URBAN FETCH CAN'T DELIVER, QUITS RETAIL BUSINESS

JON SPRINGER

NEW YORK -- Urban Fetch, the "instant gratification" Internet site that sold food, videos and other convenience items over the Internet for same-day delivery, is getting out of the retailing business, a victim of what the company called "present market realities."

Urban Fetch, a private company with operations here and in London, said it will instead focus on its business-to-business Urban Fetch Express courier service. Its Internet site last week was advertising a "farewell sale" with items including movies, games, health & beauty aids and snack foods offered at a discount. Following the sale of those items, Urban Fetch will cease to be a retailer, Susan Tainter, a company spokeswoman, told SN.

Urban Fetch's decision to shift its focus comes after months of speculation that it would merge with Kozmo.com, a New York-based competitor. However, Tainter said talks broke off earlier this month. "There were too many issues that neither side could agree on," she said.

Urban Fetch Express, a courier service the company introduced this spring, is already profitable, said Tainter. Its food and convenience retailing operation was "incredibly close to profitability," she added, but was abandoned as the consumer-based Web retailers fell out of favor with investors who, since April's dot-com stock crash, have demanded profitability from e-tailers.

"We're deploying all our assets to the B2B side, focusing on our Urban Fetch Express service, which is already profitable," Tainter said.

Ross Stevens, Urban Fetch's chief executive officer, said Urban Fetch "would not rule out the possibility of re-entering the B2C market if conditions change."

Tim Laseter, principal for McLean, Va.-based consulting firm Booz-Allen & Hamilton, told SN he was disappointed to see Urban Fetch abandon its retail business, which he considered to be further along than its deeper-pocketed competitor Kozmo in creating a profitable business model.

"I had greater faith in Urban Fetch finding the right path," he said. "Now, I'm afraid neither will make it."

Laseter said Urban Fetch had begun to attack the issues that made the fast-delivery services vulnerable to losing money, namely small-order sizes and margins. Urban Fetch for example shied away from offering rental videos and concentrated on higher-ticket items such as wines, when it concluded that delivering and retrieving the items cost the company money and didn't necessarily open customers to higher-ticket purchases, Laseter said.

"Urban Fetch realized that once a video customer, always a video customer. It was not a base to tap into further purchases," he said. "I think they worked hard to get the right product mix and drive density."