When it comes to selling pet food online, Chewy Inc. is the cat’s meow, growing into the industry leader in e-commerce in just six years since its founding in 2011. Now, it’s being acquired by one of the largest store-based pet supplies retailers, PetSmart Inc.
PetSmart announced the acquisition today, saying it would close by the end of the company’s fiscal second quarter in late July.
The deal adds an exclamation point to Chewy’s meteoric rise. The web-only retailer booked online sales of $900 million in 2016, only its fifth full year in business. It now accounts for 57% of online pet food sales, versus 33% for Amazon.com Inc. (which owns pet site Wag.com), 4% for Petco and 2% for PetSmart, according to web analytics firm 1010Data.com.
Chewy is No. 57 in the newly released Internet Retailer 2017 Top 500 Guide, while PetSmart is No. 365, with 2016 online sales of $71.8 million, according to an Internet Retailer estimate, up 16.0% from $61.9 million in 2015. This is Chewy’s first appearance in the Top 1000.
PetSmart, which is privately held, did not disclose the purchase price. However, investment bankers have been predicting that Chewy might parlay its rapid growth into an initial public offering of stock that could have valued the e-retailer at as much as $2 billion. Chewy has raised $236 million from investors.
CEO Ryan Cohen, who co-founded Chewy with chief technology officer Michael Day, will continue to lead Chewy, which will operate largely as an independent subsidiary of PetSmart, the companies say. Day also will remain on board, the companies say.
Chewy emphasizes customer service, offering 24/7 access to agents who were encouraged to stay on the phone with customers and learn about their pets. The e-retailer asks customers to upload photos of their pets and each month and sends scores of Chewy loyalists small oil paintings of their pets. During the past holiday season, Chewy also sent handwritten holiday greetings to 2 million customers.
“Chewy’s high-touch customer e-commerce service model and culture centered around a love of pets is the ideal complement to PetSmart’s store footprint and diverse offerings,” says PetSmart CEO and president Michael Massey. “Together, PetSmart and Chewy will provide the most convenient customer experience to a wider base of pet parents across every channel.”
Founded in 1987, PetSmart operates 1,524 stores in the United States and Canada and has a workforce of 55,000. Private equity firm BC Partners acquired PetSmart in 2015 for about $8.7 billion.
Chewy, based in Dania Beach, Fla., near Fort Lauderdale, has over 5,000 employees and 3.8 million customers, PetSmart says. The web-only retailer operates distribution centers in Indiana, Nevada, Pennsylvania and Texas, with a fifth facility in Florida under construction.
“Since we started Chewy, we have been dedicated to understanding and satisfying the evolving needs of our customers to deliver the highest quality pet products and customer service,” Cohen says. “Combining our strong e-commerce expertise with PetSmart’s best-in-class infrastructure, footprint and breadth of offerings including services will help us ‘wow’ our customers even more.”
PetSmart says consumers purchased $66.75 billion in pet supplies in 2016. The 14 pet supplies retailers in the Internet Retailer Top 500 generated a total of $1.98 billion in online sales, or 3.0% of the total market. That was an increase of 43.2% from $1.38 billion in 2015, largely on the strength of Chewy’s growth to $900 million in online sales in 2016 from $423 million a year earlier.
In announcing the deal, PetSmart said in a press release, “Chewy’s position in the growing underpenetrated online pet retail segment complements PetSmart’s strong footprint in brick and mortar.”
Chewy is a finalist for two of the 13 2017 Internet Retailer Excellence Awards: Emerging E-Retailer of the Year and E-Retail Growth Award. The IR Excellence awards will be handed out at a June 7 banquet at IRCE in Chicago.
Chewy built its business by offering a broad range of pet food and supplies from 550 brands, and this year introduced its first private-label product, American Journey dog food.Favorite