Store Wars

The Internet sure isn’t what it used to be. Designed as a decentralized way to protect data in the event of a nuclear war, hyped as the electronic superhighway that would connect ordinary persons with their soulmates on the other side of the world, the Net has now become the single most efficient way to get a pint of Ben & Jerry’s delivered to your door in under an hour.

You’ve probably already seen the orange-and-green bus ads for, the New York-based video-delivery service that recently expanded its range of offerings to include CDs, video games, ice cream, magazines, and Krispy Kremes. The awkwardly named has just launched a similar service in New York. And the much-talked-about and recently delayed IPO of Webvan – the massive Internet-based supermarket – has only focused more attention on the tooth-and-nail competition to own the best Web delivery brand in our uncommon market.

Daily errands aren’t the most obvious use for one of the Defense Department’s more ambitious postwar projects – especially since Web-based orders might travel through the Net by way of norad before reaching their destination. But before you dismiss this as a range war over scrubland, consider how much money is being amassed to turn your computer into everything from a grocery cart to a Blockbuster bag.

On one side are the full-service forces, led by established entrepreneurs like NetGrocer’s Jim Barksdale (Netscape) and Webvan’s Louis Borders (Borders Books). They’re building facilities to house and deliver everything from Diet Coke to diapers in an effort to make your weekly trip to the supermarket a thing of the past. Weighing in as the underdog and local favorite is Joseph Park, the plucky founder of, who describes his service as “a localized FedEx system” for the kind of convenience items you buy at the corner deli.

Internet-based home delivery won’t become a significant market for at least five years, and even then there will be “scary logistics problems,” according to Forrester Research e-commerce analyst Carrie Ardito. More to the point, she adds, no one knows whether ordinary Americans – especially suburbanites with easy access to cars – will want to do their shopping by computer.

The analysts may be skeptical, but they haven’t used Kozmo – and many don’t live in Manhattan, where even the middle class gets its dry cleaning delivered. In a city where being busy is all but synonymous with success, Internet delivery could surpass the cell phone and the PalmPilot as the ultimate power tool.

I started using Kozmo more than a year ago and found that video rental is the killer app of the Internet delivery business. Though there’s a Blockbuster – not to mention newsstands and stores that sell ice cream – steps from my door, the five-block walk to the video store is always the hardest. The problem isn’t the distance – it’s finding and choosing a movie in a vast, hard-to-navigate store where I can’t get a second opinion from my spouse and I suddenly can’t remember what movie I wanted to see in the first place. Too many times, I made the journey back empty-handed.

On Kozmo’s site (, however, I can browse for a movie from home. It’s searchable, so I can find all of a director’s or an actor’s films with a few mouse clicks. And if I can’t find a movie I’m in the mood for – or I can’t persuade my wife to watch The Godfather again – I’m no worse off. Win or lose, it takes all of 10 minutes.

I became addicted. I became a Kozmo bore. It got so bad that when my wife was taking the elevator down with a neighbor who had a Blockbuster box, she pointed and excitedly explained, “You can get those picked up and delivered over the Web.” He smiled indulgently.

But Kozmo, it turns out, just wants to use video rental as the way into your wallet, much the same way began selling books before moving on to everything else. On the risk that someone, somewhere, lives more than two blocks from a Duane Reade, it plans to add toiletries next. Like an early regular at a quiet corner bistro, I’m both proud and panicked.

The big mystery about Kozmo – the one the orange-and-green ads play off – is how they do it. And while the ads suggest everything from rocket-powered roller skates to human cannonballs, the answer is actually prosaic: bicycle messengers.

The other big mystery is how Park plans to make money renting videos for about the same price as Blockbuster ($4) and selling ice cream for less than the deli on the corner, and then delivering them free of charge. (Kozmo is adamant that you don’t even have to tip the couriers.) The answer is that without paying sky-high retail rents – Kozmo serves Manhattan from the Battery to 125th Street from its Union Square office and an uptown satellite – it can move product more efficiently.

“I want to be the Internet bodega,” Park says. Barely five feet five with a cherubic face topped by a thatch of black hair, Park was a 24-year-old working at Goldman Sachs in L.A. when he came up with a meticulously thought-out business plan for Internet-based delivery. Working backward from the concept of Internet-dispatched bicycle messengers, he thought through a number of products he could begin with before settling on videos.

Kozmo made its debut in New York in March 1998, but it’s not limited to New York any more than it’s limited to videos. By July 1999, it had set up shop in Seattle. Last month, it opened in San Francisco. Next comes Washington, D.C., then more than twenty other markets by the end of 2000. Park hints darkly at international ambitions after that.

Although he’s already selling more Ben & Jerry’s than almost any single store in New York – more than 1,000 pints a week – Park has a long way to go to give Blockbuster a run for its money. Kozmo had one of its busiest days ever during Hurricane Floyd, when it logged 2,000-plus orders for housebound New Yorkers, but the Blockbuster chain says it rents 1,500 videos per minute in the U.S. So Kozmo does about the same volume of business as four of its stores.

At Kozmo’s surprisingly small Union Square office, bicycle messengers mill around like bettors at an OTB, amid a clutter of freezers packed full of ice cream and bookshelves overflowing with videos. If this sounds a bit like a college-dorm-room dream, that’s because it reflects a view of a world where no one buys the economy-size toothpaste. Like the Internet itself, Kozmo caught on first among young men – the kind of guys who have made Playboy the company’s most popular magazine and The Matrix its most popular movie. The day I was there, someone was having the recently released Sega Dreamcast machine delivered. One customer even asked when Kozmo would begin delivering pot.

“Like the Internet itself, Kozmo caught on first among young men – the kind of guys who made ‘Playboy’ the company’s most popular magazine and ‘The Matrix’ its most popular movie. One customer even asked when Kozmo would begin delivering pot.”

Given Park’s ambitions, you could almost see him taking convenience to its natural next level by offering the Kozmo version of a Saturday-night special: two videos, a bottle of wine, and a package of condoms. “And some Altoids!” says Mike Klibaner, Kozmo’s VP for product development. He’s joking, but who knows?

New York seems to breed permanent adolescents. Here, where people expect convenience and no one can make plans for next Saturday night, Kozmo should have no problem building a loyal clientele. But Park isn’t only after the deli on the corner – he’s after the whole suburban Slurpee culture.

“What I think is going to draw people to start using our service on a regular basis – New York may be less of a case – is the convenience-store business,” says Park. “The average person goes to a convenience store like 7-Eleven three times a week, on top of a weekly trip to the supermarket.” Like Borders at Webvan, he claims his super-secret software will enable him to provide a service that no one else can match. But he’ll have the same problem in the suburbs as Webvan: Outside the city, the convenience store is only a car ride away. Suburbanites just aren’t used to ordering in, and they should be forgiven for not thinking of the Internet as a way to run errands.

Whether Kozmo becomes the next Amazon depends on whether Park can get suburbanites out of their SUVs and onto the Internet. After that, it becomes a battle of money and logistics. And while these would-be national corporations wage their global battle to replace the corner grocer, I’ll keep ordering Krispy Kremes.

Store Wars