Dot-com bust Kozmo makes comeback as online warehouse delivery service
- Kozmo.com, a website devoted to grocery delivery created during the dot.com frenzy of the 1990s, has found new life through Yummy.com, a grocer that operates six stores in the Los Angeles area and also does delivery. Yummy.com is relaunching Kozmo.com as a quasi-warehouse club, according to Digital Commerce 360.
- The new Kozmo.com makes on-demand deliveries within two hours of an order being placed by using Yummy.com’s order fulfillment and delivery system. It is expected to be profitable from the start. Digital Commerce 360 said the relaunch will start by serving the Los Angeles metro area, but the company hopes to develop relationships with other retailers who might benefit from selling through the website. It plans to expand Kozmo.com by the end of 2018.
- Kozmo.com sells items found in the grocery store, such as meat, packaged foods, produce, health and beauty products and alcohol. But unlike other warehouse clubs, it will not sell products in bulk packages. Instead, the business offers deals to customers who buy several regular-sized products.
Kozmo.com likely was a vision before its time in the late 1990s. In those days, fewer homes were connected to the web, and consumers were first starting to grasp the idea of the internet and mass connection. Today, nearly everyone has a smartphone in their pocket and people are accustomed to constant interconnectedness. In the years since the birth of Kozmo.com, the concept of online shopping and instant delivery has exploded.
Grocery companies, eager to capture any new revenue they can, understandably see online as a potentially lucrative opportunity. An estimated 20% of all grocery spending — a total of around $100 billion — is expected to come from online shoppers by 2025, according to the Food Marketing Institute and Nielsen.
Industry experts forecast the number of consumers buying groceries with the click of a button could double during the next decade. With e-commerce comprising just 2% of grocery sales today, there’s plenty of room to grow their online businesses.
Still, many consumers have not yet bought into online grocery shopping. A 2017 Walker Sands study found 40% of those surveyed said they’d shop online for groceries if it were less expensive, and 25% said they would participate if delivery times were more convenient.
The Walker Sands Future of Retail study further found just 16% of consumers bought groceries through Amazon. The market is closely watching whether online sales will spike for Whole Foods items, which likely appeal to millennials and those most likely to shop on the internet. Amazon, which acquired Whole Foods last year, expects to deliver the eco-friendly store’s foodstuffs through its Prime Now in certain markets, such as Austin, Cincinnati and Dallas.
Yummy.com officials believe that although the company is small, it has the business model and technology to take on Amazon, Walmart and Costco.
Barnaby Montgomery, CEO of Yummy.com, expects the company to make money right away by launching in markets where Kozmo.com once had a large customer base and by offering prices that require people to purchase a minimum number of each item, he told Supermarket News. The site also can serve as a delivery system for other retailers, he said. In today’s gig economy, companies can hire delivery people at lower costs, and can be smarter about targeting certain markets.
This could be the right time for Kozmo 2.0. Still, industry onlookers must wonder whether the nostalgia for the Kozmo.com of two decades ago is as strong as company officials would like to believe, and whether that will be enough to compete with the likes of Amazon or Costco at a time when online grocery services are still searching for ways to be successful and profitable. It's unlikely that the majority of millennials or younger online shoppers will have the same ties to the dotcom Kozmo, meaning for it to survive this time around it will have to dominate in service, timeliness and, of course, price — a challenge in today's dotcom world.