Chewy box

Chewy’s influence on the pet products market has been far reaching since the company was founded a decade ago. The online retailer, which recently marked 10 years in business, has not only influenced how pet owners shop and spend money on their pets, it also quickly became an oft-cited threat to the independent brick-and-mortar pet specialty channel—but that hasn’t stopped independent retailers from biting back.

Started From the Bottom

Like many origin stories, the company began at ground zero in 2011, and even then, it was a twist of fate that Chewy came to be in the first place.

According to a Business Insider article, Ryan Cohen was just weeks away from launching an online jewelry business when a new idea came to him as he was in his neighborhood pet store: What if he could set up an online platform that replicated the experience of shopping in a pet store, without the inconvenience of having to actually go there?

“I thought if I could deliver the same kind of personalized experience as the neighborhood pet store, but do it online and deliver a really convenient value proposition, that we could build a really big business,” Cohen told Business Insider in 2019 shortly after Chewy went public.

And that’s what he, along with co-founder Michael Day, did.

As Chewy began trailblazing the online pet retail market, pet owners took note.

“Chewy’s customers have been singing its praises since the online pet products retailer launched in 2011,” George Anderson, editor-in-chief for RetailWire, said in an article RetailWire published earlier this year. “The company has built a loyal following with the fundamental understanding that pet parents regard their fur babies as significant members of their families.”

Chewy’s growing following of loyal customers prompted brick-and-mortar pet specialty retailers of all sizes to strategize ways to differentiate themselves in the changing marketplace.

Instead of continuing to compete with Chewy in the online space, PetSmart decided to purchase the increasingly popular brand in 2017 for $3.35 billion. The combination of PetSmart and Chewy would enhance both companies’ capabilities and reach, officials said at the time.

In 2019, Chewy went public. For its first quarter ended May 5, 2019, Chewy reported net sales of $1.1 billion, up 45 percent from $763.5 million in the year-ago period. By the end of its fourth quarter and fiscal year 2019, officials had reported 13.5 million active customers, an increase of 2.9 million customers compared to the year-ago period.

RELATED (from 2019): What Chewy’s Latest Announcement Means for Pet Specialty Brick-and-Mortars

The figures kept climbing. Chewy kicked off 2021 with “robust net sales growth,” CEO Sumit Singh and CFO Mario Marte wrote in a letter to shareholders just this past June. Net sales grew 31.7 percent year-over-year to $2.14 billion during the first quarter of fiscal year 2021 ended May 2. Active customers for its first quarter came in at 19.8 million.

Products and Services

From the onset, customer service has been the cornerstone of Chewy’s very existence:

“Chewy’s commitment to customer service is the core of our brand, and our customers love us for it,” the company’s website reads. “We ‘wow’ pet parents through 24/7 assistance, advice and encouragement every day of the year.”

This “wow” factor includes everything from traditional correspondence assistance to “above and beyond” services, including sending a customer flowers to congratulate them on a wedding that was mentioned on a call, Anderson noted in the RetailWire article.

“Another representative sent an unused keyboard from the company’s supply closet when a customer mentioned having a broken device,” Anderson said.

Chewy is also known for sending its customers portraits of their pets. As part of its 10-year anniversary celebration, Chewy unveiled the “Ultimate Pet Portrait,” which consists of two large-scale murals in its hometown markets of Boston and Dania Beach, Fla. The murals depict the pets of more than 100 customers who have been with the brand since 2011.

Over the years, Chewy has grown to offer more than 45,000 items, including its own private brands and prescription food, and prescription medication products, according to officials. And the offerings are only increasing. In June, Chewy officials announced the company’s entry into the fresh and prepared pet food space with its premium proprietary brand, Tylee’s, and that it would also be offering Freshpet products.

“We are enthusiastic about the fresh and prepared foods category and the opportunity to serve new customers and expand assortment choices for our existing ones,” company officials said at the time. “With this launch, Fresh joins Connect with a Vet and our Compounding Pharmacy on the growing list of recently launched offerings that expand our total addressable market.”

Where Lies the Competition?

While many pet owners have been singing Chewy’s praises, some pet retailers haven’t been so enthused.

“I walked inside my FedEx driver’s truck the other day, and a solid 75 percent of the contents were boxes from online pet product vendors,” Aquila Brown, co-owner of The Yuppy Puppy in Spokane, Wash., told PPN in a 2018 story. “It was dismaying, and I found it offensive.”

PPN has been hearing similar feedback from its readers for years.

In 2019, Amazon and Chewy were cited as the top competitors that posed “a significant threat” to pet businesses that were surveyed as part of PPN’s 2019 State of the Industry survey, which was conducted by independent research company Readex Research. Nearly three-quarters (74 percent) of respondents indicated that Amazon was a threat, and 70 percent pointed to Chewy as a threat. Other competitors included: big-box specialty stores (57 percent), other online vendors (47 percent), other mass-market big-box stores (43 percent), Walmart (36 percent), local brick-and-mortar competition (20 percent) and supermarket/grocery chains (25 percent).

