Costco Just Spent $1B to Speed Up Delivery

Costco has made a blockbuster acquisition to speed up its last-mile capabilities at a time when consumer demand for the retailer’s products could be at historically high levels.

The wholesale club retailer has acquired logistics firm Innovel Solutions from Transform Holdco (TFCO) for $1 billion. The acquisition includes a long-term commercial arrangement whereby Costco provides TFCO with warehousing, delivery and installation services to Sears and Kmart members, and Costco will retain more than 1,500 Innovel employees on a go-forward basis. Hoffman Estates, Ill.-based Innovel was Sears Logistics before changing its name in 2018.

The addition of Innovel is expected to boost Costco's last-mile delivery capabilities for big items such as appliances. Innovel operates 15 distribution and fulfillment centers and more than 100 last-mile cross-docking facilities, where goods are transferred from incoming freight directly to outbound trucks. The logistics company's network reaches 90% of the U.S. population, including customers in Puerto Rico. 

Last week Costco reported impressive second-quarter results, noting that the COVID-19 outbreak has helped increase its revenue.

Also on Tuesday, Costco CEO Craig Jelinek issued an update on the company's coronavirus outbreak efforts, saying that the retailer will limit certain items, reduce services and increase sanitization efforts.

“As many of you have noticed, we’ve experienced a surge of business during this time,” Jelinek noted. “As a result, we’ve taken steps to control the number of members in our warehouses and asked that members and employees practice social distancing. We’ve also reduced some services.”

According to Jelinek, Costco has increased protocols in sanitizing surfaces, including shopping cart handles, merchandise shelves, front end belts and registers.

“Limits have been implemented on certain items to help ensure more members are able to access the merchandise they want and need," he said. "Our buyers and suppliers are working to ensure in-demand merchandise as well as everyday favorites are available in our warehouses."

Issaquah, Wash.-based Costco operates 785 warehouses worldwide, including 535 in the United States and Puerto Rico. The company also has ecommerce sites in the United States, Canada, the United Kingdom, Mexico, Korea and Taiwan.