Amazon Targets One-Hour Delivery with Kozmo Deal

In a deal that could ultimately accelerate delivery times across the e-commerce landscape, Amazon.com announced Monday that it has invested $60 million (US$) in one-hour delivery service Kozmo.com.

Amazon, which also received warrants to purchase additional shares in Kozmo.com, plans to take advantage of the three-year alliance by offering customers a one-hour delivery option for certain book, music and toy orders. The e-tail giant will also use other one-hour delivery services.

“We’re always looking for new ways to offer more choices to our customers, whether it’s new products or new delivery options,” said Amazon president and CEO Joe Galli. “In a short time, Kozmo.com has developed a strong track record for meeting a unique customer need, and this agreement provides us a one-hour delivery option for the types of products that customers may want immediately.”

Kozmo.com currently serves New York City, Boston, Seattle, Washington, D.C., San Francisco, and Los Angeles.

New Industry Standard?

While this new deal may be part of Amazon’s attempt to cast a wide net over e-commerce, it also holds the potential to redefine the public’s expectations. More than one industry study has suggested that while consumers enjoy the instantaneous nature of online purchasing, the associated wait times for delivery is a growing source of frustration.

In fact, Kozmo itself was borne of frustration with online fulfillment. In 1998, Kozmo CEO Joe Park founded the company after becoming a disaffected online shopper.

Since that time, Park’s concept has solidified its position in the e-marketplace. As reported in the E-Commerce Times, the company secured $28 million in venture capital funding last October from Amazon and an additional $30 million from Japanese Internet investor Softbank earlier this year.

The company also signed an agreement with Ticketmaster Online-City Search to be its exclusive “under one hour” delivery service on its extensive network of city sites across the United States.

Copycats on the Scene

To say that the public is hungry for the service would be an understatement. While Kozmo is now averaging over 1,000 orders a day, copycat services are lying in wait.

One such service, Urbanfetch.com, is trying to muscle in on New York’s City’s sizeable population of consumers who either do not have time or transportation to shop for convenience items. What started as a delivery of books and movies has expanded to include such other goods as ice cream, donuts and pizza.

“Their big challenge is whether the model is scaleable to more cities,” said Melissa Shore, an analyst with Jupiter Communications. “Expanding their product line is a smart move, because the incentive is there now to get your movie and your snacks in one stop rather than two. Building customer loyalty will be crucial.”

In fact, Jupiter reported at the end of last year that only seven percent of the top 93 e-commerce sites offer same-day delivery. With an industry leader now embracing instant delivery, that figure is likely to change rapidly.