Why Petsmart is buying the Zappos of pet supplies
PetSmart is betting the farm that pet supply upstart Chewy.com, and its high-touch customer service model, will help it better compete in a world where more consumer spending is gravitating online.
PetSmart, the retail giant with more than 1,500 stores across the U.S., has agreed to purchase its young rival for a stunning $3.35 billion, just slightly more than Walmart paid for Jet.com last year.
The PetSmart-Chewy deal is similar to the Amazon-Zappos deal in 2009, in which Amazon paid $1.9 billion for Zappos, which also has a high-touch customer service e-commerce model.
E-commerce drove 16% of pet care sales in 2016, accounting for more than 80% of pet care category growth from online channels, according to Nielsen e-commerce data for the 52 weeks ended Dec. 31, 2016.
According to a news release, PetSmart says the acquisition accelerates the execution of PetSmart’s strategy and is a critical milestone in its transformational journey to be the most convenient, best-in-class pet retailer. The combination of PetSmart and Chewy will enhance both companies’ capabilities and reach, offering the widest selection of pet products and services available both in-store and online in North America. 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 strives to be the trusted partner to pet parents and pets in every moment of their lives,” said Michael Massey, president and chief executive officer of PetSmart. “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.”
Chewy is one of the leading online retailers of pet products and has seen extraordinary growth since it was founded by Ryan Cohen and Michael Day in 2011. Chewy’s position in the growing, underpenetrated online pet retail segment complements PetSmart’s strong footprint in brick and mortar. In addition to providing a “wow” customer experience, Chewy’s extensive product selection and subscription model have attracted and retained a significant customer base that has contributed to the growth of customer purchasing through online channels.
“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 Ryan Cohen, co- founder and CEO of Chewy. “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.”
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. Both companies will use their shared innovative capabilities and offerings in order to deliver the most value and convenience to customers.