There are some successful virtual e-commerce companies such as eBay, Amazon.com and so on. However, there are also a large number of failures of e-commerce companies that are failed to continue their business through e-commerce. One of the shinning examples is kozmo.com.
Kozmo.com was a short-lived online store and delivery service that provided fast and friendly service. It was founded by young investment bankers Joseph Park and Yong Kang in 1997 when they wanted goodies from a convenience store delivered to their door. They started the business in March 1998 at New York City. The great idea of this company was that you could order anything at anytime and they will delivered direct to your house within one hour with free of delivery charge for any item.
At the height of its business, the company operated in Atlanta, Chicago, Houston, San Francisco, Seattle, Portland, Boston, New York, Washington, D.C., San Diego, and Los Angeles in July 2007. It was popular with college student and young professionals. However, Kozmo.com ended it services in March 2001. The causes of failures are:
(i) Cost > Revenue
This is the main cause that brings to the failure of Kozmo. Kozmo offered free delivery charge and competitive prices to their customers for every product even the customer only buy a pack of snack. In case, the cost of delivery is more than the revenue that their earned. Kozmo was suffered sustainable financial loss due to the reason. Even though a $10 minimum charge was introduced after this, but that didn't stop it from closing in March 2001. Kozmo is learned too late that its primary attraction of free delivery charge to all customers was also its undoing.
(ii) Target consumers
Kozmo make a worst decision that stop to catering their main client which are middle class college-student due to the thought of target more upscale customer base who could afford expensive products. Indeed, college students were the customers that make up almost 76% of their sales.
(iii) Withdraw of investor
Investors promised to give a private funding of $30million to Kozmo but later on an investor had backed out of a $6million commitment. This has caused the merger deal with Los Angeles-based PDQuick collapsed when the funding that was promised to PDQuick did not materialize.
(iv) Ambitious business plan and lack of planning
The company had overly ambitious plans for expansion and didn't stop them down quickly once capital dried up. Besides, Park and Kang were relatively inexperienced to manage an e-commerce business. They may have overestimated the amount of revenue it could gain from the market. The revenues that Kozmo generated from sales were insufficient to cover all the business expenses.
As a conclusion, in order to success an e-commerce business, only has a creative idea without proper plans is insufficient. The use of business strategies, effectiveness in cost control, strong organizational, and efficiency in customer relationship management to meet the demands of its valuable customers are the key elements contribute to the success of e-commerce.
References:
http://www.thestandard.com/news/2008/05/29/where-are-they-now-kozmo-com
http://en.wikipedia.org/wiki/Kozmo.com
http://news.cnet.com/2100-1017-255710.html
http://www.cnet.com/1990-11136_1-6278387-1.html
http://www.businessweek.com/bwdaily/dnflash/apr2001/nf20010416_207.htm
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