A failure E-commerce Business- kozmo.com
Nowadays, many company and businessmen have conducting businesses through e-commerce. There are many successful company that generate profit and receive recognition through e-commerce such as e-bay,Amazon and Dell Corporation. Although there are many company that success through doing business online, there are some example of failure such as e-toy.com and kozmo.com.
Kozmo.com was a venture-capital driven online company that provide free one hour delivery of anything from DVD rentals to Starbucks coffee in United States. The founders of Kozmo.com were young investment bankers Joseph Park and Yong Kang in New York City.
Kozmo.com had a business model that promised to deliver small goods free of charge, typically by using bicycle messengers. Its headquarters were located in New York City. The company raised about $250million, including $60 million from Amazon.com and $28 million from a group of investors which included Flatiron Partners, Oak Investment Partners and Chase Capital Partners.
Factors of Failure:
Kozmo.com had raised more than $250million, but the company was unable to generate enough revenue to cover its costs. In 1999, the company had $3.5million revenue, compare to $26.4 million losses. The problem occurred when its business model included offering a costly delivery home delivery service for free. This offer covered a very small order such as DVD and pack of gum which it was impossible to turn a profit. As a result, it made the customer satisfied and excited, but it drew losses to the company. Although Kozmo.com was profitable in four cities, there were seven more cities that made losses.
More reasons about the failure factors??
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