Boosting its last-mile capabilities, Costco Wholesale Corp. has bought third-party delivery and logistics provider Innovel Solutions for $1 billion in cash.
In announcing the deal on Tuesday, Costco said the transaction has been completed. Hoffman Estates, Ill.-based Innovel was a subsidiary of Transform Holdco LLC, the operator of Sears and Kmart stores.
Innovel has for decades provided Sears with “final mile” delivery of big and bulky products, along with installation and “white glove” support services, across the United States and Puerto Rico. More recently, Innovel has begun serving other customers, including Costco since 2015.
Products delivered and serviced by Innovel include major appliances, furniture, mattresses, televisions, grills, patio, fitness equipment and wine cellars.
“We have had a great relationship with Innovel and share a philosophy of taking care of our members” Costco CEO Craig Jelinek said in a statement. “We believe the acquisition will allow us to grow our e-commerce sales of big and bulky items at a faster rate.”
Innovel provides warehousing, transportation, installation and home delivery services to retail, manufacturing and commercial clients. Costco noted that Innovel’s network covers nearly 90% of the U.S. and Puerto Rico, and the company regularly ranks in the top quartile of customer satisfaction scores.
On its website, Innovel said it can reach 100% of continental U.S. ZIP codes, plus Anchorage, Alaska, and Oahu, Hawaii. The company said it offers a 24- to 48-hour delivery capability for 85% of households and 93% of orders and makes more than 4 million deliveries per year, with 1,100 trucks on the road daily.
With more than 1,500 employees, Innovel operates 11 distribution/fulfillment centers and over 100 final-mile cross-dock centers, with 15 million-plus square feet of warehouse space. The company also operates dedicated call centers.
Costco’s acquisition of Innovel comes as other large retailers — such as Walmart, Amazon, Target, The Kroger Cos., Albertsons Cos., Ahold Delhaize USA, H-E-B, Publix Super Markets and Dollar General —bolster their distribution, logistics and delivery capabilities to meet demand for fast-growing product categories and adapt to an emerging omnichannel business model. Efforts include the construction of new distribution centers, automated facilities to fulfill online orders and dedicated space in stores for e-commerce orders.
Issaquah, Wash.-based Costco said that, under its ownership, Innovel will continue to serve Sears and other current third-party customers. In North America, Costco operates 786 warehouse clubs — including 547 in the U.S. and Puerto Rico, 100 in Canada and 39 in Mexico — as well as e-commerce sites in the U.S., Canada and Mexico.