Costco makes $1 billion e-commerce acquisition
Mon 23/03/2020 – 14:44
Costco just made a $1 billion acquisition that went largely unnoticed, even though the deal could have a major impact on the company’s sale of big ticket items.
(Author : Mike Troy)
The deal also serves as a reminder to the rest of the retail industry of the benefit of a pristine balance sheet and a business model that generates ample cash flow – factors which allowed the company to pay $1 billion for an obscure logistics company. Costco described Innovel as a leading provider of third-party end-to-end logistics solutions with nationwide capabilities, from Transform Holdco, the parent company of what’s left of Sears and Kmart.
The deal went largely unnoticed amid the escalating COVID-19 situation and related fall out on the U.S. economy. However, the deal has the potential to have a major impact on Costco’s sale and profitability of big ticket items. That’s because Innovel provides final mile deliveries and installation of products such as major appliances, furniture, mattresses, televisions, grills, patio products and fitness equipment. Those are all categories in which Sears was once a major player and where Costco has gained shared, but was reliant on a patchwork of third parties, including Innovel, to make deliveries.
Innovel operates a fleet of 1,100 trucks, 11 distribution centers and more than 100 final-mile cross-dock facilities and has worked with Costco since 2015.
“We have had a great relationship with Innovel and share a philosophy of taking care of our members,” said Costco CEO Craig Jelinek. “We believe the acquisition will allow us to grow our e-commerce sales of big and bulky items at a faster rate.”
Innovel’s network provides coverage to nearly 90% of the U.S. and Puerto Rico, according to Costco. The company operates 547 of its global network of 786 warehouses in the U.S. and Puerto Rico.