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Kozmo.com sees more sales in Starbucks deal

The Internet retailer is betting brick-and-mortar Starbucks Coffee can bolster sales of Kozmo's Web-based food, entertainment and convenience item business.

Kozmo.com is betting brick-and-mortar Starbucks Coffee can bolster sales of its Web-based food, entertainment and convenience item business.

The two companies today entered into a five-year co-marketing agreement that will exploit similarities in their customer bases.

Starbucks will receive $150 million from Kozmo.com, which will be used partially to promote the Internet retailer inside the Seattle, Wash.-based coffee dealer's shops.

The deal "is Net retailers use same-day delivery to competea realization of our business-to-consumer and business-to-business Web strategy," Kozmo.com CEO Joseph Park said in a prepared statement.

Kozmo.com, which offers personalized delivery services in Boston, New York, San Francisco, Seattle and Washington, D.C., plans to use the Starbucks deal initially for supporting existing markets. Kozmo.com customers place online orders for convenience items--ranging from snack foods to DVDs to books--that are delivered about an hour later.

The New York-based Internet retailer, which opened for business in 1997, will put drop boxes for the return of rental items in Starbucks stores in the five cities it services. Kozmo.com also will use Starbucks' more than 2,100 stores in 34 states as a foothold for expanding into new markets.

Starbucks benefits by Kozmo.com selling selected coffees over the Internet. The coffee dealer estimates about 90 percent of its 10 million customers surf the Web.

"This alliance defines the benefits of a truly integrated clicks-and-mortar strategy for our customers," Howard Schultz, Starbucks CEO, said in a prepared statement. "In fact, the similarities between Starbucks and Kozmo.com customers make this a value-enhancing proposition for everybody."

Starbucks anticipates about a 1 cent earnings-per-share gain for the remainder of fiscal year 2000 and about 5 cents a share for 2001.

Kozmo.com has cut a swath of recent deals, including ones with Ticketmaster Online-CitySearch and Amazon.com, as it looks to expand into new markets.