"We have a pretty clear path and key metrics in terms of average order per delivery per hour and gross margins," says Seth Goldstein, a partner at Flatiron and a Kozmo board member. "We've made some other changes."
The quiet period prevents the company from discussing plans in detail.
Kozmo's travails aren't unique. Last-mile delivery services - like Urbanfetch.com, Sameday.com and PD Quick - are all trying to find a way to turn a profit, although there are few details on their numbers since all are still private. While analysts are not ready to write off this category altogether, they're highly skeptical. In a scathing report that surveys same-day home-delivery services titled, "Last Mile to Nowhere," Booz, Allen & Hamilton (dossier) partner Tim Laseter writes: "We think the last mile will lead to the gallows rather than to the promised land." He sites four reasons: "limited online sales potential; high cost of delivery; a selection-variety trade-off; and existing, entrenched competition."
Based on publicly available information, Laseter's report argues that even if Kozmo scales wider and larger, the company will never break even.
Urbanfetch, which recently imposed a $10 minimum purchase to guarantee free delivery, is similarly finding it hard to reach profitability. While the company's $50 average order is far higher than Kozmo's, the company is forced to split the New York market with Kozmo. Industry sources say Urbanfetch's bankers are putting the company up for sale. Urbanfetch executives were unreachable at press time.
While far larger, Webvan is hardly immune to the category's woes. For the second quarter, Webvan reported a net loss of $74.4 million, or 23 cents a share, on sales of $28.3 million. This is compared with a loss in the same period a year ago of $234 million on sales of $383,000. Webvan is currently trading around $6.75, down from its 52-week high of $34. The quarter's numbers, it should be noted, do not reflect Webvan's proposed purchase of HomeGrocer.com (HOMG) for an estimated $1 billion in stock.
Sameday, which was originally called Shipper.com, has struggled to find a niche, since it competes with traditional delivery services like UPS and Federal Express. More recently, it launched Sameday Mall, an online retailer with same-day delivery, but it abandoned that business a few months after its October launch. Earlier this year, Sameday retuned its operations to serve as a business-to-business fulfillment service for other retailers.
Online grocery delivery company PD Quick, which recently changed its name from Pink Dot, is planning to spend its recent $20 million investment on expanding beyond its home base of Los Angeles into 30 additional cities. But getting into new markets like Washington and New York means taking on Webvan and Kozmo.
The truth is, any one city has only so much room for a last-mile delivery service.
Instant Gratification
A number of services are competing to own the "last mile." They include:
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* planned expansion. Source: Booz, Allen & Hamilton
Benjamin Hammer contributed to this report.
