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Chewy business model and how does it make money

By Abhishek Goel 28th February 2022

Chewy makes money in a variety of ways. Here is a detailed overview of their revenue streams, as well as the Chewy business model, year-over-year revenue, and how Chewy works. 

Chewy is an e-commerce company that offers various pet-related items both online and at 17 retail locations around the United States.

Chewy business model

What is Chewy?

Chewy is an online retail and distribution business for pet owners, offering an easy and adaptable platform for customers to order pet food and pet-related items. Pet owners may choose from over 2,000 brands and categories including food, vitamins & supplements, toys, beds, and many more.

Furthermore, goods are available for practically every commonly kept animal. Dogs, cats, fish, birds, bunnies, reptiles, horses, and other animals are examples.

They have approximately 7 million things for sale in their store, with prices ranging from $1 to over $200.

Users may then personalize their purchase by selecting parameters such as pet size, breed type, age group, weight range, and more. Chewy has around 20 million consumers who shop the company’s 60,000+ goods on a daily basis.

Chewy: Origin & company history

Chewy is an online pet store based in the United States.

Ryan Cohen and Michael Day created the firm, which is headquartered in Florida, in 2011. The two met in a Java chat group and discovered that they shared the same interests. While Day was looking for a programmer for his website, Cohen was working as an affiliate marketer.

They started an online jewelry business with $150,000 of their own money at first. However, due to a lack of enthusiasm for the business, the enterprise was a failure. They then pooled their leftover funds to buy pet goods from distributors. Soon later, a website was built, and a third-party fulfillment facility was arranged.

Chewy currently has over 7 million pet products for dogs, cats, birds, rabbits, fish, and reptiles.

Chewy was purchased by PetSmart for $3.35 billion in 2017. This was the highest-value acquisition of an eCommerce company at the time.

How does Chewy make money?

The chewy business model involves two major revenue streams. Chewy makes money by selling pet food and other pet-related products on its website. Health goods, toys, training equipment, and animal housing such as kennels or aquariums are examples of non-food things.

Customer service

Because the pet sector is as competitive as it is lucrative, the firm strives to differentiate itself by providing exceptional customer service.

Customers who have lost their dogs have been known to get condolence flowers from Chewy. On occasion, the firm may give clients pet drawings or handwritten messages.

How else does the organization set itself apart? Continue reading to find out!

Chewy business model

Autoship customer sales

What is Chewy Autoship – Chewy’s Autoship program makes it simple for you to set up recurrent deliveries and save money on items you purchase frequently. With your first Autoship, you’ll get 35% off your order, but your discount can’t exceed $20. On all subsequent Autoship orders, you will also receive a 5% discount on select brands.

Chewy generates all of its money through eCommerce sales, but in 2020, $4.89 billion, or 68.4 percent of Chewy’s total revenues, came from revenue produced through its Autoship subscription program.

Chewy’s auto-ship subscription offering allows clients to set up periodic product delivery with no membership costs.

Customers that use Chewy Autoship on their orders can save up to 35% on their initial order and 5% to 10% on subsequent recurring orders. Chewy Autoship users also get access to Chewy’s Pet Health service, which includes completing Pharmacy prescriptions, adding Vet Clinics, and digitally communicating with Vets.

In 2020, income earned by Chewy’s Autoship subscription service accounted for 68.4 percent of total revenues.

Connect with a vet

If Chewy client has a question about their pet’s health or behavior, they may use the Connect with a Vet service or a telehealth service to get in touch with a licensed veterinarian. 

People also need to transfer their pets to veterinaries. For this, pet taxis are a preferable solution. You can also start with a smart pet taxi solution. Pet boarding and traveling is a smart business solution. Jugnoo.io can help you build a pet boarding app. Check out their website.

The objective is to improve the stickiness of its product even further. People are typically unwilling to transfer platforms and services they have grown to trust due to switching expenses. Pets, which are very sensitive issues for many people, accentuate this.

Customers had previously noticed that Chewy has begun to raise pricing in several of its product categories. As a result, the corporation may soon declare that some of its ancillary services would be charged as well.

Value proposition

Efficient delivery service: the company offers free one-to-two-day shipping on purchases over $45, as well as an auto-shipping option that allows clients to arrange goods to be dispatched automatically. 

Wide range of products: Offers a wide range of products from numerous brands, including toys, food, treats, and equipment for a variety of pets, such as dogs, cats, fish, reptiles, and rabbits.

Accessibility and flexibility: The ​​company maintains an easy-to-use online platform where consumers can browse items, schedule delivery, and manage payment settings. As well as provide 24-hour phone and online customer care.

Simple returns procedure: The company provides 365-day hassle-free returns to consumers who are dissatisfied with their purchases.

Industry expertise and knowledge: Chewy business model, employs a number of customer care representatives who can help clients with questions and inquiries about specific goods and brands.

Chewy

Key partners

The chewy business model also consists of key partners to ensure smooth business operations.

Supplier and vendor partners: include vendors of items and supplies that the Company resells through its online and phone sales channels, as well as providers of technology, services, and equipment used throughout the company.

Distribution and delivery partners: These are third-party distribution and delivery service providers who help the Company with its shipping services.

Rescue & shelter partners: Group of non-profit and philanthropic organizations interested in animal rescue and care with which the Company partners on various initiatives

Strategic & alliance partners: A group of firms with which the Company works on collaborative initiatives and mutually beneficial activities.

Company cost structure

Chewy incurs expenses for the procurement of supplies and equipment, the management of its supply chain, the development and operation of its online sales platform, the maintenance of its IT and communications infrastructure, the operation of its logistics and distribution infrastructure, the management of its partnerships, and the retention of its employees.

The majority of the Company’s expenses are related to the purchase of products and supplies. As well as the payment of salaries and benefits to its staff of over 1,200 people. It also incurs substantial occupancy costs as a result of its network of offices, distribution centers, and warehouses.

Chewy business model

Chewy profits, funding & revenue:

Chewy has garnered $451 million in venture capital investment over seven rounds, according to Crunchbase.

Among the notable investors are BlackRock, Greenspring Associates, New Horizons Venture Capital, Lone Pine Capital, and others.

Chewy was valued at $8.8 billion when it went public in July 2019, raising an additional $1.02 billion. The corporation is now worth more than $34 billion.

Chewy reported yearly revenues of $4.85 billion for the fiscal year 2020, up more than 37% from the prior year. Due to different growth initiatives, the corporation continues to lose money. In 2020, the net loss was $92.5 million, including $129.2 million in share-based compensation.

Chewy’s publicly available financial records, including annual reports, can be found on their website in the investor area.

How to start your own online pet store

If you’re looking to create your own online pet store, the Jungleworks suite would be the best tool for you as it is a combination of powerful ordering, delivery, and growth tech stack. Book a demo with our business experts today and build your own online pet store with ease and without coding today.

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