chewy-business-model

How Does Chewy Make Money? The Chewy Business Model In A Nutshell

Chewy is an online retailer of pet food and pet-related products. Founded in 2011 by Ryan Cohen and Michael Day, PetSmart acquired it in 2017 for $3.35 billion. As an eCommerce retailer, Chewy generates revenue by selling pet food and other pet-related items on its website. These non-food items include health products, toys, training equipment, and animal homes such as kennels or aquariums.

Origin Story

Chewy is an online American retailer of pet food and pet-related products.

Headquartered in Florida, the company was founded in 2011 by Ryan Cohen and Michael Day. The pair met in a Java chat room and recognized that they had mutual interests. Cohen was working as an affiliate marketer while Day was trying to find a programmer for his website.

Initially, they launched an online jewelry business with $150,000 of their own money. But with no passion for the industry, the venture proved to be unsuccessful. They then pooled their remaining capital into the purchase of pet products from distributors. A website was launched soon after and a third-party fulfillment center was secured.

Chewy now offers around 7 million items for pets including dogs, cats, birds, rabbits, fish, and reptiles.

In 2017, PetSmart acquired Chewy for $3.35 billion. At the time, this was the highest value acquisition of an eCommerce business.

Chewy revenue generation

As an eCommerce retailer, Chewy generates revenue by selling pet food and other pet-related items on its website. These non-food items include health products, toys, training equipment, and animal homes such as kennels or aquariums.

While the bulk of revenue comes from online sales, the company also has a dedicated telephone sales and support team.

Customer service

The pet industry is as competitive as it is lucrative, so the company seeks to stand out from the rest by offering exemplary customer service.

Chewy has been known to send bereavement flowers to customers who have lost their pets. On occasion, the company also sends pet sketches or handwritten notes to its customers.

How else does the company differentiate itself? Read on to find out!

Autoship

The company also recognizes that pet food is purchased periodically. As a result, it offers the Autoship service to schedule deliveries.

Here, Chewy customers can select the products they need and decide on a delivery frequency. This service is similar to the Amazon service Dash. Chewy offers 30% off eligible items in the first Autoship order with a 5% discount on all subsequent orders.

The Autoship service is free to use for the customer, but value for the company is derived elsewhere. Autoship users are essentially signed on to a paid subscription plan which means repeat business for Chewy. In fact, the company notes that approximately 66% of all revenue came from Autoship customers.

Connect with a Vet

The Connect with a Vet service allows Chewy customers to get access to licensed veterinarians if they have a question about pet health or behavior.

For Autoship customers, this service is available free of charge.

Key takeaways:

  • Chewy is online pet food and pet supplies retailer founded by Ryan Cohen and Michael Day. After a chance meeting in a Java chat room, the two pooled their resources to purchase pet stock and secure a third-party distributor.
  • Chewy earns money by selling pet food and related items on its website. To differentiate itself in the market, it offers exemplary customer service and allows pet owners to speak to a vet free of charge.
  • Chewy purportedly makes two-thirds of its revenue through the Autoship service, a delivery cadence system for periodic pet food deliveries.

Read Also: How Does Amazon Make Money, The Walmart Business Model, How Does eBay Make Money, Business Strategy Lessons From Costco, How Does Craigslist Make Money.

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