BUSINESS - PetSmart Chewy Deal Causes Commotion in the Industry

The pet industry is abuzz about the recent announcement of PetSmart’s acquisition of Chewy.

How is this going to impact independent pet retailers?

Chewy has been a formidable opponent in online retail - often selling products at prices the big box stores are unable to come close to competing with.

Another major component of Chewy’s success is outstanding customer service.

Anywhere one looks, happy customers are sharing stories of how well the company treats them and how well the company knows them.

People are speculating on the purchase outside of the animal industry as well.

The $3.35 billion acquisition is being touted as the biggest e-commerce purchase in history by publishers like Tech Crunch.

Recode is pointing out the deal is larger than Walmart’s acquisition of Jet.com, which was done for many of the same reasons - expanding Walmart’s e-commerce abilities and positively impacting their customer service.

Even e-commerce focused eMarketer is writing about the deal.

This deal is a big deal!

A Pet Business article touches on independent retailers concerns regarding how this acquisition can impact their bottom line.

While some fear the deal can make PetSmart an even stronger competitor, others believe it can actually take away some of Chewy’s clout.

Why?

Some pet food brands have chosen to sell their products through Chewy rather than big box stores like PetSmart through loyalty to independent retailers and they may pull their products.

In fact, Tuffy has already announced they will stop selling through Chewy because of the acquisition.

Also, Chewy has been operating with a very low profit margin and therefore very little profit.

There is a belief that PetSmart will want to raise that margin and generate more profit and that can’t be done without increasing the prices of online products.

The impact on the independent retailer remains to be seen, but what is clear is many people are watching to see just what happens.

BUSINESS - PetSmart to Acquire Chewy Inc.

PetSmart, Inc. announced it has entered into a definitive agreement to acquire the online pet retailer Chewy, Inc.

The acquisition accelerates the execution of PetSmart’s strategy and is a critical milestone in its journey to be the most convenient, best-in-class pet retailer.

Chewy is one of the leading online retailers of pet products and has seen major growth since it was founded by Ryan Cohen and Michael Day in 2011.

With the recent upgrade to the PetSmart website that boosts e-commerce, it’s clear the acquisition is part of a plan to grow the online portion of their business.

The combination of PetSmart and Chewy will enhance both companies’ capabilities and reach, offering a wide selection of pet products and services available both in-store and online in North America.

Michael Massey, president and chief executive officer of PetSmart said in a release, “We are focused on improving our customers’ experience in-store and online as we continue to execute against our long-term strategic initiatives. 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. Together, PetSmart and Chewy will provide the most convenient customer experience to a wider base of pet parents across every channel.”

Upon closing, Chewy will continue to be led by CEO Ryan Cohen and operate largely as an independent subsidiary of PetSmart, focusing on its current business strategy, while PetSmart will continue to execute its strategic initiatives across the combined company.

“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,” said Cohen.

“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.”

The acquisition, which is subject to customary regulatory approvals, is expected to close by the end of PetSmart’s second fiscal quarter of 2017.

PetSmart’s recent acquisition of Allpaws was more about social innovation than retail services, demonstrating the importance of both aspects to the pet supply retailer.