Chewy bets on pet healthcare for the future
Chewy has been selling pet products online for 11 years and now sees pet healthcare as the future of the industry. The pet e-commerce company launched its pharmacy in 2018 and added a compounding pharmacy, which can mix custom medications needed by patients, in 2020. Chewy has since launched its “Connect with a Vet” telehealth service. and her pet insurance. It also owns and publishes PetMD, averaging over 5 million unique visits per month, according to analysis by SimilarWeb.
Chewy ranks 13th in the Top 1000. The database is Digital Commerce 360’s ranking of the largest online retailers by web sales.
Customers sought health care from Chewy
Chewy’s primary focus is food and supplies in the $130 billion pet industry, but about a third of that market is spent on healthcare spending, said Chewy Health President Mita Malhotra. In 2022, Chewy had 20.4 million active customers, the retailer said.
Prior to the pharmacy’s launch, Chewy heard from customers that they wanted to purchase medical supplies from the company.
“We buy everything else from you…why don’t you transport medical equipment? Why don’t you sell pharmaceutical products? customers asked Chewy, per Malhotra.
Chewy first ventured into healthcare as a pharmacy because it made sense with the existing e-commerce platform, Malhotra told Digital Commerce 360. The biggest opportunity was in drugs for “chronic disease and preventive care,” she said. They represent approximately 70% of the drugs sold by Chewy.
Consumers have shown a preference for purchasing these products, with examples like insulin and prescription foods, in the form of subscriptions. The strategy was a huge success, and autoship orders accounted for 73% of sales in the last fiscal quarter, accounting for $1.98 billion in revenue.
However, less than 5% of Chewy customers purchase all of their pet health care products from the e-commerce retailer, CNBC reported. The retailer hopes to make healthcare 30% of its business in the near future.
Consumers’ willingness to pay for their pets’ health care has paid off for Chewy, but first it took convincing them that it was a reputable provider.
“Trust is rooted in how you really take care of customers. Do you listen to them? Do you take care of them? said Malhotra.
For Chewy, it’s a consequence of the retailer’s customer service, which has made headlines for how it treats pet owners in difficult times. Some customers told Entrepreneur in 2022 that they received flowers, condolence cards and even portraits when their pets died.
Customer service representatives have leeway to have these interactions with customers, Malhotra said. Currently, only about 20% of Chewy’s customers buy pharmaceuticals, but she thinks that number will grow with a focus on customer service. Chewy declined to share specific statistics about its pharmaceutical sales.
Pet health is resilient
The companion animal category is “resilient” even in times of economic downturn, Malhotra said, and that’s even more true for pet healthcare. She cited a 2021 Metlife study of 2,000 dog and cat owners, which found that 58% said they were more worried about their pets’ health than their own. 52% of respondents also said they spend more money on their pets’ health care each year than on themselves.
Malhotra said this trend is clear in Chewy’s sales.
“Food, pharmacy, welfare regiments: people aren’t cutting back,” she said. These categories are “sustainable,” while consumers might opt out of more discretionary items like toys if they have less to spend.
Better medical care and better nutrition also help animals live longer. This leads to additional health care expenses for pets and increasingly expensive care as they age, according to a report by Bloomberg Intelligence.
“We are seeing a sharp increase in consumer spending on pets and expect this to continue through 2030,” Bloomberg report co-author Diana Rosero-Pena said. “Consumers are willing to pay more for items for their pets, with the pet food market having the potential to grow more than 50% from current levels by the end of the decade.”
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