Amazon Invests $60 Million in Kozmo for Faster Delivery

Amazon.com wants to shorten its delivery time from days to hours.

The Internet commerce giant announced Monday that it had invested $60 million in Kozmo.com, a service that provides one-hour delivery of food, books, video rentals and other items in six cities, including Los Angeles.

Amazon, based in Seattle, now ships its books, CDs and other products via mail, United Parcel Service or Federal Express from seven huge warehouses located across the country. Kozmo, based in New York, delivers via car, scooter and bicycle from local warehouses in metropolitan areas.

Amazon spokesman Bill Curry said the company planned to distribute books, music and toys through Kozmo. But he would not disclose a date when the deliveries would begin or how items would be chosen from its huge inventory.

Last month, Kozmo began deliveries in the Los Angeles area from warehouses in North Hollywood, West Los Angeles, Hollywood, Pasadena and the South Bay. Kozmo officials declined to comment on its arrangement with Amazon.

The venture is one in a series of efforts by Amazon to expand its services. The company has not posted a profit since its founding six years ago, and reported a loss of $185 million for the fourth quarter ended Dec. 31.

Market analyst Ken Cassar of Jupiter Communications said Amazon had to get into the instant-gratification game to stay competitive. Kozmo and other door-to-door Internet delivery companies have shown that people love the convenience of ordering something on the Internet and then having it delivered in less than an hour.

“Amazon has no choice but to pursue immediate delivery options,” he said, “especially considering the competition it faces, not only from companies like Kozmo, but also . . . Barnes & Noble and Wal-Mart.”

These national retailers could begin offering local delivery from their outlets, he said.

Logistically, however, Cassar said Amazon faces a big shift in the way it operates.

Amazon will have to pinpoint customers in areas served by Kozmo, and then let them know what specific products can get to them within an hour. “I argue that it will double the complexity of the transaction,” Cassar said.

Neither Amazon nor Kozmo would say how much of an equity stake Amazon had taken in the company, although the Wall Street Journal reported recently that it had acquired 23% of the company.

In announcing the deal Monday, Amazon said its investment in Kozmo closed in December.