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Kozmo delivers 275 pink slips

For the second time in eight weeks, online convenience store Kozmo.com trims its work force, this time laying off 275 employees.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
2 min read
Online convenience store Kozmo.com has trimmed its work force, laying off 275 employees, the company confirmed today.

Kozmo says new software developed by its engineering staff will streamline its delivery system and will allow it to fulfill more orders with fewer workers. The software will allow the company to plot routes that allow deliverers to cover more territory and make more stops.

The axe fell yesterday on the company's dispatchers, deliverers and warehouse workers in Los Angeles and New York, the two largest markets in which it operates.

The cutbacks, which amount to about 10 percent of its work force, come hard on the heels of a first round of layoffs at the company's New York headquarters in June, when 24 employees were let go. At that time, executives said they did not anticipate further layoffs.

"We've been continually working to maximize our efficiencies," said Kozmo spokesman Michael Gordon. "In Los Angeles, we've gone from five distribution centers to three and let go of the people at the other two centers. We moved to more efficient and fewer facilities in New York."

Gordon added that Kozmo's service areas will not shrink, and customers will not be affected by the cutbacks.

As investors snub e-commerce companies, e-tailers are in a hurry to turn profits to prove the soundness of their business models. With funding drying up, companies are running out of cash and cutting costs, which usually includes letting employees go.

Kozmo, which filed for a public offering in March, had planned to offer shares to the public by now. Though Kozmo still has its S-1 on file with the Securities and Exchange Commission, it is waiting to see if the stock market bounces back this fall before it tries a public offering, sources close to the company have told CNET News.com.

But the company said it is not facing a cash crunch. Kozmo has saved enough of the $250 million it raised in private equity financing, including the $60 million Amazon.com invested in it in March, to last well into next year, sources said.

As proof of its financial health, Gordon said Kozmo will begin operations in San Diego next week, its 11th market. He also said the company continues to grow its 300,000 customer base by double-digit percentages each month.

The layoffs coincide with a change in Kozmo's leadership. Former chief executive and founder Joseph Park stepped down last month and has been replaced by Gerry Burdo, the company's former chief financial officer.

In recent months, Kozmo has suffered through site glitches, labor disputes, and accusations that the company was redlining--the practice of declining service to areas with large minority populations--in Washington, D.C.