Chewy.com IPOs with Bark, Bite and Billions

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Chewy.com, the online pet product giant is expected to begin trading today at a price that values the company at $8.8 billion — almost $2 billion more than originally expected. We looked at our data to see how well Chewy holds up against traditional competitors and Amazon.

Key Takeaways

  • Chewy has taken ~ 15% market share from its competitors since its mid-2017 acquisition by Petsmart.
  • Traditional pet stores saw their share of overlapping customers with Chewy more than double over the past 3 years.
  • In 2018, transactions at Chewy averaged $66 in size, with each shopper frequenting the platform 6.5 times a year, compared to less than $50 and under 5 times for its competitors.
  • Chewy customers are big spenders, with customer lifetime spend of new cohorts more than triple that of its main competitors.

Chewy Has Been Gaining Market Share

It’s no secret that the pet industry has seen explosive growth over the last few years, a fact that likely contributed to PetSmart acquiring Chewy.com in mid-2017 for $3.35 billion — which at the time was the largest amount ever paid for an e-commerce brand.

According to Earnest data, Chewy has been doing pretty well for itself since then, taking roughly 15% market share from other pet retailers in the years post-acquisition: about 10% from PetSmart and 5% from Petco.

A Shared Customer Pool, Growing in Chewy’s Favor

According to some sources, there are more households with pets than there are households with children in the United States, and these lucky cats and dogs (mostly dogs) are certainly being treated like family. Pet ownership has steadily increased and with it the demand for food, litter and other goods.

More traditional retailers are still popular with pet owners, but Petco, Petsmart, Pet Valu and Pet Supplies Plus customers are increasingly shopping on Chewy.com. Over the last two years, these traditional pet stores saw their share of customers more than double at Chewy — and the trend shows no signs of slowing down.

Chewy Customers Spend More Money, More Often

Higher frequency of spend and higher basket sizes have led to Chewy outperforming its competitors. In 2018, the average Chewy customer completed 6.4 transactions on the site, averaging $66 per transaction. Its main competitors saw fewer than five transactions in 2018, with customers spending between $40 — $50 on average.

The key to Chewy’s success may be in getting customers to come back to the platform. Focusing on new customer cohorts in 1Q16, Chewy Customer Lifetime Spend over three years is still ahead of its four competitors combined at $1,200. This is a function of Chewy’s higher customer retention (40%) on its e-commerce platform vs. less than 20% retention for its brick & mortar competitors.

What About Amazon?

According to its founders, Chewy is betting on its top-notch customer service and the convenience of a multi-channel experience to become the largest pet retailer in the world. Still, Chewy may have a formidable competitor in Amazon — which launched its own private-label pet food in 2018 called Amazon Wag.

Amazon has dominated in almost every industry it set its sights on, and the fact that almost all Chewy customers are already Amazon customers is probably keeping Chewy executives up at night.


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