February 23, 2001 2:55 PM PST

Kozmo cuts staff amid strategy shift

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Online convenience store Kozmo.com said it laid off 60 workers Friday as part of a sweeping plan to build a brick-and-mortar presence.

Kozmo, one of the last Internet-only delivery companies, joins the long list of Web companies that have adopted traditional sales channels as a way to survive the dot-com shakeout. Under the new plan, first reported by CNET News.com, the New York-based company is expanding its business-to-business operations--including leasing out its warehouse space and fulfillment operations--and dropping the .com from its name. Kozmo will also unveil a print catalog on April 1, the company said.

The focus-shift by Kozmo prompted the company to make layoffs at the Web site. Of the 60 workers laid off Friday, the majority were engineers and programmers, the company said. The job cuts, confirmed by spokesman Matt Higgins on Friday, are the third round of layoffs for Kozmo since August and represent 4 percent of the company's total work force.

Chief Executive Gerry Burdo said privately held Kozmo, which offers same-day delivery of a range of consumer goods that people order online, is taking new steps to "refine" its business strategy.

"Clearly, the new plan broadens our reach," said Burdo, who took over as CEO last summer. "Our plan was based on fundamentally broadening our revenue channels and becoming more than a pure Internet site."

These are trying times for e-commerce companies that deliver goods to customers' doors. Kozmo's main rival in New York, Urbanfetch.com, closed its e-commerce operations last year. Several online grocers have also gone out of business, including Streamline.com and ShopLink.com. The two largest online supermarkets, Webvan and Peapod, are ailing.

Wednesday, Peapod reported its biggest quarterly loss yet and said it would run out of cash by the end of the year without additional financing. Webvan said Tuesday that it was closing its operations in Dallas and laying off 220 workers.

Burdo said Kozmo has enough money to last it "well into the future" but refused to specify exactly how long. He also declined to discuss when the company might show its first companywide profit. Kozmo did make money at three of its operations last December, but in each of the cities it operates, the company has yet to show a quarterly profit.

Burdo said the company's backers, which include New York-based venture capital firm Flatiron Partners, have given the company assurances that if it continues to make strides, they will continue to fund the company, Burdo said.

The new catalog, which will have the same "look and feel" as the Web site, will go out initially in April to about 400,000 consumers, Burdo said. The catalog will feature Kozmo's main product categories: entertainment, meals, grocery, drugstore and gift shop. Kozmo also intends to redesign its Web site to focus on these stores.

The company will encourage customers who wish to order from the catalog to phone into the company's call-in center, which Kozmo plans to revamp in the coming weeks.

 

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