Kozmo.com lays off workers, seeks to widen business

Online delivery service Kozmo.com Inc. last Friday laid off 60 workers, about half of them in its technology department, and disclosed plans to try to expand its business by adding a printed catalog and a set of order fulfillment services aimed at manufacturers and other corporate users.

The New York-based company also said it plans to drop the .com suffix from its business name as of April 1. The attempt to expand beyond the online delivery market follows several rounds of layoffs and last month's closing of delivery operations in San Diego and Houston.

"Kozmo was built out of the Internet," a company spokeswoman said today. "But our products have a much broader reach than just people on the Internet." She added, though, that the moves now under way don't represent a major change of direction for the company, which had envisioned moving toward a less-Internet-dominated approach from the start.

The company plans to distribute 400,000 copies of its new 24-page product catalog by mail and in newspaper inserts in the nine U.S. cities where it currently operates. Each catalog will contain a four-page pullout section with menus from restaurants that use Kozmo personnel to deliver meals to customers, the company said.

Paul Ritter, an analyst at The Yankee Group in Boston, said the move to a printed catalog "seems like an obvious change of direction" for Kozmo, given the difficulty of making money in its current mode of operation. "They can't continue [just] with online deliveries as a road to profitability," he said.

Ritter said the catalog will bring the company into the multichannel retailing world. "From that standpoint, it's a good step," he said. "[But] whether it can lead them to the ultimate windfall of profitability, I still have questions about that."

Kozmo.com is changing to reflect the realities of the retail business, said Barrett Ladd, an analyst at Gomez Advisors Inc. in Waltham, Mass. "In order to really maximize your presence with your customers, you need to be more than just online," Ladd said, adding that many successful online retailers also have catalogs or brick-and-mortar stores.

The addition of the catalog is just one of several changes that Kozmo.com plans to make during the next few months. The company also said it's working on several deals to provide delivery services for other retailers, in addition to setting up a fulfillment service for manufacturers in the cities where it does business.

Executives hope to set up the company as a "pipeline to deliver ... products for ourselves and others," the Kozmo.com spokeswoman said. "We have the delivery infrastructure, [and] we have the technology to route the orders efficiently." She added that Kozmo made a profit in three markets in December -- New York, San Francisco and Boston.

Kozmo.com, which was founded in 1997, offers one-hour delivery services for movies, CDs, food, toys and a wide assortment of other consumer goods. Friday's 60-person layoff left the company with about 1,500 employees and followed a cut of 120 workers made when the San Diego and Houston operations were closed.

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