Dot-Com Delivers - two e-commerce delivery services, Urbanfetch.com and Kozmo.com, battle to control the market in New York City

Kiplinger's Personal Finance Magazine, March, 2000 by Ian Baldwin, Courtney Mcgrath

For less than you would pay at the store, INTERNET SERVICES bring media and munchies right to your door.

THE REAL FIGHT in New York this year has nothing to do with the Senate contest between Rudy Giuliani and Hillary Clinton. It's the battle between two Manhattan companies--Urbanfetch.com and Kozmo.com--for supremacy in a business that barely existed a year ago: whizzing Web-ordered food and entertainment to customers in an hour or less.

But then New Yorkers expect, and usually get, just about any sort of consumable delivered to their door. What makes Kozmo.com and Urbanfetch.com novel is their use of the Internet to deliver faster and better than anybody else. All you do is fill out a short account form, add goods to a shopping cart, check out with a credit card (sorry, no cash on delivery), and the goodies appear on your doorstep.

With the help of our far-flung associates (who literally worked for food), Online Shopper put Kozmo.com through its paces in the five cities it serves: Boston, New York, San Francisco, Seattle and Washington, D.C. If you don't live in one of those places, sit tight, because Kozmo.com plans to incorporate at least 20 more cities this year, starting with Los Angeles (Chicago and Atlanta are next). Urbanfetch, which we tested for comparison, serves only New York but is considering expansion here and abroad.

A Web weekend. Here is what Kozmo can slide on to your doorstep in less than one hour: books and CDs, DVDs and videos for rent or sale, video games and magazines--plus drugstore items and the snacks needed to experience all this entertainment properly. Kozmo will also sell you a Sega Dreamcast, Nintendo 64 or Sony PlayStation player, and Urbanfetch has a full electronics store for those who need a Palm Pilot on their threshold in a New York hour.

The edibles vary by city, but nowhere could Online Shopper spin a proper meal from Kozmo's menu--flatbread sandwiches in New York and refrigerated pizza in San Francisco are as close as it gets. Urbanfetch has a few offerings at the other extreme of the scale, including a lobster dinner for two. Both services mercilessly target the instinct toward sugary indulgence with candy, cookies, sodas and more flavors of Ben & Jerry's ice cream than anyone should be familiar with. Kozmo makes concessions to local tastes, such as fresh coffee beans and gourmet salsa in Seattle, but local online delivery at this stage is more like a convenience store than a supermarket.

Little matter. Kozmo and Urbanfetch won us over with impressive speed, flawlessly executed orders and deliverypersons who weren't just polite but often charming (see the box on the next page for details). In fact, the deliveries hewed to a magical clockwork that Kozmo's namesake, slacker Kramer of Seinfeld, could never match. And here's the best part: The prices include delivery for what you'd pay in a store or less. "I just can't believe they do it for that price," raved one of our testers.

Passing on the savings. Charging nothing extra for delivery, the idea goes, can be profitable because the service eliminates the high cost of urban retail space, stocking everything in a central warehouse and hiring a fleet of couriers.

Some of those savings are being passed on already. Our food prices varied by city (a box of Oreos that was $1.29 in Washington was $1.50 in New York), but everywhere they were at or below retail. The same was true for new-release video rentals, compared with what Blockbuster charges in the same city, and Online Shopper had no trouble getting the sort of in-demand titles Blockbuster spreads thick on its shelves.

On top of that, Kozmo and Urbanfetch let you keep the rental for three nights and will pick it up (Kozmo charges $1 for this convenience). There's no charge if you use Urbanfetch or a Kozmo drop box (the company has placed dozens of squat silver boxes in each city, often in coffee shops). That may be easier to manage, anyway: With Kozmo, you have to call for a pickup by 11 a.M. the morning after the third night, and in the two cities where we asked for at-home pickup, Kozmo arrived 15 minutes after the scheduled one-hour window had closed. When we tried to return a book and game we'd bought, Kozmo was more than an hour late--twice.

Otherwise, Kozmo's on-the-ground system is a machine of beauty. Only in New York did Online Shopper uncover any lapses: Our Manhattan tester received his order nearly an hour behind schedule. A Kozmo phone-service rep admitted that 30 minutes late was par for the course on a weekend night (the company is planning a third warehouse to beef up capacity). Ordering an hour or so in advance brought Kozmo's messenger to the door much more promptly. You don't have to tip, though Kozmo's deliverymen graciously accepted our gratuities (Urbanfetch forbids its couriers to take tips).

Kozmo's virtual operation could take lessons from its physical one. Pages on its Web site--including the all-important order-confirmation page--often don't print out properly, so be sure to write down the order number. Urbanfetch's plodding Web servers had problems with Online Shopper's credit card and scotched our entire order. When the problem was resolved, we had to reorder everything from scratch. But solid telephone support managed to save the day. All our calls to the companies were answered quickly--as you'd expect from services that peddle instant gratification.