Kozmo.com, started in March 1998, offered various items like convenience foods, drugstore items and videogame and movie rentals online, promising delivery within an hour with no delivery charge and no minimum order. You could get electronics like game systems and movie players (to play the rentals), but you could also just order a single pack of gum or a candy bar, and a Kozmo bicycle courier would deliver it to your door for the face value of the item.
Amazon invested in Kozmo to the tune of $60 million, receiving a 31 percent stake in the company [source: Sandoval]. Kozmo also partnered with Starbucks, paying them for the privilege of locating Kozmo video drop boxes in their stores and providing a limited selection of Starbucks goods for delivery. The service was convenient and popular with customers, but the business model proved unsustainable as most orders cost more to deliver than they made back. Every market required warehouse space and lots of workers, and they also suffered for expanding into multiple markets too quickly. Kozmo eventually implemented a $10 delivery fee, and was beginning to make a profit in three of its nine urban locations, but it came too late to save the company. It postponed an IPO that had been planned for June 2000 due to the poor state of the market, and finally closed its doors in April 2001. Chris Siragusa, Kozmo's former Chief Technology Officer, started a similar delivery service in 2005 called Max Delivery. It has served lower Manhattan for years, has reasonable delivery fees and is only now beginning to work on expansion to other parts of New York City. By concentrating on a single location and slowly working out all the pricing, product offering and customer service kinks, a small but profitable company sprang from the Kozmo idea.