In its second-largest acquisition, Amazon buys the company for $970 million.
More online retailers are charging for delivery. Now Kozmo.com, which built its business on free delivery, is charging, too. Kozmo began charging $1.99 for all orders under $30 on Dec. 1. Orders more than $30 are still free. Kozmo says the fee is to offset the company’s expanded product offering and service area.
“It’s a very smart move,” says Analyst Keven Wilder, of Chicago-based Wilder and Associates. “It’s a mystery to me how they’ve gone on this long. Their fulfillment costs are very high.” Wilder says the fee will likely act as an incentive to push orders over the $30 mark. The higher ticket price, not the two bucks, is where the company will make its money. “It’s more of a psychological thing,” she says of the fee. “It’s such a small amount.”
In July, Kozmo instituted a $5 minimum order. A month later, the company laid off 300 employees because of improved automation.
Kozmo says the fee has been in the works for some time. The company has gotten some negative feedback from customers regarding the fee, but overall customers don’t seem to mind, a spokeswoman says. This is just a nominal fee for a terrific service, she adds.