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Catalog Only Part of Kozmo's Plans

Kozmo.com's decision to enter the world of catalogs in April is part of the company's larger business plan to expand its operations. The plans also include spending $500,000 to restructure its call center operations to accommodate the catalog orders.

The New York-based Internet delivery company is the most recent in a growing number of e-commerce sites to produce a catalog.

The company is in the process of designing its 24-page color catalog using a combination of its inhouse creative team and New York design agency The Sloan Group.

“We need to accomplish a fair bit with the catalog because it's a new venture for us,” said Andrew Resnick, Kozmo's senior vice president. “In addition to featuring the products, we need to tell the story of Kozmo — who we are and what we do.”

But the new business strategy is not without growing pains. Kozmo reduced its work force by 4 percent last week, axing 60 positions in its online operation. The cuts came a month after the company laid off 120 people and closed operations in Houston and San Diego.

The catalog, which will drop 400,000 copies this spring, will be circulated in its remaining market areas — Boston, New York, Washington, Atlanta, Chicago, Seattle, San Francisco, Los Angeles and Portland, OR. Kozmo plans to drop catalogs bimonthly, totaling 4 million books for 2001.

The company is using a combination of its own house files and list rentals for the upcoming campaign. The company has a customer base of 400,000, said Stephanie Glass Cohen, Kozmo's director of communications. The majority of the catalogs, however, will be sent to prospects.

The target audience is age 25 to 49, well-educated, with an annual household income of more than $50,000 and strapped for time. The average online sales order is about $30.

Kozmo's product offerings include video rentals, prepared meals, baby products and specialty gift items. The average sales order for the catalog is expected to be higher than online because of a higher purchase minimum of $10. The online purchase minimum is $5, Glass Cohen said.

This is not the first catalog Kozmo has created. During the holiday season the company distributed 2 million eight-page catalogs. Copies were inserted into newspapers in the 11 markets it was operating in at the time.

Now that the online company has become a multichannel operation, some industry experts say Kozmo has to have a solid business plan in order to withstand the new venture.

“Online delivery services haven't been doing that well, and venturing into catalogs could be the company's way of looking at other avenues to branch out,” said Mike Wychocki, executive vice president at Haggin Marketing, Sausalito, CA, a catalog and Internet marketing group.

“The big questions I would ask are, how many people are on a house file, and are they e-mail names or do they have street addresses attached to them? Do they have enough data to construct a profile and then go out and purchase like lists?” he said.

Wychocki said it is important for the company to have a strong house file of customers likely to make purchases to help sustain the catalog.

Resnick said the company is focusing on three lists — proven catalog and online shoppers and magazines. The company has not chosen a list company to work with yet, he said.

Mike Isaacson, owner of Pinpoint Direct, a catalog consultancy in Seattle, said Kozmo offers a much-needed service in urban areas. He is concerned, however, that average online sales are low and said the company should try to look at ways to raise it.

“Your average [sales] order and your average gross have to be able to support a new venture like a catalog,” Isaacson said. “There [are] printing and mailing costs to consider, and without knowing their business plan, I would probably advise them to focus on their Web presence.”

The company is moving to increase its brand awareness to attract more visitors to its site. Resnick said the company plans to advertise on cable channels within its markets and to do truck advertising that will include the Web address and toll-free number. There also will be an online push to promote the catalog.

“It's not as much as we're telling people specifically that we're launching a catalog as much as we are featuring our 800 number and inviting people to call in,” he said.

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