Takes Stake

SAN FRANCISCO (03/20/2000) - Inc. wants instant gratification for its customers. announced this morning it has snapped up a US$60 million stake in one-hour delivery service Inc.. The deal had been expected.

As part of the deal, has struck a nonexclusive, three-year alliance to offer its customers a one-hour delivery option, powered by

The news comes just weeks before plans to file to go public, sources familiar with the matter say. A spokesperson at declined to comment. also declined to comment on the size of their stake in Kozmo.

Previously, Amazon's interest in Kozmo was expected to be a part of larger investment by a range of companies. Sources close to the companies had earlier discussed an investment of as much as $120 million, with Softbank among the potential investors. A Softbank spokesperson declined to comment.

Kozmo's ambitions to tap into the public market were tempered last week after online grocer Peapod Inc. lost a $120 million venture capital-backed infusion of cash, sending its stock plunging over 50 percent. Peapod's woes have forced the larger question of the viability of venture-backed dot-coms with no foreseeable long-term profits, including Amazon.

To prove its worth, Kozmo has attempted to redub its service in recent months to be an "e-mediate Internet door-to-door service," as its press release notes.

The rhetoric is a none-too-subtle hint at where the company is headed; while Kozmo's convenience-store business model has been hammered by critics for its razor-thin margins, the Amazon deal alludes to Kozmo's business-to-business ambitions of transforming into the next Federal Express. The idea is that instead of selling merchandise, Kozmo would service large-scale e-commerce partners looking to offer a better delivery option.

For evidence of those ambitions, look no further than Kozmo's management board.

Park lured former FedEx executive Kenneth Trevathan to be the chief operating officer, and UPS executive Scott Evans to handle logistics and operations.

The announcement also comes on the heels of a deal between Kozmo and Starbucks, whereby Kozmo will pay the coffeehouse chain $150 million over ten years in a strategic marketing alliance. As a boon to Kozmo customers, they can now drop off videos and DVDs.

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