How Chewy charmed pets, owners, and investors to become a Fortune 500 company
“Chewy, say hi to your friends!” a young woman croons, holding the paw of a sweater-clad Yorkie and waving. “Hi, Stella!” a little girl yells back, and suddenly we’re in a simulacrum of that Zoom call that dominated our 2020 (and still does), a series of Brady Bunch boxes on our devices containing the faces of our friends and family members. But this video chat is different: It’s dedicated to our pets. There’s a pug and a doodle and a cat and a hedgehog and more, demanding attention and bringing joy to their owners, who delight in sharing their antics. Toward the end another young woman says, “I’m really glad I could see all of y’all,” and a man says, “This is fun,” and probably, if you Zoomed throughout the pandemic, this was the best it could possibly get.
Of course, it’s not an actual Zoom. It’s part of a marketing campaign, #PetsBringUsTogether, that Chewy, an online retailer of pet food and products based in Dania Beach, Fla., released in April of last year. The spot, put together in about six weeks after COVID-19 changed the landscape of our world, ran on TV and racked up almost 1.7 million views on YouTube. The team created a social campaign around the hashtag, encouraging the community to share their own experiences. “Now it feels almost exhausting being on Zoom,” admits Orlena Yeung, Chewy’s VP of brand marketing. “But if you think about this time last year, people were first doing that videoconferencing with family and friends, and we developed this campaign that really highlighted how pets were in the middle of that.” More than a year later, “that hashtag is still incredibly healthy, and it’s something we continue to support because it’s just core to how we see pets bringing another level of intimacy and joy and optimism into our lives.”
If you own a pet, or know someone who owns a pet, or if you’ve ever thought about owning a pet (33% of Americans considered adopting a fur-friend during the pandemic, with 11.38 million households actually doing so, according to a report from the American Pet Products Association), you’ve probably heard of Chewy. The 10-year-old pet product retailer—that’s 70 in dog years—didn’t just survive the pandemic, it thrived—this year making its first appearance on the Fortune 500 at No. 403.
For the fourth quarter ended Jan. 31, 2021, Chewy delivered nearly 51% growth and had its first quarter of positive net income. Quarterly net sales topped $2 billion for the first time, and fiscal year net sales reached $7.15 billion, an increase of 47.4% year over year. Currently, the company boasts 19.2 million active customers; in 2020, Chewy saw a 42.7% increase in active customers and a 3.3% increase in net sales per active customer, to $372. Even more important, autoship sales—which allow customers to subscribe with a slight discount for the regular delivery of various items, and which make up 68.2% of the company’s total net sales—hit $1.39 billion in Q4, a year-over-year increase of 46.1%. Though the stock struck a pandemic high of $118 in February 2021, and has since reset to the mid-$70s, that still marks a sizable gain for investors that bought in at the IPO. As Mad Money host Jim Cramer (himself a dog owner) recently said, “Chewy has one of those businesses where you sign up for auto renewal. Auto renewal is the single most profitable form of business in the world today. I am a buyer of Chewy.”
Well before the pandemic, before the advent of TikTok, back in the time of the iPhone 4, Amazon was the top e-commerce site of 2011, with Staples and Apple trailing behind. Ryan Cohen, a 25-year-old college dropout and the owner of a toy poodle named Tylee, had an idea: What if you could duplicate the experience of shopping in your neighborhood pet store, personal touches and all, but online? Cohen had been on the verge of launching an online jewelry store, but he couldn’t shake the feeling that pets were the better draw. He and his cofounder Michael Day pivoted, and Chewy.com (then called “Mr. Chewy”) was born.
At first, investors resisted, feeling that Amazon, which had been selling pet food since the late ’90s, had already cornered the market, as Cohen told Business Insider in 2019. But the gambit wasn’t just about selling a product, Cohen insisted: Chewy could provide a unique and personal customer service experience, with experts available around the clock to recommend dog food or cat litter or just talk to you about your pet, whether you had recently adopted a kitten or your beloved iguana had passed away. (Chewy is still known for sending flowers to pet parents who are coping with loss.)
Over the next few years, confident that showing customers Chewy cared would build lifelong relationships with them—along with the sense that pet owners would continue to spend more and gravitate to online sources for goods—Chewy grew, garnering major investments from Volition Capital, T. Rowe Price, and BlackRock. By 2014, the company had opened its first fulfillment center in Mechanicsburg, Pa. By 2016, Chewy had nearly $900 million in revenue, and by 2017, the company had consumed 51% of online pet sales in the U.S., with revenues of approximately $2 billion. Petco and PetSmart both approached with merger offers, and Cohen and Day sold Chewy to PetSmart for $3.35 billion, the largest e-commerce acquisition at the time.
A year later, Cohen stepped down, and Sumit Singh, an executive with senior leadership experience at Amazon and Dell (not to mention, “dog dad to a shih tzu named D”), became CEO and director. (Cohen, who was recently named chairman of gaming retailer GameStop, is no longer involved with the company.) The Chewy Pharmacy launched in 2018, and in June 2019, after separating from PetSmart, Singh took Chewy public, raising more than $1 billion in the process. Currently, the company is an independently standing public entity with the private equity firm BC Partners as its largest shareholder, with over 70% ownership.
Chewy has more than 18,000 employees across two headquarters (in Dania Beach and Boston), two corporate offices (in Minneapolis and Seattle), four customer service centers, and 13 fulfillment centers across the U.S. The company sells more than 60,000 items (for dogs, cats, small animals, birds, reptiles, farm animals, and even horses), everything from pet food to pharmaceutical supplies (Chewy seeks approval from your vet) to nonprescription medical items, like supplements and dental care products. Everything generally ships in one or two days, often for cheaper than what you get through your vet or local supplier, plus there’s the undeniable convenience of not having to lug a bag of dog food home from the store.
