142896768 chewy pet company final
Chewy pet company
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Chewy Pet Company Background Information
Chewy Pet Company is an American internet shop specializing in animal food and other
pet-related items. Rahan Cohen and Michael Day launched the firm as “Mr. Chewy” in June
2011. Chewy’s revenues increased substantially between 2014 and 2015, rising from $205
million to $423 million. The company’s headquarters are in Dania Beach, Florida. In 2017,
PetSmart paid $3.35 billion for the firm. PetSmart’s acquisition of Chewy was the largest ever
acquisition of an e-commerce firm at the time. The company raised $1 billion in its first public
offering in 2019. Chewy Pet Company accounted for 51% of all online pet food sales in the
United States in 2017, with a revenue of about $2 billion. Following the takeover, Cohen
retained his position as CEO of the company, which operated mostly as an independent
subsidiary of PetSmart. Following the acquisition, the company’s revenues skyrocketed,
increasing from $2.1 billion to $3.5 billion between 2017 and 2018. Clients who had signed up
for auto-renewal accounted for 66% of the company’s income.
Chewy began trading on the NASDAQ on June 14, 2019, with a share price of $22 and
the ticker symbol CHWY. Despite the COVID-19 era’s economic instability, Chewy continued
its expansion and saw a significant rise in demand for its products from millions of existing and
new clients. Chewy has established a collaboration with Trupanion to provide its clients with pet
health and wellness services. Following its establishment in Dania Beach, Florida, the firm
eventually established a factory in Mechanicsburg, Pennsylvania, to assure reliable overnight
delivery throughout the Northeast. The firm launched a new office in Boston, Massachusetts, in
2017, which serves as its second headquarters. The company plans to establish its fully
automated distribution center in October 2020. By the end of 2019, Chewy was worth $10.2
The Opportunity in Pet Industry
Chewy, Inc. is the world’s leading legitimate pet e-commerce firm. The pet business is a
fast rising industry that is benefiting from current macro trends such as pet humanization,
premiumization of pet food, and changes in internet buying. The majority of American families
now consider their pets to be members of the family, owing to the fact that pets have been regular
members of American homes for many years. Chewy, Inc. capitalized on the reality that pet owners
are willing to spend a significant amount of money on goods and services of high quality for their
animal family members (Owen, 33). In 2020, the American Pet Products Association released
industry statistics indicating that average pet expenditure in the United States had climbed at a
compounded annual growth rate of 5%. According to the research, the pet business is quickly
migrating to internet buying. According to the research, internet purchasing for pet supplies
climbed from 4% in 2014 to 27% in 2020.
Growth and Operation strategy
Chewy’s growth and strategy is based on five key pillars:
Expansion of share wallet
New customers acquisition
Expand the platform and distribution network
Expand the company’s operation into pet healthcare
The core of Chewy’s growth strategy is to increase revenue from the company’s existing clients.
The company’s management believes that its active consumers are still in the early stages of their
lifetime expenditure curve. This suggests that the company could see significant revenue growth
in the future as share wallets grow. The capacity to generate revenue growth is mostly dependent
on Chewy’s ability to sustain client loyalty over a lengthy period of time. Employee engagement
in the company’s Autoship subscription program, which includes a feature that allows consumers
to order things they routinely order on a pre-set frequency and save 5%, can be used to gauge
Chewy’s customer loyalty. This method shows a strong level of customer loyalty in Chewy,
considering that Autoship subscribers accounted for 69.3 percent of Chewy’s income.
Chewy’s expansion plan also includes acquiring new consumers. The organization intends
to grow its consumer base through existing and new channels of advertising and marketing. As of
the first quarter of 2021, Chewy had 19.8 million active customers, approximately 32 percent
higher than the previous year. Several websites have made analogies between Chewy and its
primary competitor Amazon, which is a major participant in the e-commerce business (Weinstein,
2020). The main advantage of Chewy compared to Amazon, based on the information in the blogs,
is that Chewy delivers products ordered faster in a 1-3 day shipping while in Amazon, only prime
members get fast shipping.
The main business of e-commerce companies searching for Chewy is to expand its
platform, acquire more customers, and later retain loyal customers. The main effect of a larger
customer base is that it will result in economies of scale, releasing the law of increasing marginal
returns. During the first quarter of 2021, Chew established its 12th fulfillment center in Lewisberry,
PA. The company later established a fully automated fulfillment center in Reno, NV, which is an
important approach in expanding the company’s footprint for high service levels and cost controls.
