Chewy (CHWY) CEO Sumit Singh gave investors plenty to chew on as the company’s public debut on the NYSE at one point soared by as much as 77% —above its $22 IPO price and $36 opening trade. Chewy shares closed at $34.99 on Friday, up 59% from its IPO price.
“There’s a lot more growth in front of us,” Singh told Yahoo Finance. “The way we engage and retain customers. The fact that 90% of our revenue comes from repeat customers...There’s a lot more in front of us than behind us at this point.”
Chewy generated $3.5 billion in sales last year but lost $268 million. Under Singh’s leadership these past two years, the company has captured more than 50% of the online pet care market which totals $6 billion, according to the American Pet Products Association, APPA.
The entire pet care market in the United States is $70 billion and Singh expects the online share to hit 25% by 2022. He is guiding Chewy to take a large bite of it. “We’re investing in building our private brands. We’ve gotten into health care where we’re really wanting to partner with veterinarian practices as well as pet parents,” he explained.
Catching up to Amazon
Singh’s vision for Chewy is to expand the one-stop pet shop experience that he believes is more meaningful to “pet parents.” Data from SimilarWeb, a global leader in web analytics shows Chewy is barking up the right tree.
“Chewy is managing to reach more people and at the same time their competitors are not growing at the same pace,” Pascal Cohen, head of solution engineering and implementation for SimilarWeb in North America, said. He compared desktop visits to Chewy’s site with competitors like Amazon (AMZN), Petco (which is privately held) and PetSmart (the private company which owned Chewy and remains its majority shareholder). According to SimilarWeb, Chewy has doubled its desktop penetration outpacing the others.
In a direct comparison to Amazon’s pet category, Chewy has a 9% conversion rate among visitors to its website, but Amazon still leads with a conversion rate of 13%. “Fact is Chewy caught up to Amazon and based on our data it generates more traffic than Amazon’s pet category,” Cohen said.
Price wars are coming
But one potential problem for Chewy is visitor overlap that threatens to drive customers to other web retailers. SimilarWeb data shows roughly 40% of the consumers who went to Chewy on a desktop computer also visited other web retailers to compare prices.
“Chewy is gaining market share and growing but Amazon is still a giant when it comes to price comparison,” Cohen said. “They (Chewy) need to be more competitive from pricing.”
Singh said Chewy is already competitive. “Our share of wallet constantly expands. In 2018 our cohorts were on average $334 share of wallet but we’ve shown that when customers stick with us five, six, seven years, that number increases to $700 to $800.”
Singh pointed out that two-thirds of Chewy’s revenue comes from its subscription auto-ship program. “The fact that 90% of our revenue comes from repeat purchases allows you to say that the engagement that we build fuels loyalty. Loyalty fuels that repeat purchases and we just need to do more of that.” he said.
The personal touch counts
But Singh, who has a small four-year-old Shih Tzu named Dee who his three-year-old daughter considers her brother, believes the personal experience a Chewy customer gets will keep customers coming back.
“We send you welcome cards, holiday cards. We send pet portraits. Thousands of local artists across the country who partner with us to send hand drawn pet portraits to your house. You can’t buy these,” he said. “These are a total surprise and delight.”
Adam Shapiro is co-anchor of Yahoo Finance On the Move.