Costco grows its LTL arm to fulfill 85% of big-and-bulky home deliveries

Dive Brief:

Costco is now delivering about 85% of its LTL shipments for U.S. e-commerce through Costco Logistics, which provides in-home delivery of big and bulky items, Executive Vice President and CFO Richard Galanti said on the company's Q2 earnings call.
Deliveries for Costco Logistics, which Costco acquired as Innovel Solutions in March 2020 for $1 billion, were up 22% YoY, Galanti said.
For the quarter, Costco "averaged more than 65,000 stops per week with Costco Logistics, which translates into a little over three million planned drops in Costco Logistics for the fiscal year," Galanti said.

Dive Insight:

Costco's acquisition of a middle- and final-mile carrier as the COVID-19 pandemic took hold has allowed the retailer to take more control over its delivery process during an e-commerce-driven LTL boom.

"We certainly didn't know that we would sell more big and bulky items. What we're finding is because people are at home, notwithstanding some of the economic things of layoffs and furloughs, people are buying things for the house," Galanti said of the acquisition in May 2020.

This includes big and bulky items offered for in-home delivery through Costco Logistics such as refrigerators, washers and dryers, ovens, grills and mattresses. Big and bulky items made up over a third of Costco's e-commerce sales, Galanti said in December.

The share of large e-commerce shipments delivered by Costco Logistics has grown since the acquisition. The 85% rate Galanti disclosed is an improvement from Q1, in which Costco Logistics deliveries represented 70% of the company's U.S. e-commerce bulky shipments.

When acquired by Costco, Innovel had network coverage to nearly 90% of the U.S. and Puerto Rico and more than 1,500 employees. Additionally, it operated 11 distribution or fulfillment centers, and more than 100 final-mile cross-dock centers. The news release announcing the acquisition's completion said Innovel would continue to serve existing third-party customers.

The growth in delivery demand for bulky goods has also driven other trucking companies to acquire last-mile providers and bolster existing services.

In November 2020, J.B. Hunt purchased Mass Movement, which had delivered more than 2 million equipment pieces to 3,500 fitness centers, one of four final-mile M&As the company had made since 2017. And FedEx expanded the coverage of its FedEx Freight Direct service in 2019 to deliver large items into more homes and businesses.