Chewy’s CEO Explains How the Pet Products Disruptor Has Set the Stage for Ongoing Growth

Key takeaways:

• Chewy’s high-touch service and subscription-based offering position the pet brand for growth, analysts say.
• The company launched a telehealth service in 2020 based on the opportunity it saw in the market due to the pandemic.
• Chewy will switch to a hybrid work-from-home structure after seeing that employees could still collaborate and innovate in that environment.

If dogs could talk, they’d probably ask for the pandemic to go on forever.

Families sheltering at home during the past year have provided nonstop companionship for their furry friends, and the businesses that support pet ownership have reaped the benefits.

Chewy, the Dania Beach, Florida-based e-commerce retailer specializing in pet food and other pet-related products was no exception. Its business soared as consumers looked online for their pet-product needs. In addition, the company expanded its offerings with a new veterinary triage service that helps pet owners deal with their pet’s health issues remotely, and the company also came around to new ways of thinking about working from home.

Chewy ranks among the leaders in pet-product e-commerce, along with Amazon and Walmart.com. Brick-and-mortar pet product specialists, led by PetSmart and Petco, also have been increasingly seeking to expand their online offerings. According to the American Pet Products Association, U.S. retail sales of pet products were expected to reach $99 billion in 2020, up from $95.7 billion in 2019.

Analysts have noted that Chewy, with its subscription-based offering and strong reputation for customer service, is well positioned in the marketplace.

“When it comes to cementing customer loyalty, subscription- and loyalty-program-based products and services can be a powerful tool,” David Lummis, pet market analyst with research firm Packaged Facts, told CO—. “The trend is already in force in pet food, with all of the major online retailers now avidly encouraging auto-replenishment, such as Chewy with Autoship and Amazon with Prime Subscribe & Save,” among others.

Lummis estimated that online sales of pet products jumped to 27% of total category sales in 2020, up from 22% in 2019.

In a virtual presentation at the National Retail Federation’s Big Show conference, Sumit Singh, CEO of Chewy, said the company reacted quickly early in the crisis and revamped several aspects of its operations.

“Health and safety came first,” he said. “Once we got past that, it was essentially [about] what do we need to keep our websites up, with all the traffic that's going to come in? And so, we made sure that our infrastructure was in place to be able to handle the customer demand.”

That effort included not only ensuring that its technology network was up to the task, but also that its supply chain capacity and inventory levels were adequate to meet the influx of orders that began streaming in from customers. Even though Chewy was not always able to position its products in the optimal locations for distribution to customers given the pandemic, it was still able to provide adequate levels of service, considering the circumstances, Singh explained.

“We invested dramatically in buying up our inventory levels — albeit they were not properly positioned, but that's OK,” he said. “We were least able to get product to the customers in a really credible manner.”

Pandemic accelerates expansion into pet health via ‘Connect with a Vet’

But Chewy did more than prepare for increased demand for product. The company also listened to the feedback it was getting from customers, recognized the opportunity to expand into a new line of business, and rolled it out in the middle of the pandemic. The company’s “Connect with a Vet” service allows customers to ask licensed veterinarians questions about their pets’ health and is free of charge to customers who subscribe to Chewy’s Autoship automatic replenishment program.

Although these vets cannot diagnose or treat medical conditions and cannot prescribe medication, they can help pet owners decide how urgent their concerns are and whether they might need to seek an in-person visit with a vet, or perhaps seek emergency care.

Amid the pandemic, “what we recognized was that veterinarian availability was compromised,” said Singh. “There was a bit of friction there because of the lack of availability of veterinarians or reduced hours or the customer not being able to travel during lockdown.”

A telehealth solution for customers was already on Chewy’s roadmap as a potential service to be considered a few years down the road, but the pandemic pulled it forward, Singh explained.

Moving to a hybrid remote work, on-site model

Like many businesses, Chewy was also forced to change its workplace processes during the past year. Its employees began working remotely, and the company invested in systems to ensure workers could continue to collaborate. Chewy’s customer service representatives also worked from home, and the company expanded the ranks of those personnel significantly to handle the increased business.

Before 2020, the company had feared that working from home would inhibit the collaborative environment it felt was essential to its business, but the past year proved otherwise, Singh said. Although he still “fundamentally believes” that working from home full-time would hinder collaboration and innovation, it’s reached a compromise, given the success the company achieved in the past year.

Chewy has decided on a hybrid model in which employees have the opportunity to work on-site on some days and off-site on others.

“That is something that we're going to have to learn our way into,” said Singh. “That adaptability and flexibility is going to be important.”

He said Chewy was planning to double down on its customer service efforts in 2021 to retain the gains of the past year. It is already known for high-touch customer service specialties such as sending customers oil paintings of their pets based on online profile pictures.

“We acquired more customers the first half of [2020] than we acquired the entire year 2019,” said Singh. “These customers are going to come to us with increased demands and elevated expectations that we will have to gear up to ensure that we are meeting, via innovation and via great service. And I think that applies to all businesses out there.”

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