The finance chief of Chewy Inc. plans to ramp up the number of products the pet-supply retailer offers to help boost orders and is considering ways to monetize its new, free telehealth service for animals.
The Dania Beach, Fla.-based company, which sells items such as food, toys, leashes and crates for pets, now offers about 65,000 items on its online shop, after adding about 20,000 in the past two years, Chief Financial Officer Mario Marte said.
The idea is to build out Chewy’s online catalog so pet owners don’t need to shop elsewhere to find the products their animal might need, and to increase the amount customers spend, he said. While new customers might start by spending about $150 a year, those who have been registered on the website for five years or longer often place orders of $700 or more a year, Mr. Marte said.
Chewy has been adding users at a rapid pace, which might in part have to do with increased pet ownership in recent months, said Stephanie Wissink, an analyst at investment bank Jefferies Group. “Consumers are increasingly looking to simplify [their shopping routine] and drive convenience, especially during the pandemic,” Ms. Wissink said.
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The company had about 18 million customers at the end of its fiscal third quarter Nov. 1, up 5.1 million from a year earlier. It added 2.9 million new customers during 2019. There are about 100 million pet-owning households in the U.S., according to Chewy.
The pet profiles that customers create on the Chewy page help with driving revenue. The more information owners enter about their animals, for example breed and age, the more precise the offers Chewy makes to these customers. “The recommendation engine gets better over time,” Mr. Marte said.
Chewy reported net sales of $1.78 billion in its latest quarter, up 45% from the prior-year period. Its net loss shrank to $32.8 million, from $79 million a year before. The company expects strong revenue growth in its current fiscal fourth quarter, Mr. Marte said.
Its telehealth service, called Connect With a Vet, could provide additional growth opportunities, analysts said. The company works with a team of veterinarians who conduct initial consultations online and give recommendations for local vet clinics. Launched about 10 weeks ago, the service has been rolled out in 47 U.S. states, and Chewy looks to expand it further, Mr. Marte said.
Chewy could make money with its telehealth service either by charging its customers or the vet clinics that it is referring customers to, Ms. Wissink said.
Mr. Marte declined to provide specifics on how the company could monetize its telehealth offering.
Other companies also have expanded into animal health. For example, PetSmart Inc., which acquired Chewy in 2017 and listed it on the public markets in 2019, has a partnership with Banfield Pet Hospital, which operates a chain of vet clinics.
Chewy’s telehealth offering is currently only available for customers that sign up for automatic order refills, which represent about 70% of Chewy’s net sales, according to analysts at advisory firm Evercore ISI.
The high percentage of customers who automatically renew orders on a regular basis help Chewy’s management provide reliable revenue forecasts, said Seth Basham, an analyst at Wedbush Securities Inc., a financial-services firm.
“Not only do new pet parents spend more than other new customers initially, they are more ‘sticky’ as they tend to enroll in Autoship [Chewy’s automatic order refill], providing strong visibility to revenue growth” in way that many pandemic-boosted retailers don’t have, Mr. Basham said in a note to clients.