Kozmo Cans Starbucks Drop-Off Plan

Ever-changing e-tailer Kozmo said Monday it will abandon a US$150 million plan to install video drop-off boxes in hundreds of Starbucks (Nasdaq: SBUX) coffee shops across the United States.

Kozmo spokesperson Stephanie Cohen Glass told the E-Commerce Times that the five-year agreement, announced in February 2000, had been based on Kozmo’s aggressive national expansion plans. At the time, Kozmo had plans to enter 21 metropolitan markets around the U.S, but the company has since said it would focus on nine cities.

The agreement with Starbucks also called for Kozmo to offer delivery of the coffee giant’s products.

“When we initially entered into the agreement with Starbucks, we had expansion plans that were much greater than we eventually ended up,” Glass said. “Because our plans changed over the course of the past year, the deal was no longer financially viable.”

Drop Drills

Glass said the 500 existing drop-off boxes will be removed from all Starbucks stores by the end of the week. She added that Kozmo will instead look to replace the lost drop-off locations with others in the nine cities where it now operates.

Kozmo already maintains agreements with scores of local merchants to maintain video drop boxes. For instance, Kozmo’s Boston branch offers drop-off boxes in local supermarkets, ice cream shops and diners.

The boxes are designed to avoid customers having to pay to have videos picked up after they view them, and are seen by Kozmo as a marketing and branding tool as well.

“It’s a system that has worked out well for us,” Glass said. “These locations were just more than we need now that we’ve decided to focus on those nine cities.”

Changes Afoot

Launched in 1997, Kozmo has recently undergone a slew of changes, instituting delivery fees for the first time and adding higher-margin products to its offerings.

With early backing from the likes of Amazon and Softbank, Kozmo created a stir by dispatching orange-clad bicycle couriers to deliver whatever a customer desired in less than an hour.

However, although the company filed for a $150 million IPO last year, it never got off the launching pad. In January, just after closing a $30 million funding round, the company laid off 120 workers and ceased operations in San Diego, California and Houston, Texas.

No More ‘Dot-Com’

More recently, Kozmo dropped the dot-com part of its name and said it would begin producing a catalog to diversify the way it reaches customers.

Last week, Kozmo announced it had hired former BMG Entertainment executive Tom McIntyre as the company’s chief financial officer.

While McIntyre is credited with overseeing rapid growth at BMG, his charge at Kozmo will be achieving “market by market profitability,” according to Kozmo chief executive officer Gerry Burdo.

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