Kozmo.com, a website that in the late 1990s pioneered delivery groceries and other goods purchased online before closing when the dot-com bubble burst a few years later, is getting a second chance.
Yummy.com, a multichannel grocer that operates six stores in the Los Angeles area and also offers grocery delivery, has rebooted Kozmo.com as an online warehouse club with no annual fees. Kozmo.com, like its parent company, will start by serving the Los Angeles metropolitan area and fulfilling its orders from Yummy.com.
The company is also actively seeking retailers in Los Angeles and elsewhere that might benefit from selling on the Kozmo.com platform. Kozmo.com says it plans to roll out to new markets by the end of 2018.
Kozmo.com sells the kinds of items typically found in grocery stores, including produce, meat and packaged groceries, health and beauty products, beer, wine and liquor.
Unlike other warehouse clubs, Kozmo.com does not sell products in bulk packages. Instead, it offers discounts to shoppers who buy multiple regular-sized products. For example, it is currently selling four bottles of Angeline Pinot Noir wine for $8.07 per bottle. Shoppers are unable to add only one bottle to their cart.
Kozmo.com now offers next-day delivery for $5.99 with a minimum order of $35. Starting April 1, Kozmo plans to start making on-demand deliveries within two hours of an order being placed. To do that, Kozmo.com will use Yummy.com’s order fulfillment and delivery system. The company expects Kozmo.com to deliver orders profitably from the start.
“Selling online through a branded marketplace like Kozmo allows a retailer to expand the universe of customers interested in the retailer’s assortment without diluting its offline brand,” says Barnaby Montgomery, co-founder and CEO of Yummy.com.
Montgomery says the company is not ready to talk about specific markets yet but is hoping to open where Kozmo previously had a large customer base.
“While Kozmo was certainly ahead of its time 20 years ago, customers were incredibly positive and passionate about the service,” Montgomery says. “We are essentially giving a beloved brand a new life with a solid business model and an established infrastructure. In addition, we believe the Kozmo brand will lower our customer acquisition costs and give us an advantage when customers make their shopping decisions.”
While Yummy is relatively small, Montgomery thinks it has the right technology and business model to take on some big warehouse store players like Sam’s Club, which is owned by Walmart Inc. (No. 3 in the Internet Retailer 2017 Top 500) and Costco Wholesale Corp. (No. 9).
“We are not going to concede the market to Sam’s Club and Costco,” Montgomery says. “Our core advantage lies in our owned fulfillment system that allows us to fulfill Kozmo orders for a fraction of our competition. From a customer perspective, Kozmo bundles are typically smaller than the warehouse clubs, allowing customers to have more practical stock ups with less waste.”
Yummy.com, which fills online orders on demand in about 30 minutes, was founded in 2002 by Montgomery and COO Arthur Zonneveld.
Founded in 1998, the first version of Kozmo.com folded in 2001, after having raised $233.3 million from investors, according to data from Crunchbase. The brand was acquired by Yummy.com in 2013.
Kozmo.com originally offered one-hour delivery of groceries and other consumer goods via bicycle, car, truck or public transportation for no delivery fee. It later began charging $1.99 for deliveries under $30. At the time it closed, the company blamed its demise on changing market conditions that forced it to pursue profitability sooner than expected.