Chewy identified pet healthcare as one of the growth opportunities mainly due to its low
penetration in the sector. As of the end of the first quarter of 2021, less than a fifth of Chewy’s
customers was exposed to health care. Chewy’s business strategy in pet healthcare is to reduce the
cost and accessibility of pet healthcare. The company recently introduced ‘Connect with a vet,’ a
video conferencing telehealth platform that allows pet owners to have a video chat with a vet for
seven days a week until 11 P.M eastern time. This strategy effectively addresses the market need
of offering pet healthcare services at night, weekends, and during holidays when the physical pet
care facilities are frequently difficult to be operational.
Chewy, Inc. Money Making Model
Chewy, Inc.’s revenue strategy is built on the firm attracting new customers and
maintaining those customers for a longer period of time through its value offer and gaining a
substantial portion of the customer’s wallet over time. Chewy obtains vendor discounts for
promotional purposes or for meeting purchase volume criteria. These reimbursements are
accounted for in line with industry norms as a decrease in inventory carrying value, resulting in a
decrease in cost of goods sold and an increase in gross profit margin—the remarkable
capabilities of the company’s money-making strategy. Chewy generated more cash than the firm
need to run the business and spend in the business during the fiscal year 2021. This is a strong
sign of the company’s remarkable income-generating methodology, which allows Chewy to
expand its revenue and recruit new clients without spending a lot of money.
Analyzing Chewy’s cash flow earned by operations indicates that the company’s greatest
source of cash inflow is the Accrued expenses and other present liabilities section in the
statement of cash flow. Chew, Inc. received the majority of the cash paid to the firm as an
incurred expenditure in the form of outbound fulfillment. Outbound fulfillment is the process of
delivering finished goods to clients from a distribution facility.
Chewy, Inc. debuted in 2019 and just split from its parent firm, PetSmart Inc. It is critical
to assess if the firm’s management has the essential qualifications to continue the organization’s
prior development pattern under the old parent company PetSmart. Chewy Inc. was acquired by
PetSmart in May 2017 and went public in June 2019. PetSmart subsequently allocated all of its
shares to BC partners’ affiliates. Mr. Sumit Singh, the current CEO of Chewy Inc., has held the
position since 2019. The CEO was previously the Worldwide Director of Amazon’s Consumables
division. Given that Chewy is a corporation that depends largely on technology. The role of Chief
Technology Officer is held by the firm. Since June 2018, Mr. Satish Mehta has held the role. Mehta
worked at United Health Group, Staples Inc., and Yahoo before joining Chewy Inc.
Balance Sheet Strength
The balance sheet of Chew Inc. is cash-rich, which along with the company’s desire for
development, might lead to significant mergers and acquisition (M&A) transactions. M&A
transactions relate to the connection of firms and assets through various financial transactions such
as consolidations, mergers, acquisitions, and asset purchases. Chewy Inc. has $637 million in cash
at the end of the first quarter of 2021, which is projected to represent around one-third of the
company’s total assets (Lee, 179). The corporation also possessed a total dry-powder purchase
capability of $1 billion, including a $300 million revolving credit facility that was not being used.
Customer Relationship Management
There are various approaches that Chewy is utilizing in customer relationship management
to improve the experience of the company’s customers and still ensure that the organization’s
employees remain happy and productive. Chewy as a company prioritizes a positive working
environment for its employees. By ensuring that the employees have a positive working
environment, the company has recognized its call center culture. Chewy also takes its call center
agents through continuous training to ensure they are looped in on their performance goals and
metrics. Developing a call center culture in the organization has resulted in customers’ better call
center experience. Chewy has also created brand trust through personalization and consistency.
The company utilizes customer data to personalize conversations with its customers (Weinstein,
20). The organization’s call center agents are provided with customers’ history to approach every
customer interaction with adequate knowledge on various customer’s needs and past service
experience, which is very important in developing small moments of connection. The
organization’s agents are trained to use customers’ names during conversations to connect. Another
approach in Chewy’s customer relationship management is eliminating effort in the customer
journey. The company has achieved this through its automated shipment program, which has
gained a huge fan base, especially from busy pet owners.
Weinstein, Art. “Creating superior customer value in the now economy.” Journal of creating
value 6.1 (2020): 20-33.
Owen, Alyssa Quay. Pet Ownership to the Rescue? Perceptions of Becoming a Pet Owner During
the Covid-19 Pandemic. Diss. Oklahoma State University, 2020.
Lee, Joo-Heon. “A Study on the Effects of Service Quality Factors of Companion Animal Online
Shopping Malls on Customer Satisfaction and Loyalty.” Asia-Pacific Journal of Business
Venturing and Entrepreneurship 16.4 (2021): 179-193.