Kozmo.com Cuts Staff, Exits Markets

Internet-based home delivery service Kozmo.com joined the long list of e-commerce companies to announce layoffs Monday, announcing that it willcut 120 workers and cease services in two U.S. cities.

Kozmo immediately stopped its operations in San Diego, California and Houston, Texas.

“Like any retailer, Kozmo is continually evaluating its strategy,” spokeswoman Stephanie Cohen Glass told the E-Commerce Times. “Those cities never reached a level of traction in a similar time frame as some of our top performing cities.”

Kozmo had made an aggressive push in Houston, expanding service in the city last September. “Houstonians have embraced Kozmo,” general manager Edward Hymes said at the time.

New Capital Coming

The latest job cuts account for about 6 percent of Kozmo’s workforce, which had been trimmed several times during 2000. Glass said most of the workers were in the two cities shut down, along with several workers in Chicago, Illinois and 10 at the company’s New York City headquarters.

The move comes just weeks after Flatiron Partners, Kozmo’s main venture backer, agreed to invest another US$30 million into the company amid growing signs that the delivery service was close to obtaining profits in at least some markets. Flatiron previously invested $28 million in Kozmo late in 1999.

Layoffs Mount

The cuts come amid mounting evidence that the long run of increasing dot-com layoffs was not slowed by the turn of the calendar year.

According to Chicago, Illinois-based executive search firm Challenger, Gray and Christmas, the month of December 2000 set a record for Internet company layoffs, with 10,459 jobs cut, 19 percent more than in November 2000.

January has gotten off to a fast start as well. eToys, Inc. said last week it would cut 700 workers, while online advertiser Engage slashed 550 workers from its payroll.

This week, Kozmo joined MVP.com, Ameritrade and New York Times Digital in announcing staff-cutting measures of their own.

New Leadership

When it filed for its $150 million initial public offering in March of 2000, Kozmo said it lost $26 million during 1999 on $3.5 million in sales.

Late last year, Kozmo’s founders yielded leadership of the company to Gerry Burdo, who was hand-picked by Flatiron Partners. Burdo has overseen a host of internal changes, including higher minimum-order prices and the introduction of more big-ticket items.

Legal Woes

Though it grew rapidly early in 2000, Kozmo made headlines for a much different reason last year. In April, the Equal Rights Center and two co-plaintiffs filed a lawsuit in federal court against Kozmo, alleging that the company refused to deliver to predominantly African-American neighborhoods.

The federal suit was later dismissed by the plaintiffs, who said they planned to re-file it in state court. However, in December, Kozmo effectively settled the case by announcing it would work with the Equal Rights Center on initiatives aimed at bridging the digital divide in Washington, D.C. and other cities, and by providing $125,000 to get efforts off the ground.