An example of an E-commerce failure and its causes

An Overview of Dot.com failure

At the year of Millennium, dotcom which is one of the examples of e-commerce face a huge doom in loss.

When and why does a dot-com become a dot-bomb? Here are some reasons:

This internet company was in such a rush to go public that forgot one small detail which is a sound of business plan. Firstly, profitability couldn’t be reached due to a lot of investment capital was poorly spent on planned companies. besides, poor Human Resources management did occur as well. Due to lots of cash in their hands, this company hired too many staffs or even worse, hired unqualified staffs. eg: hiring of friends or relatives often returned no value on investments.

In addition, poor financial management did occur in Dotcom Company. eg: they may build fancy offices which cost massive amount which doesn’t make any gain to the company. Next, there are even hundreds of errors could be found in just one web page of dotcom. eg: many customers did complain about the incorrect price and even the length and weight of the online products. Therefore customer dissatisfaction occurs and this company has to pay back to customers in return of cash. besides, lack of advertising gives a poor result for this company. This may lead to the problem which is nobody even knows whether this company really exists.

Link : http://www.disinfo.com/archive/pages/dossier/id333/pg1/index.html

Example: Kozmo.com (1998-2001)

Kozmo.com was a venture-capital-driven / short-lived online store and delivery service that promised fast, friendly and without delivery charged of anything from snacks to movies such as DVD rentals to Starbucks coffee in the United States. The founder of this company are Joseph Park and Yong Kang, they started the business in March 1998 at New York City.

Kozmo.com was well-known with the idea that you could order anything at any time and have them delivered direct to your house within one hour with free of delivery charged. Kozmo.com is one of the top 10 tech we miss which hailed by CNET.com. The model of this kozmo.com targeted only large cities, especially New York and Boston. Items were delivered by employees with van, bikes or scooters. Unfortunately, it was failed and ran out of cash and as a result had closed on April 11, 2001.

There were few causes that make Kozmo.com failed:

1. Targeted to wrong customers

In July 2000, at the height of its business, the company expanded to seven cities. It was familiar with college student, young professionals, and the urbanites. This is one of the greatest errors for Kozmo when they stopped catering to their main client based on middle class collage-students and targeted upscale clients(young professionals and urbanites). This is because they want to target more upscale clients who would order expensive products. Indeed, kozmo ditch its collage-student customers who bring many businesses (pay a premium to have thousand of items) from DVD players to cotton swabs.

2. Cost

The company went out of business when they found that it was cost too much to deliver a DVD and a pack of gum. Eventually kozmo offered free delivery and charged competitive prices to its customers(a $10 minimum charge was introduced), but that did not stop it from closing in April 2001. This is because the cost of delivery and warehousing were too high. Besides, the company had hired about 1,100 of employees and there was a "big" payment too.

As a conclusion, although Kozmo.com had a great idea to have an online business, but their business still come to failure with the reason of they did not had a proper business plan. Without a proper business plan, Kozmo was too late to learn that its primary attraction of free delivery was also it’s a cause of defeat.