Sumit Singh, CEO of Chewy Chewy has become the rare e-commerce company that knows how to make money. This has set it up nicely for its foray into an area that CEO Sumit Singh is betting will see hot growth for years: health care for pets.
After years of vacillating between money-making and money-losing quarters, the online pet giant is now reliably profitable, with net income in 2022 double what it was a year earlier. Singh, a former Amazon executive, was brought in four years ago to instill greater discipline, closely scrutinizing marketing costs and relying on analytics in an industry that often chases growth at all costs, which are chronically accompanied by deep losses.
Under Singh, Chewy has prioritized cultivating customer loyalty over chasing new shoppers—and all the heavy marketing spending the latter entails. Now, some 73% of sales come from its automatic shipping service favored by repeat customers. Singh has spent a fortune on other efforts like automating distribution, which crimped profits for a while. But these investments appear to be paying off in the form of greater efficiency and control of its supply chain.
Having millions of customers locked into shopping on Chewy.com has given Singh confidence the company can successfully climb the next rung on his long-term plan: a pet healthcare market—despite the fact that it does not have a fleet of stores like PetSmart and Petco from which veterinarians can work.
“Customer loyalty leads to repeat purchasing. Repeat purchasing leads to recurring and amplifying revenues. So you bring in a pet parent to buy food, and then they’re buying treats, and then they’re buying hard goods, and then they’re buying health care,” Singh tells Fortune. Under his watch, Chewy’s sales rose 254% between 2018 and 2022 and could surpass $10 billion this year.
Chewy’s efforts on the health care front include its launch last month of CarePlus , an insurance and wellness suite of products that provides pet owners around-the-clock access to Chewy customer service and licensed veterinarians.
Other potential growth areas include merchandise and services for cat owners who have been overlooked in a pet market that has long focused more on larger dog products. Customers have made clear they want this. “Cat parents are vocal,” jokes Singh, who does not own one but does have a Shih Tzu named D.
This interview has been edited and condensed for clarity.
Fortune: At long last, Chewy is consistently profitable in contrast to many other e-commerce players. What does it take make money in e-commerce?
Of course, e-commerce companies can be profitable, and we are proof of that. I have the mantra that we’ve advocated internally at Chewy, which is ‘get big fast’ but also ‘get fit fast.’ I think what happens a lot of times is that growth-oriented companies don’t build operating fitness and discipline into the routine of the organization early on. Operating fitness essentially means that we will deliver the scale, but at the same time prepare the company to get structurally, and incrementally better, year after year after year.
A big challenge for many e-commerce companies is customer churn and the intense marketing spend needed to win new ones. The vast majority of sales at Chewy now come from automated replenishments for repeat customers. Is that the secret sauce?
Scale and market leadership cannot come, in my opinion, without having tremendous customer loyalty. Customer loyalty leads to repeat purchases. So our business amplifies over time.
A lot of e-commerce and digital-first brands are face planting now after early buzz and fast growth. What’s your advice to these companies as they grow?
Chewy has remained incredibly disciplined in utilizing cash flows and being the governor of our own growth. The advice that I would give companies is to understand cash burn and understand the core metrics that actually deliver the value proposition and sustainable long-term profits for the company. In our case, it was customer loyalty. We understood that from the get-go, and we built an engine that beyond delivering scale, preserves the integrity of the customer experience. You can’t just acquire a customer and lose them the next year or not know whether they’re going to buy from you again. You run out of people or worse, you run out of credibility with them.
Now you’re pushing hard into health care. Assuming pet adoption numbers return to normal after the COVID boom, is this relatively new business line key to maintaining growth?
Accessibility and affordability in pet health care have always been a battle. Fewer than […]
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