First, a little background: To fully appreciate this post, it'll help to watch this one-minute video or read the transcript of this subtly funny Saturday Night Live commercial spoof from 1988. Or, if that's not the way you roll, you can just keep reading and I'll explain....
The spot, for the fictional First Citiwide Change Bank, poked fun at the self-important talking-heads financial services TV ads of the time. Its premise was that the bank existed solely to provide change - if you had a hundred-dollar bill and wanted a fifty, two tens, four fives and five ones and twenty quarters, First Citiwide was your kind of bank.
The kicker (starting at 0:53 in the clip) is delivered by the bank spokesman, who admits that customers always ask how Citiwide makes any money, if all it does is give people change. "The answer is simple," he explains. "Volume."
That seemed pretty funny to my high-school-senior brain, and come to think of it, it seems pretty funny now. It does not, however, seem like the basis for a legitimate business plan. For, like, a non-spoof company.
Which - finally! - leads me to the point of this post. Over the weekend, for no apparent reason, I was reminiscing about one of the great casualties of the dot-com bust: Kozmo.com.
For those who don't remember, or who didn't live in one of the seven markets it eventually served, Kozmo was a web-based retailer that sold snacks, drinks, small electronics, CDs and DVDs. And with distribution centers strategically located throughout each of its cities, it offered one-hour delivery.
So if it was 2000 - the year before Kozmo krashed - and you absolutely had to have a pint of New York Superfudge Chunk (which I did a few, OK, several times) and a copy of *NSYNC's No Strings Attached CD (which I definitely did not), and you had to have them pretty much right away, it was Kozmo to the rescue. And, despite the almost unfathomable convenience, prices were pretty much the same as you would have paid at 7-Eleven for the ice cream or at Tower Records (remember them?) for the CD.
Oh, and if it sounds too good to be true, it got better still: Delivery was free.
In other words, it was perhaps my favorite company of all time.
But even as I was enjoying the heck out of this brave new business model, I also felt a creeping doubt. Something close to guilt, actually. Without charging a premium, let alone a delivery fee, how could Kozmo possibly survive? I was pretty sure that the more I ordered from Kozmo, the more money I was costing the company, and the sooner it would go out of business. But there was Superfudge Chunk to be eaten, and I had Internet access, so I blithely put those doubts aside.
Until one day, probably just a few months before it all went pfffft, when I had the opportunity to write an article about Kozmo's marketing strategy. While interviewing the marketing director, I mentioned that I didn't quite understand how they could charge the same prices as retail stores, offer free one-hour delivery and absorb all of the attendant costs, and still turn a profit.
I am not making this up.
Her answer was simple: "Volume."