PPN’s 2020 State of the Industry survey showed similar results, although the “significant threat” from each entity was down. Amazon and Chewy again came out on top, with 66 percent and 64 percent, respectively, followed by big-box pet specialty stores at 49 percent. Other categories, along with some new ones: pet specialty online vendors other than Chewy (43 percent), general merchandise/nonspecialty online vendors other than Amazon (38 percent), other mass-market big-box stores (37 percent), Walmart (34 percent), supermarket/grocery chains (20 percent), Tractor Supply and farm/feed stores (19 percent), warehouse club stores (19 percent) and local brick-and-mortar competition (14 percent).

Chewy, however, has its own competition. Amazon may come to mind, but “established brick-and-mortar players adapting to the new era of retail” could be the bigger threat to Chewy, according to Financial Times, a London-based newspaper.

The COVID-19 pandemic compounded the drive for pet owners to move over to shopping with Chewy for the convenience of having products delivered, said Heidi Neal, owner of Loyal Biscuit, which has stores in Maine.

“But I also think we have all stepped up our game in some capacity because of them,” Neal added.

It hasn’t been without challenges, though.

“[Chewy] has definitely impacted our business—the convenience of having it delivered, especially large bags of food, is a convenience that can’t be denied,” Neal said. “Because of where we are located, offering local delivery is just not an option for us without losing money (low, spread out population). We have people come in now and buy 5-pound bags just to get them through until their delivery arrives from Chewy. We always try and let them know that we are actually less expensive on food, most of the time, but that we also have a buy 12 get one free program that Chewy doesn’t offer. Sometimes that wins them back, but more than not, the convenience of delivery wins out.”

In some ways, Chewy has actually helped brick-and-mortars bolster efforts, according to Paul Allen, founder and CEO of Woof Gang Bakery & Grooming, an Orlando, Fla.-based specialty pet retail and grooming franchise with more than 100 stores in the U.S.

“Notably, the huge amount of money spent by Chewy on advertising has been good for brick-and-mortar specialty pet,” Allen said. “Chewy’s promotion of premium pet foods and the advantages of quality foods has generated broad consumer awareness of certain brands. This can translate into storefront customers being more knowledgeable about premium brands and their health benefits.”

Online in General

The pandemic has shuffled a lot of people’s shopping habits, pushing many pet owners to go online. However, e-commerce’s eminence in the pet market is not only tied to the pandemic sales boost, according to market research firm Packaged Facts.

“The pre-coronavirus surge in internet sales of pet products had already spurred a massive pet market investment in e-commerce logistics over the past several years, which has helped shore up the products side of the industry and will continue to do so,” said David Sprinkle, research director at Packaged Facts.

Even before the pandemic, e-commerce sales were a primary pet market driver, with more than $5 billion worth of non-food pet supplies sold online in 2019, with e-commerce accounting for an estimated 21 percent of product sales, according to officials. As a result of the pandemic-driven accelerated consumer migration online, Packaged Facts expects e-commerce to surge to 35 percent of the non-food pet supplies market by 2024.

“Even durable items that had been resistant to shifting online in the past—whether due to the ‘touch factor’ (as in the bed category) or because they have traditionally been impulse purchases (as in the toy category)—are seeing a growing share of internet sales,” officials said. “Accordingly, now is the time for retailers to up their game by exploring incentives for online ordering for home delivery, ‘click-and-collect’ (buy online, pick up in store/BOPIS—or, in the age of coronavirus, curbside) and subscription-based sales.”

Since a primary component of the Woof Gang Bakery & Grooming business model is grooming, e-commerce does not affect its in-person pet services, according to Allen. However, regarding pricing, the overall industry supply chain is a mess, Allen said.

“As long as vendors give away product at a loss to companies like Home Goods, and offer deeply discounted pricing and inequitable terms to other big retailers, this will continue to impact specialty pet,” Allen added. “It is time to stand up to inconsistent vendors with prejudiced wholesale pricing. Pricing equity could be a positive for vendors that want to sell exclusively to brick-and-mortar, and it would certainly make the storefront channel relevant again.”

While many companies are ethical, there are suppliers within the pet industry that have thrown principles out of the window, according to Allen.

“E-commerce is fair if everyone pays sales tax; it is fair if MAP [minimum advertised pricing] is followed,” Allen said. “But everyone knows that selling a 30-pound bag of dog food at less than MAP and shipping for free is simply wrong. Competition is great, but only when we all start at the same point and operate by the same set of rules.”

PPN presents an overview of some of its most-read Chewy stories:

From 2021:

From 2020:

From 2019:

From 2018:

From 2017:

From 2016: