The Chewy business model is based on selling pet food and pet-related products online while maintaining excellent customer service and convenience. Read on for a comprehensive overview of how Chewy works and makes money.
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Michal Day and Ryan Cohen established Chewy in 2011. The company has its headquarters in Dania Beach, Florida. Cohen’s exposure to the business world began at an early age, having spent the better part of his childhood with his father, a glassware-importing business entrepreneur in Montreal.
Cohen was inspired by his father, who was also his mentor, and started developing websites for local businesses and family members at the age of 13. He would later stumble upon the affiliate marketing world in his teenagehood, making thousands of dollars monthly. Instead of going to college, Cohen decided to continue working on his business and embarked on finding a programmer to boost his affiliate marketing operation. He’d later meet Michael Day in a Java chatroom, who would become his co-founder.
Day, then a computer science student at the University of Georgia, dropped out of school to join Cohen in business. The two chose to venture into eCommerce, where they started selling jewelry online. Both parties invested $150,000 in the business to buy up inventory. They gave up the business in 2011 after attending a trade show in Miami due to a lack of passion for learning about the different precious metals and gems available in the market. Cohen’s inspiration to launch Chewy came from his experience as a dog owner.
During an interview, Cohen said, “We even spent a few hundred thousand dollars on jewelry, and we were a few weeks away from launching the company, but I have a poodle, Tylee, who’s now 12 years old, and I would go every couple of weeks to buy products from this store owner who knew me and who I really trusted and who was a pet lover like me. And I had this epiphany; I realized I’m so much more passionate about this category. So we sold the jewelry, luckily getting back most of our money, and started Chewy.”
The team launched Chewy’s website during the summer of 2011. The business was funded solely via income from their previous affiliate marketing business and sales they’d already generated through Chewy. Cohen was convinced the business needed capital to run successfully. As a result, he flew to Silicon Valley in search of investors. Unfortunately, he wasn’t successful.
The investors he approached sighted a few concerns, such as his age, competitors, and business location. However, rejection didn’t discourage Cohen from focusing on his goals. In October 2013, Chewy raised its initial round of funding and received $15 million from Volition Capital. Volition’s funding was the cue other investors needed to invest their money in Chewy. In 2014 the company raised two funding rounds worth $41 and $30, respectively.
Cohen would later step down as CEO in March 2018 after being at the helm for seven years. In 2017, PetSmart acquired Chewy for $3.35 billion. Chewy eventually went public in July 2019, raising $1.02 billion. While the Coronavirus pandemic left a reeling effect on businesses, Chewy reaped tremendous benefits from selling its products online.
Apart from gaining numerous customers, the company made a profit for the first time since its launch. Today, the company has more than 7,000 staff and operates in over 20 locations in the U.S.
Ryan Cohen and Michael Day founded Chewy in 2011. While PetSmart acquired the company in 2017, it went public in 2019.
Chewy’s mission statement is “To be the most trusted and convenient destination for pet parents (and partners) everywhere.”
To shop on the Chewy platform, customers must create an account on Chewy.com. After signing up, customers can choose from the 75,000 products on the website.
Chewy makes money by selling pet food and pet-related products on its eCommerce website. The company also earns a significant percentage of revenue from:
Over 60% of the company’s revenue in 2020 came from its Autoship subscription program. The program is a strategy for customers to activate recurring deliveries on their preferred products with zero membership fees. By activating auto-ship on orders, customers save up to 35% on their initial order and between 5% to 10% on recurring orders.
Autoship customers also enjoy access to Chewy’s Pet Health service. It includes virtually connecting with vets on-demand, adding vet clinics, and filling pharmacy prescriptions.
Chewy also generates non-autoship revenue through its eCommerce site.
The Chewy Business Model can be seen in the business model canvas below:
The customer segments of Chewy are:
The value propositions of Chewy are based on the following:
Systematic delivery service: Chewy offers between one and two-day shipping on purchases amounting to over $45. Customers can use the autoshipping option to set automatic dispatch of their products.
Chewy channels consist of:
The company offers top-tier customer relationships, that consist of:
Chewy’s revenue streams consist of
Chewy’s key resources consist of
Chewy’s key activities involve:
Chewy’s key partners facilitate smooth business operations. They are:
The cost structure of Chewy includes:
Petco provides pet medications and supplies alongside other services such as dog training and grooming, a monthly wellness plan, a company-branded debit card, automated deliveries, and pet insurance.
Currently, Petco has more than 24 million customers. The company generated approximately $6.15 billion in revenue in 2022 and posted a more than $190 million profit. More than 27,000 individuals work for Petco.
Amazon also launched private label brands, which are more affordable than other companies. In 2022 during National pet month, Amazon launched Amazon pet day, a 24-hour event allowing customers to access attractive discounts on pet-related products.
In 2020, Walmart launched a pet care service, bringing together some of Walmart’s existing offerings, like pet insurance, pet sitting, and dog walking. The company later launched a new dog and cat food brand. Apart from pet utensils like beds and food, Walmart provides pet medication through Walmart Pet Rx.
The firm creates content on different health issues and treatments. It also ships prescriptions automatically. Former anesthesiologist and PetMeds founder Puelo established the business as a mail-order service for human and animal prescriptions before moving to pet supplies due to the massive competition in the human prescription industry. PetMeds later went public on Nasdaq’s stock exchange.
Below, there is a detailed SWOT analysis of Chewy.
Chewy is a renowned brand that offers the best quality products for your pets. Its core revenue generation source is its website, where customers can access their preferred products. In today’s overly competitive market, Chewy offers impeccable customer service while allowing pet owners to connect with licensed vets for free. These services have helped the company stay ahead of its competitors.
Chewy’s autoship service, a delivery system for recurrent pet product deliveries, is one of the best earners for the company. As demand for pet food and other related products and services rises, Chewy will remain relevant for many years.
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