In October 2020, the company launched a program called Connect With a Vet that enabled pet parents to speak directly to licensed veterinarians about their pet’s health, a free service to customers who had signed up for autoship, available in 47 states. A video-chat function soon followed. “Access to see them in real time, it’s a game changer,” says Dr. Katy Nelson, senior veterinarian at Chewy Health. “It allows us to have a more authentic connection.” In November, Chewy announced it would start compounding, or producing and filling orders of customized prescription medications, as well. “We really set ourselves on a mission of making health care more affordable and accessible for all pet-owning households in the U.S.,” says Mita Malhotra, VP of Chewy Health.
Among the numerous services Chewy offers, the things that everyone seems to talk about most are, in the company’s lingo, the “surprise and delight” strategies and “wow customer engagements” that are key to the brand’s connection with users. Andrew Stein, senior director of customer service, tells me about “the Wow Factory,” a team of approximately 2,500 customer care representatives who work around the clock not only to help customers pick out new food or solve problems with deliveries but to truly listen. They are given the freedom to engage with customers and create “superpersonal” experiences and connections, like painting pet portraits on items that resonate with customers, from football helmets to skateboards to bike racks. (Artists make sure to consider “the nuances of the pet,” Stein adds. “If there’s a freckle in the middle of the nose, that’s in the painting.”) While the intensity of customer engagement hasn’t changed since the beginning, Stein says, the company has enhanced agents’ capability to do things with the information they receive, like sending a welcome mat when learning a customer has purchased a first home, or having a giant birthday card signed by the entire call center upon learning that a customer is having her first birthday (her 80th) since her husband died.
In response to the COVID pandemic, the team created a Chewy tea and honey box to send to customers who didn’t feel well. They keep a stock of bottles of sparkling cider on hand that say “Aged to Paw-fection” to ship to people for celebrations. Chewy onesies are mailed to new (human) members of the family. “And then usually the baby with the dog will cuddle up; that’s my and the team’s favorite part, watching them post on social media,” says Stein. When a delivery is late, agents are similarly empowered to do more: They might send a replacement or even a local courier. “We’ve had people drive it to their house,” says Stein. “The thought of not doing something right for the customer because of cost, it’s not how we operate. Happiness scales, caring a lot about pets and pet parents scales. It’s so core to what we do. They’re now a Chewy customer for life.”
And, when pets pass away, Stein says, “We don’t look at it like, ‘This customer may not be a customer.’ This is a huge event in their life. I’ll see our customer service reps, they’ll be crying. That’s the magic, hiring people who love pets as much as we do.”
Love or money
There are, of course, an array of negative comments to be found online about Chewy if you look: A vet talking about why he hates Chewy, former employees complaining about the culture, criticisms of their handling of COVID. But there are just as many (or more) positive comments out there, to the extent that some more dubious readers wonder if perhaps all the favorable Reddit comments are some sort of skillful marketing ploy from Chewy.
Any success story has to have its detractors, and I’ll admit, there are times when Chewy sounds just a little bit too good to be true, the Ted Lasso of pet retailers, so positive and earnest and gosh darn hardworking it hurts. But then there’s their self-described “relentless” and “maniacal” focus (two words you hear a lot when talking to Chewy leadership but don’t tend to use a lot when it comes to the preferred behavior of your pets). So what do they really care about, (pet) love or money? Well, both.
CEO Sumit Singh, who inquires about my own pet and brings her up by name in our interview, believes that Chewy’s success is about tapping into that deep relationship between you and your pet, harnessing an iota of the love we feel for our beloved animal friends, and using it to maintain significantly higher customer retention rates compared with the average retail experience. It’s an inherently emotional commitment between Chewy and its customers, and how could it not be with your pet involved? “Our connection with our customers is much closer to, for example, you going to Disney than you shopping from Amazon,” he explains. “The coherence and the memories that an experience of visiting a Disney theme park brings, it’s the same level of emotive impact that our culture and experiences have on people, on customers. Or at least that’s what we strive to be.”
It seems a win-win: #PetsBringUsTogether, but they are also bringing pet owners to Chewy in increasingly huge numbers, capitalizing on a growing share of the $100 billion U.S. pet market, which is expected to reach $120 billion by 2024. According to the company, Chewy competes in roughly 70% of that $100 billion, which leaves it “with an additional $30 billion opportunity in health care and services” to grow into. Next up: expanding outside the U.S.—Chewy Paris, maybe?
The company also gives back, including to its own employees: In 2021, Chewy “will invest approximately $60 million in higher wages and benefits, the bulk of which will be directed to our fulfillment and customer service teams.” They have donated more than $76 million worth of pet products, food, and other essential items directly to nonprofit shelters and rescue centers since 2012, with $30 million in food and other products donated in 2020. The site includes a Wish List feature, which lets shelters and rescue organizations post lists of requested supplies so that customers can purchase them and Chewy will deliver them.
Singh says of the company’s success: “These are not just numbers on a spreadsheet to us, and these are not just dollar values attached to them. We truly care about solving problems that customers might appreciate and therefore stay loyal to us for.” When he joined Chewy in 2017, the pet market was still this emerging sleepy little category, he adds. “I found the excitement of unlocking the true potential of what Chewy could become really empowering. You take that, and you take the good foundation of values the company was based on, and you combine those two together, and magic can happen. I’ve been dancing into work every day for the last three years.”
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