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Chewy+, Chewy’s recently-launched paid membership program, is exceeding expectations with CEO Sumit Singh comparing its potential stickability to similar programs from Amazon, Walmart, and Costco.
“We see this program in line with an Amazon Prime or Costco membership or a Walmart+ with similar benefits and similar returns,” Singh said on Chewy’s second-quarter analyst call. “Our job is to position it as the best pet membership program in the industry.”
Chewy began testing the program in May 2024. The program offers:
- Free shipping on all orders.
- 5% rewards to redeem on future orders.
- Limited time seasonally relevant member exclusive offers.
Chewy is currently offering a 30-day free trial period to new subscribers. Once the trial ends, members pay an introductory price of $49 per year. Non-members pay $4.95 in shipping fees per order, and earn free shipping for orders over $49.
Singh said in the month of July, approximately 3% of Chewy's total monthly sales were to Chewy+ members. The retailer is seeing “strong incrementality” in spend, NSPAC (Net sales per active customer), and a positive contribution profit per customer across Chewy+ customers compared to non-members.
Chewy+ customers are also buying at a higher frequency and adding three more categories on average to their orders versus non-members, he said. Additionally, Chewy+ members are displaying incremental Autoship adoption and greater mobile app usage relative to nonmembers.
“All of this is leading to both higher as well as accelerated NSPAC curves for Chewy+ customers compared to non-members, which in turn is contributing positively to Chewy's net sales flywheel,” said Singh. “As we exit this year, we expect approximately mid-single-digit percentage of our net sales to go through the Chewy+ program. Further, we expect the program to generate positive gross profit dollars in fiscal 2025, though at a gross margin rate below Chewy overall, reflecting both the ramp that we anticipate in the second half of this year and the mix of paid versus free trial members.”
He cautioned that Chewy will continue to evaluate the program structure, including pricing and member benefits.
Chewy+ Faces Subscription Fatigue Concerns
The momentum around Chewy+ comes as consumers are reportedly facing fatigue amid a surge in subscription offerings, including newer ones from Apple TV, Disney and Peacock.
A recent survey of 1,000 Americans from MarketWatch showed 40% had canceled a subscription service within the past 12 months, with one-in-three citing budget cuts as their reason for doing so. Subscribers spent a median of $60 per month, or $720 per year, on subscription services. Asked which subscription service they canceled, the top five answers were video streaming, 55%; music streaming, 23%; shopping platform, 15%; and gaming and grocery/kit delivery, both at 14%.
Amazon reportedly signed up fewer subscribers over this year’s Prime Day, and missed its target, despite extending the event to four days, according to internal company data reviewed by Reuters. Costco, however, continues to see healthy membership growth despite raising membership fees last September for the first time in seven years. In its fiscal third quarter ended May 11, the U.S. and Canada renewal rate concerning Costco was 92.7%.