Costco acquisition brings white glove delivery and white good service in-house
Costco is planning to enhance its ability to deliver the appliances, furniture and other bulky products it sells with a big last-mile logistics and installation acquisition.
The warehouse club chain announced that it has acquired the third-party delivery and installation company, Innovel Solutions, for $1 billion cash. Costco plans to leverage the Service Live platform, a solution for complex installations previously owned by Transform Holdco, Innovel’s former parent and the holding company for Sears and Kmart. Costco will maintain a deal with Transform Holdco to provide warehousing, delivery and installation services for Sears and Kmart, as well. Transform Holdco plans to use the $1 billion cash influx to pay off all of the company’s non-real estate debt.
The intent behind the acquisition is to boost e-commerce sales, Costco CEO Craig Jelinek is quoted by the Seattle Times. Innovel has 11 distribution centers and more than 100 final delivery centers nationwide.
Innovel, which was known as Sears Logistics until 2014, signed Costco as a customer two years after the name change, according to the New York Post. The removal of the Sears name was done to place distance between the Costco delivery experience and Sears’ bad reputation, according to an employee of the company.
Fast, efficient home delivery and home installation have become perennial topics of discussion in the retail world with the broad customer adoption of e-commerce and the ascendancy of Amazon.com.
Most recently, the coronavirus outbreak has led to an increased interest in e-commerce in spaces with thus far limited consumer adoption, such as grocery.
Short term, there have been indications that coronavirus-related trends have also been affecting sales of some appliances.
In the U.K., there has been a significant and seasonally abnormal uptick in the sale of freezers, according to a report by BBC News. Online retailer AO.com reported a 200 percent increase in freezer sales and the John Lewis department store saw a similar uplift. An AO.com representative attributed the increase to customers needing places to keep stockpiled food.
- Costco Acquires Innovel Solutions from Transformco for $1 Billion – Costco/Transform Holdco/PRNewswire
- Costco aims to lift online sales with $1 billion purchase of logistics firms – The Seattle Times
- Sears finds a new way to rake in cash – New York Post
- Freezer sales heat up amid coronavirus stockpiling – BBC
DISCUSSION QUESTIONS: Did it make sense for Costco to acquire Innovel Solutions? In what ways do you expect Costco to leverage the logistics provider, now that it is the owner?