fulfils that promise.
Kozmo may be a thing of the past. But understanding the lessons it can teach us may prove to be the key to the Net's future.
