Message to Amazon: Put Away the Toys

Amazon.com is reportedly among a group of several investors that is pumping $100 million (US$) into a startup bicycle delivery company called Kozmo.com, Inc.

The cash infusion comes only seven months after the company, which home-delivers movies, snacks and other items purchased online, began expanding its operations outside of its New York City marketplace.

The question is whether this investment is a serious foray into a new market segment, or just a plaything in a toybox.

While rumors abound that Kozmo.com — like Amazon — is not profitable, some industry observers feel that the quick delivery company is positioned to give Amazon a natural alternative to Federal Express and United Parcel Service (UPS).

Additionally, most of Kozmo.com’s deliveries are made via more than 1,000 bicycle messengers, adding agility and flexibility to Amazon’s present delivery options.

Delivery Options

Until now, Amazon has been focused upon constructing huge warehouses in Kansas, Nevada and other locations, using UPS or the U.S. Postal Service to deliver most of its smaller items. The strategy was to keep costs down by staying clear of urban areas.

Amazon has wavered from that stance somewhat. Last year, the company bought a stake in HomeGrocer.com, Inc., a Bellevue, Washington-based company that offers next-day home delivery of groceries ordered via the Internet. The investment was apparently made with an eye toward a time when the online merchant will be able to offer faster delivery of groceries and other products in some urban areas.

The difference, however, is that Kozmo.com is an unproven commodity. After founding the startup, 28 year-old Joseph C. Park quickly hired executives from Federal Express to chart the company’s growth. In the beginning, the delivery service focused only on books, videos and CDs, but now handles everything from batteries to doughnut deliveries.

Another Obstacle to Profitability?

Still, by investing heavily in such a high-risk delivery system, it seems that Amazon.com founder Jeff Bezos is staying true to form: Visionary instead of pragmatist.

One has to wonder if Amazon.com might not have done better by trying to forge some special delivery arrangements with companies that proved themselves long ago.

Brick-and-Mortar Deal Still Needed

Plus, even if Kozmo.com turns out to be a smashing success, Amazon is still no closer to cutting a deal with a major brick-and-mortar retailer — which it needs if it is going to be able to transform itself from a vulnerable dot-com into a brick-and-click stalwart.

In light of the enormous consolidation going on in the e-commerce arena, Amazon would do well to put away the toys for a while and concentrate on the basics of turning a profit by betting on the sure thing.

What do you think? Let’s talk about it.

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