It was a news item that wasn’t fully unexpected, yet it caught some e-commerce industry observers off guard.
Last week, online delivery service Kozmo locked up its bikes, cashed in its dreams and became another footnote in the work-in-progress version of electronic commerce history.
Kozmo’s ticket was punched not long after the demise of NBCi.com (Nasdaq: NBCi), the Internet arm of NBC Television. Well, perhaps it wasn’t a demise so much as a necessary absorption by parent company General Electric (NYSE: GE).
GE evidently decided to cut its losses and trip the off switch on NBCi.com before the venture caused the conglomerate any further embarrassment. And how do you accomplish that if you’re a mega-power like GE? Simple. You just buy back all the outstanding publicly held stock and re-direct the public’s interest into Must-See TV.
Will Monica and Chandler really get married next month? Will Grace move out of Will’s apartment again?
See? They’ve already re-directed my attention and it’s only been a few days.
Why It Matters
So, with dot-coms closing right and left, why do these two companies’ simultaneous endings matter?
In part, they are particularly noticeable because Kozmo and NBCi had real-world presence in their favor. Kozmo cyclists had almost become part of New York City’s culture. New Yorkers, notoriously in a hurry for everything from corporate climbing to Ben & Jerry’s Chunky Monkey ice cream, were able to satisfy at least some of their cravings with Kozmo’s handy one-hour guaranteed delivery.
In nine markets nationwide, Kozmo aimed to please with instant gratification and actual humans to represent a concept that was born in cyberspace.
As for NBCi.com, its television network sibling has one of the strongest product identities in America. Some thought the relationship would give the online offspring a boost. It didn’t.
If real-world presence and branding don’t count for something in the world of e-commerce, what does?
Where’s the Beef?
Actually, that may not be the right question to ask. A human face to connect with the keystrokes and a half-century of broadcasting probably do count for something. Perhaps the electronic newcomers simply didn’t know how to take full advantage of their built in-head starts.
For Kozmo, what was the added value that it brought to the marketplace? For years, I have spent a good deal of time in New York, and delivery of everything from ethnic food to laundry detergent has never been a problem. If you live in one of the city’s boroughs, your corner grocery store probably provides almost the same service Kozmo touted, albeit a bit slower sometimes. And if you stay in a decent hotel, one call to the concierge can generally yield the same moo goo gai pan or Tide.
Kozmo’s concept, while a decidedly new age interpretation, was not a new value for consumers.
There was little added worth involved in visiting NBCi.com as well. How many sweepstakes and contests can we really endure?
Of course, in the end, it came down to simple dollars and cents. For Kozmo, what began as the brainchild of one guy in his East Village apartment in New York resulted in investors pouring almost US$300 million into the company’s promise.
Didn’t anyone realize how much Ben & Jerry’s you’d have to deliver in those nine markets to recoup that outlay, much less turn a profit? And why were heavyweights such as Softbank so willing to keep plying the service with cash, as recently as 12 weeks ago?
Further, if big investors were going to continue backing Kozmo, why didn’t they insist the company infiltrate markets where delivery services would be a true added value in the marketplace? It’s tough to get rented videos and cheese popcorn delivered in an hour in Omaha, Nebraska. Everyone seems to have missed the forest for the trees.
Meanwhile, observers wondered when the plug might be pulled on NBCi.com once it reported a loss of $662 million last year. Yet GE kept selling stock to all comers. What was that all about?
It’s incredible that GE would risk its decades-earned reputation in such a irresponsible manner. The portal was clearly not going to make it. What is not so clear is why GE waited so long to kill it.
Mainstream conglomerates on the level of a GE would do well to take the NBCi debacle as an object lesson. Strong initials like NBC and GE backing dot-coms do not necessarily spell success.
While brick-and-click operations may be the inevitable direction for e-commerce, a company still needs added value, whether it’s peddling e-commerce like NBCi or pedaling it like Kozmo.
What do you think? Let’s talk about it.
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.
Now what? So brick-and-click won’t work either. There has been so much debates about business models for so long, dates back to the days when Ebay just came out and Onsale (now egghead) had the lead. Business model is a gimmick, bottomline for a business is profitability. A lot of big name dot coms have failed the public, but please don’t be fooled by them. Media should come down to the ladder and look at the second tier players, many of which are growing at a surpring speed even now. That’s the robust part and the future of dot coms business. The only thing missing from their business is the lime light.
Xoom and Snap actually had strong brands (like Infoseek) that were killed by the conglomerate’s brand. Bottom line is, these were really much smaller companies, with modest but possibly useful services, than the public markets could dream of them being. The public appetite for Internet stocks explains a lot of these plays. Overinvestment created overhype, excessive hiring, and too much duplication. The sad result is that the backlash was just as strong as the bubble, and many good companies are shutting down because they can’t find the funding they need to develop towards profitability.
Now if Yahoo crashes and burns, I really won’t know what to think… but I don’t think it will.
There are 30,000+ existing grocery locations in the U.S. that were very carefully planned in every aspect. Why build warehouses when virtually every neighborhood already had a built in warehouse there? Why hire people to pick, pack and deliver when there are so many entrepreneurial people in the U.S. willing to do the service for their own reasonable profit?
Internet Home Delivery thinks it has the winning business model. It’s been around for two years now.
I agree with Jim. Like most .com’s, folks got caught up in the how rich can I be, how big can my IPO be. .com’s are equal to opening a small business in America… only 10-20% make it last longer than two years. People still want to get rich quick or gather even larger AM ounts of cash. How much money do you need to live on? Most of these investors have lost tons of $, but when you come down to the basics of life – food, shelter, clothes – I’m not worried about them. The folks I worry about are the employees who do the grunt work and need their jobs for the basics of life. I’ll be praying for them.
well written article. There are a myriad of reasons why…there always are. Good article, good questions.