Anyone who has ever owned a pet will tell you they are part of the family. No one knows this better than Chewy, the pet ecommerce store, which has made headlines with its unique approach to customer service.
Just how unique is evident in this tweet from one of its customers. The customer had asked for a refund of an unopened bag of food after their pet passed away. Chewy not only honored the refund, but encouraged the customer to donate the food to a pet shelter and sent the customer flowers.
I contacted @Chewy last week to see if I could return an unopened bag of my dog’s food after he died. They 1) gave me a full refund, 2) told me to donate the food to the shelter, and 3) had flowers delivered today with the gift note signed by the person I talked to?? 😭
— Anna Brose, MSc (@alcesanna) June 15, 2022
The tweet amassed over 700,000 likes and almost 10,000 comments, many from people who have had their own unique interactions with the brand. The virality of this single tweet epitomizes Chewy’s overall business strategy — spare no cost to delight your customers and they would reward you for it.
No.1 or None
When Ryan Cohen launched Chewy back in 2011 with his co-founder Michael Day, he knew he was fighting an uphill battle. Amazon already dominated the ecommerce space, including the pet retail market.
Instead of caving at the idea of going up against the titan, Cohen capitalized on the fact that nobody else was game for the challenge and used Amazon’s recipe to cook its own success. Cohen borrowed Bezos’ 1997 letter to shareholders as a blueprint on how to set up and differentiate Chewy. This led the leadership team to invest in a streamlined supply chain and a convenient online shopping store.
However, Cohen had the foresight to know that this alone wasn’t enough. Unless Cohen and Day aimed to be the leader in pet retail, they didn’t stand a chance. They needed something no other retailer, not even Amazon, provides. Very quickly, the pair landed on what Chewy is most known for today — its second-to-none, highly personalized customer service.
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Customer satisfaction matters, however, for most businesses, this translates to polite customer rep interactions and timely responses to enquiries. Since that is now standard practice, it is hardly the way to stand out. Chewy knew this from the onset, so it decided to re-define customer service altogether as part of a three-part broader strategy:
1. Focus on Customer Delight
Owning a pet is a highly personal matter based on an emotional bond. So the brand used every opportunity to elicit emotions in their customers. It is not uncommon for Chewy customers to receive birthday cards for their pets, a pet portrait, or a bouquet of flowers once their pet passes away. Not only is this approach memorable (hardly anyone else does it to this extent), but it is so personal that the customer has no incentive to look elsewhere.
2. Put Profits Last
Chewy is a unicorn. Only six years after the business was launched, PetSmart acquired Chewy in 2017 for $3.35 billion — considered the largest acquisition of an ecommerce business at the time. Despite this massive success, Chewy had not reported any profits until well into the fourth quarter of 2020, when it had its first net positive income quarter.
While the delayed profitability has given some investors pause, time has shown that this was the right approach for the business. When COVID-19 hit, the brand hired thousands of new employees to meet the increase in demand. When their fulfillment centers got backlogged due to disruptions in the supply chain, Chewy invested in deliveries by air to meet their delivery times. While they ran these operations at a cost for a while, the sticky nature of pet supplies meant they were able to quickly recuperate losses and keep customers happy.
Finally, as a market leader, Chewy didn’t stop at offering pet food and accessories alone. The company has invested a big chunk of its income in expanding its services into pet healthcare and producing its own pet medications. In October 2020, Chewy launched its “Connect with a Vet” service, which is free for its customers and gives them quick and easy access to medical expertise. All of this has put a great financial strain on the business, but it plays very well into positioning Chewy as a market leader in the industry.
3. Strive for Stickiness
Before launching Chewy, Cohen owned a poodle named Tylee. Every couple of weeks, he would buy food and other supplies for his dog from a store owner he trusted. At the time, he was also considering launching an ecommerce jewelry business, but it dawned on him that a much better idea would be to cater to pet owners. Not only was he far more interested in pets than jewelry, but pet owners were an incredibly sticky category of customers. Once they find a product or service provider they like, they tend to stay.
Having this knowledge, the business focused on driving repeat business via its Autoship program that offered recurring deliveries. This model gave the business predictable revenue, drove loyalty, and encouraged customers to spend more. A study by Consumer Intelligence Research Partners, in fact, has found that Autoship customers tend to spend about $820 per year on average, while other customers spend only $423.
As a reward for their loyalty, customers are offered a 35% discount on their first order and 5% off of all subsequent orders without having to pay any membership fees. In 2020, Chewy gained 5.7 million new active customers as a result of the pandemic and since then, has managed to get 74.7% of its total net sales from Autoship subscriptions.
Playing the Long Game
Unlike other ecommerce stores catering to a wider target audience, Chewy played on the strengths of its niche market. Capitalizing on the strong emotional bond between pets and pet owners, Chewy used its first years of operations to create a one-stop shop for all things pet.
They invested heavily in customer experience by offering incredibly personalized interactions and giving away free products left, right, and center. This expensive approach to customer care is now paying dividends. In 2023, Chewy experienced 14.7% year-on-year growth and this trend shows no signs of leveling off. That’s the power of pet love and the power of customer loyalty.