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Urbanfetch to stop delivering goods to consumers

The online convenience store is dumping its consumer business to focus on delivering goods for other companies.

Online convenience store is dumping its consumer business to focus on delivering goods for other companies, its executives confirmed Thursday.

New York-based Urbanfetch said its 6-month-old business-to-business service, Urbanfetch Express, has become profitable and generates more revenues than its New York and London consumer operations combined. The company also said the investment markets' "volatile period" played a part in its decision.

"We had a dramatic change in the capital markets," Urbanfetch chief executive Ross Stevens said. "Financing has dried up for companies like ours. Present market realities dictate that we focus our resources where we can make a profit in a much shorter time frame."

Stevens said Urbanfetch's consumer operations will stay open for several more weeks as the company liquidates its inventory.

Internet companies offering home delivery caught the media's fancy this year. Ordering goods over the Internet and receiving them within hours was the kind of convenience analysts heralded as the Web's best chance at winning over the public.

But none of the online companies that offer home delivery have produced profits. Home grocers such as Webvan, Peapod and have seen their share prices dwindle to almost penny stocks. Last week, shares of Webvan and Streamline saw new lows.

The strategy shift comes two days after, another Internet convenience store offering home delivery, and Urbanfetch said they broke off merger talks. For a year, the companies have tussled for control of the online home delivery market in New York. They once shared very similar business models, dispatching messengers to transport everything from televisions to potato chips to customers' doors in an hour.

Some analysts predicted that Urbanfetch would leave the consumer business this week and are crowning the much larger Kozmo as the winner of the home-delivery war in New York.

While Urbanfetch does business in New York and London, Kozmo has spread to 11 cities across the United States, including San Francisco, Chicago and Los Angeles. Kozmo has attracted about $250 million in private financing, and last month, Twentieth Century Fox, Universal Studios and DreamWorks SKG took undisclosed stakes in the company.

Urbanfetch has taken in around $70 million in private financing. "At the end of the day, we were not able to raise sufficient capital to continue the business," Stevens said.

In a move that signaled Urbanfetch could be having difficulties with some of its consumer offerings, the company ceased its video rental operations last month.

Layoffs are imminent at Urbanfetch, Stevens said. The company plans to keep only those employees involved with Urbanfetch Express.

Stevens would not say whether he will stay on as CEO. "We haven't made any final decisions on senior management," he said. "We're just very disappointed to have to close our (business-to-consumer) operations, and we thank all our customers for their loyalty and support."