4 Chewy strategies for pet food e-commerce growth

Chewy’s stock price opened on Monday at US$34.72, or nearly 60% higher than the IPO price.

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(Wildstrawberry | BigStock.com)
(Wildstrawberry | BigStock.com)

Chewy executives have a four-part strategy for continuing the growth of the internet-based pet food retailer, which they shared shortly before the Chewy’s initial public offering.

  1. Increase customer spending: Chewy noted that their customers who remain active spend an average of three to four times as much in their third year as they did in the first.
  2. Expanding health care products: Chewy plans to expand further into pet health care by complementing existing over the counter and vet diet offering.
  3. Growth at scale: Using an advanced technology platform enables Chewy to grow sales volume and increase active customer numbers while reducing marginal transaction and operational costs.
  4. Smartly managed cost/logistics network: With high sales volume and participation rates in Autoship, coupled with low seasonality, Chewy aims to use its assets efficiently to lower fixed and variable cost per unit and inventory levels.

Chewy share price opens 60% higher than IPO

Following e-commerce pet food retailer Chewy’s initial public offering on the New York Stock Exchange, the stock increased from its original share price of US$22 to a high of US$41.34. Chewy’s stock price retreated a bit and opened on Monday at US$34.72, or nearly 60% higher than the IPO price.

On June 14, Chewy made 46,500,000 shares of its Class A common stock available at a price to the public of US$22.00 per share. The offering consists of 5,600,000 shares of Class A common stock being sold by Chewy and 40,900,000 shares of Class A common stock being sold by a wholly-owned subsidiary of PetSmart.

PetSmart purchased Chewy in 2017 for approximately US$3.4 billion and remains the majority owner with a 70% stake in the company and 77% controlling interest.

History of PetSmart and Chewy online pet food retailer

Following the acquisition by PetSmart, several pet food brands stopped selling their products on Chewy. For example, Tuffy’s Pet Foods executives decided to stop offering their products on the website.

In April, Chewy selected Salisbury, North Carolina for its new fulfillment center that will serve the Southeastern United States. The facility will create 1,200 new jobs and result in a US$55 million investment by Chewy in Rowan County.

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