Read time: 5 minutes

Good morning! It's Thursday, February 15th. Today’s post breaks down the success of Chewy, the leading online pet retailer with $11B in annual revenue!

THE FEATURE

Chewy's $11B Journey: From Jewelry to Pet Industry Leader

Last year, Americans spent $143.6B on their pets— a massive increase from just $90B in 2018. 

This increase is partly due to the uptick in pet ownership during the pandemic, but it is also due to new industry innovators. 

Online pet product retailer Chewy has taken over the industry, generating $11B last year compared to old-guard brands Petco and Petsmart, which made $6B and $9.7B in revenue, respectively. 

Let's see how Chewy broke into the pet market and expanded it!

So, What's the Business?

Chewy was founded by Michael Day and Ryan Cohen, but it wasn't the duo's first business.

In 2011, they invested $150K to purchase inventory and launch an online jewelry marketplace. After struggling to compete in an entrenched industry with knowledgeable experts, Cohen had his lightbulb moment that led to the creation of Chewy. 

It seemed that every week, he'd be purchasing food, toys, or picking up meds for his 12-year-old poodle. Not only was he more passionate about pets than jewelry, but he realized that bringing online convenience to the pet market could be far more lucrative. 

After selling their jewelry inventory, Day and Cohen used the funds to start Chewy in the summer of 2011. The pet industry was under-penetrated online at the time, and Chewy saw exponential growth from fixing that.

By 2017, Chewy had $2B in revenue, representing 51% of online pet food sales!

The founding vision for Chewy was to replicate the local pet store experience and bring it online at scale. Today, Chewy has expanded into a one-stop-shop for all pet needs, supplying the company with a variety of revenue streams: 

• Online Pet Retail: Chewy is home to over 110K products, with food, training tools, and toys for almost any kind of pet.

• Autoship: Autoship is a subscription program that customers can use to have their preferred products shipped on a recurring basis. Chewy generates 75.5% of its revenue from Autoship sales!

• Pharmacy: Consumers can fill prescriptions and book veterinary telehealth appointments through Chewy. Last year, ~20% of Chewy users purchased medications, making it the largest online pet pharmacy.

• CarePlus Insurance: Chewy launched its pet insurance plans in 2022, seeing it as a way to bolster profits via an additional recurring revenue stream. CarePlus is sold as the most flexible and affordable pet insurance option, with plans starting as low as $20 per month.

By selling pet food, toys, healthcare, and insurance, Chewy didn't just increase the online exposure of the pet industry; it monopolized it. 

Creating Brand Loyalty in a Digital Age: Focus on the Little Things

Online businesses bring convenience to consumers, but they typically don't foster the social connections that deepen brand loyalty like brick-and-mortar stores can. 

Chewy's founders wanted their business to replicate the personalization and care of the local pet store, and they pulled it off in a fantastic fashion and won over consumers. 

For example, one user took to Twitter to report that when her dog died, Chewy gave her a full refund on the dog food she purchased and delivered flowers to her doorstep signed by the customer support member she spoke to. That post garnered 683K likes. 

The company is also known to surprise pet owners with free portraits of their furry companions. 

Much of Chewy's success comes from using customer satisfaction as a marketing wedge. In addition to a responsive customer support staff, Chewy goes above and beyond for pet lovers and organically creates viral marketing material from genuinely pleased customers. 

Get In Touch

1) Promote Yourself! Get in front of 7,000+ business professionals by sponsoring this newsletter (we ❤️ our sponsors). Just hit reply to this email and say, "Let's partner!"

2) Do You Have An Outlier Business? We want to share your story if you are building something cool and growing fast. Hit reply to this email and tell me - what you're building, why, and why it's an outlier business.

3) Ask Us Questions: Are you struggling with a business or career question? Just ask it, and we'll share it with thousands of people who want to help.