Chewy Digital Transformation Strategy

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Chewy Digital Transformation Strategy

Key Takeaways

  • Chewy is an online pet food and products retailer based in Plantation, Florida. The company was founded in 2011.
  • On October 25, 2020, Chewy began using ServiceNow, a cloud computing platform offering digital workflow solutions, to streamline its processes in human resources, security operations, facilities, and application performance management. Previously, the company was using ServiceNow’s IT service management module (ITSM) for its IT service portal.
  • On October 28, 2020, Chewy launched “Connect with a Vet”, a telehealth service targeting pet owners and veterinarians. The service will give pet owners direct access to veterinarians.
  • Chewy plans to scale its platform by investing in automation, technology, and product innovation.

Introduction

A company analysis for Chewy focusing on its digital transformation strategy has been provided in the following brief. Details regarding Chewy's future strategic initiatives related to digital technology was limited in the public domain; therefore, we provided additional strategies that were not linked to digital technologies.

Chewy's Digital Transformation Strategy

Company Overview

  • Chewy is an online pet food and products retailer based in Plantation, Florida. The company was founded in 2011.
  • Chewy has had seven funding rounds where it raised $451 million. The most recent was a Series F funding round on April 4, 2017, where it raised $125 million. The lead investor was Lone Pine Capital.
  • The company’s investors include Volition Capital, Greenspring Associates, New Horizons Venture Capital, Verlinvest, BlackRock, Wells Fargo Capital Finance, and Lone Pine Capital.
  • Chewy had its IPO on June 13, 2019, where its stock opened at $22.

Corporate Values and Mission

  • Chewy’s operating principles include, putting customers first, delivering results, earning trust, operating at depth, accelerating time, acting as the owner, debating openly, building high-performing teams, simplicity, and thinking big.
  • The company’s mission is “to be the most trusted and convenient destination for pet parents (and partners), everywhere.”

Past and Future Strategic Initiatives

Past Strategic Initiatives

  • On October 25, 2020, Chewy began using ServiceNow, a cloud computing platform offering digital workflow solutions, to streamline its processes in human resources, security operations, facilities, and application performance management. Previously, the company was using ServiceNow’s IT service management module (ITSM) for its IT service portal.
  • On October 28, 2020, Chewy launched “Connect with a Vet”, a telehealth service targeting pet owners and veterinarians. The service will give pet owners direct access to veterinarians.
  • On July 21, 2021, Chewy expanded its telehealth service, “Connect with a Vet,” by adding features such as video consultations, pre-scheduling veterinary consultations, and providing additional hours of operation, including weekends.
  • On September 15, 2021, Chewy launched “Practice Hub,” an innovative marketplace that “provides veterinarians a complete e-commerce solution for their clients, and leverages the benefits of Chewy’s quick and reliable delivery, unparalleled customer care team, and Autoship subscription service.”
  • Chewy is leveraging automatic reorders to increase sales on its platform by promoting its autoship program on its website. The company’s autoship program offers new members up to 35% discount on their purchases and 5% thereafter. According to Consumer Intelligence Research Partners, as of 2022, 44% of Chewy’s customers were part of the autoship program.

Future Strategic Initiatives

Quotes from Executives about Chewy’s Digital Strategy

  • In an interview with Business Insider about the company’s automated warehouse, Chewy’s CEO, Sumit Singh stated “we will leverage smart robotics and cutting edge technology to pick, pack, and ship products with speed and precision.”
  • According to Sarah Lawless-Gunn, the Head of ServiceNow Platform and Product at Chewy, the company’s ambition is to “Enhance the capabilities of team members through self-service and optimize our operations by automating processes-reducing manual touch and creating better touch time.”

Marketing Stack

  • According to Stackshare, Chewy's marketing stack includes Google Analytics, Google Tag Manager, Word Press, and Google Fonts.
  • Chewy's marketing stacks according to Builtwith include Google AdWords Conversion, Rapleaf, LiveRamp, Yahoo Web Analytics, Facebook Signal, Pinterest Conversion Tracking, Mavrck, TikTok Conversion Tracking, Full Story, Datalogix, Google Customer Reviews, Microdata for Google Shopping, Criteo, Adroll, Oracle CX, Curalate, and Recruitics.

Corporate Challenges Faced by Chewy

Supply Chain Challenges

  • Chewy is experiencing pressure due to supply chain challenges. According to the company CEO, the supply chain issue was fueled by the COVID-19 pandemic in 2021.
  • Disruptions in the supply chain have made it difficult for the company to meet consumer demands. In addition, the shortages have resulted in increased prices on core functions such as human resources and transportation.
  • In Q1 2022, the company did not sell as much as it forecasted due to the inability to secure more inventory. According to the management, “sold-out products hurt sales twice as much as the company forecasted it would.”
  • Despite experiencing supply chain challenges, the company has noted the “easing of some supply chain disruptions.” For this reason, chewy is opening automated fulfillment centers to improve its shipping capacity.
  • In addition to optimizing its fulfillment centers, the company is investing in freight services. According to the CEO, the company’s strategy toward automation and transportation will reduce pricing and improve delivery performance.

Inflation

  • In Q2 2022, Chewy experienced a drop in sales revealing that there is reduced spending on dog treats due to inflation. In addition, the company’s sales forecasts for 2022 fell below what Wallstreet anticipated. “Chewy’s stock stumbled more than 9% in after-market trading.”
  • Chewy’s drop in sales is attributed to shoppers reducing their spending on discretionary items. One of the key reasons why consumer spending has reduced is the rising prices for pet care products.
  • According to the Chewy’s CEO, pricing for pet products increased in Q2 2022. The CEO added that reduced spending in pet care products resulted in an “industry wide decline in unit volume.”
  • In addition, Petco Health and Wellness, a competitor of the company, revealed to CNN that there might be reduced consumer spending on pets.
  • In the quarter ending October, Chewy forecasts that the company revenue will be between $2.44 billion and $2.65 billion. However, analysts had expected Chewy to make $2.57 billion in sales.

Research Strategy

For this research on Chewy's digital transformation strategy, we leveraged the most reputable sources of information available in the public domain, including company reports, industry, and media sites, such as SEC Filings, The Motley Fool, and Business Insider. It is noteworthy that specific information on the company's corporate values was unavailable in the public domain. We looked through annual reports and the company's website but to no avail. Further research using industry sites, such as Product Mint revealed that the company provided operating principles instead of corporate values, which we included in our findings.

In addition, information regarding the company's future strategic initiatives related to digital technology was limited in the public domain. For this reason, we included other strategies by the company. Moreover, direct quotes from the CEO and executives regarding the company's digital strategy was limited. We found a quote from 2020 by the Head of Product in the organization, but further research revealed that she was no longer with the company. Nonetheless, we included the quote since it specifically addressed digital transformation in the company and due to limited data availability.

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