An Example of E-commerce Failure and Its Causes

Kozmo.com was established by Joseph Park in the year 1997 in New York. He developed the idea of "delivery in less than one hour" and "FOC (Free of Charge) delivery" regardless what product has been ordered. (It sounds so good when I am hungry yet lazy to travel outside for food!) It adopted "bicycle delivery" to deliver the goods ordered by customers. The company was making losses for every order, but it was getting more and more popular and reached at 30% growth in sale per month. Until January 2000, it expanded from six markets and six locations to 11 cities and 22 locations, such as Atlanta, Boston, Chicago, Houston, Los Angeles, Portland, San Francisco, Seattle, Washington, D.C etc.

When Kozmo started, its only product was videos. By the end, the product lineup had expanded to include the 4 major categories which are Entertainment (videos, games, DVDs, musics, books, newsstand), Basics (personal cares, sundries, medicine cabinet, household, tobacco), Food ( snacks,meals, softdrinks, beer, gourmet), Specialty (Electronics, executive, home accessories, bath, toys, flowers)

However, sad story of Kozmo.com came over when it had to close down due to:

1. Cost-effectiveness: In order to satisfy customer and make itself competitive, Kozmo.com charged its products at a lower price, in addition, promised to deliver small products free of delivery charges. However, this affected the profitabilty of the company whereby it could not support the high cost of delivery.


2. Insufficient funding for merger: Kozmo.com was dealing a merger with Los Angeles- based PDQuick, an online grocery, however, because of the funding promised by investor did not meet, the merger collapsed. http://news.cnet.com/2100-1017-255710.htm/


3. Employees' job satisfaction declined: It is good that the company emphasized on benefits of customer by satisfying what they want. However, it seemed like torturing the employees whereby they have to deliver the products ordered to the customer within a very short time. Customer's need has gone beyond what the company can provide: One of the employees of Kozmo.com said:"I was asked by one customer, who had the flu, if I would walk her dog," said Andy Verdano, who was fired from Kozmo during a previous round of layoffs. "After I said yes, I was told that she started placing small orders three times a day, right around dog-walking time.http://www.wired.com/techbiz/media/news/2001/04/43025


4. Failed to deliver on time as it has pledged on, which was one of the important dilemmas. In order to accomplish this promise, Kozmo.com has to forecast the demand of customer; neither stockpiling too much till the stocks tie up the most liquid cash, nor too low that misses the order. Forecasting inventory demand is a very challenging and difficult part to be achieved. http://www.ecommercetimes.com/story/7598.html?wlc=1245220913