Will Amazon’s Pet Day take a bite out of Chewy?

Discussion
Photo: Amazon
May 03, 2022

Amazon.com is holding its first Amazon Pet Day in celebration of National Pet Month, focusing on a rare category where the company is facing an equally formidable online player in Chewy.

“This 24-hour event will feature incredible deals and savings that are sure to make any pup sit,” Amazon said in a press release. “Whether you are looking for pet care, tasty treats, or pet-friendly electronics, our deals offer savings on items perfect for any and every type of pet and pet owner.”

Amazon became more serious about the pet category in 2018 with the launch of its private label dog brand, Wag.

During the pandemic, a surge in adoptions drove up pet spending with the major online players, Amazon and Chewy, seeing the biggest benefit.

Packaged Facts estimates 30 percent of pet product sales were done online in 2020, up from 24 percent in 2019 and eight percent in 2015. Amazon accounted for 46 percent of the pet category’s online market share in 2020 and Chewy, 35 percent, with each expanding pet product sales by over 40 percent.

While brick and mortar still accounts for the majority of the category’s sales and supports in-store pickup and same-day delivery, Amazon and Chewy have first-mover advantages.

Chewy has regularly cited the benefits of its service-oriented model as it faces questions about its ability to compete against the lower prices Amazon’s scale can deliver. A report last year from Cardify found Chewy had a net promoter score (NPS) of 45.7 compared to 1.6 for Petco and 7.5 for PetSmart.

On Chewy’s fourth-quarter call, Sumit Singh, CEO, said Chewy’s active customer base has grown 54 percent over the pandemic and that he believes pet families are just starting a “long and rewarding relationship with Chewy.”

Amazon’s Pet Day event, nonetheless, arrives as Chewy’s shares have fallen about 40 percent in response to news of the quarter’s loss, which came in steeper than Wall Street estimates as supply chain challenges caused out-of-stocks to run twice as high as forecast. Other factors reportedly concerning investors include inflation and families abandoning their recently-adopted pets as they head back to work offices.

DISCUSSION QUESTIONS: Does Amazon have a bigger opportunity in the pet category post-pandemic? Can Amazon compete against Chewy, or will its share have to come from other players?

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Braintrust
"Amazon’s Pet Day will put pressure on Chewy, who has to continue investing in their supply network while upping even higher their customer service chops."

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23 Comments on "Will Amazon’s Pet Day take a bite out of Chewy?"


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Shep Hyken
BrainTrust

In the online retail world, Amazon ALWAYS has an opportunity. Can Amazon compete against Chewy? They already do. The stats tell the story. Chewy is a formidable competitor and their focus on just pets will give them some strong marketing opportunities that a general retailer like Amazon might not have. However Amazon knows how to become part of their customers’ lives. Get customers in the habit of using Amazon and they stay.

Zel Bianco
BrainTrust

If anyone has a shot at competing with Amazon in the pet care category, it is Chewy. Service and support is at the heart of their strategy and should be the point of difference against Amazon. Amazon will continue to expand this category as it makes sense given the household penetration, but Chewy will keep up. Just like activewear in yesterday’s discussion, the pet care category is big enough for the top players to compete and continue to grow the category.

Bob Amster
BrainTrust

Consumers see Amazon as the procurement solution for many types of products, but pet owners may see Chewy as the de facto online provider of all things pet related. This is a wait and see situation.

Jeff Sward
BrainTrust

I’ve long thought that the subscription and delivery of heavy, bulky dog food was the anchor of this competition. So this isn’t a battle for a transaction, it’s a battle for lifetime value. And the battle is for both product and process. How do you identify your dog’s favorite food? Who has the best assortment of accessories? Seems to me the battle is won at the product level, not process/delivery.

Georganne Bender
BrainTrust

Amazon certainly has the ability to take a bite out of Chewy’s sales, as it does with other retailers during its Amazon Prime Days. It’s a powerhouse retailer with a big reach. Now I am going to put my consumer hat on.

I have had several auto-ship deliveries set up with Chewy for over a year now and each one has been smooth and reliable. I would not be willing to upset this relationship to save a buck or two, and I am willing to bet I am not alone.

Paula Rosenblum
BrainTrust

You are not!

Georganne Bender
BrainTrust

There is something to be said about loyalty to retailers after all.

Katie Thomas
BrainTrust

Our research has shown that pet food is one of the most popular products to have delivered because the demand is consistent and it’s heavy to carry home from the store. Makes it a great fit for Amazon.

That said, Chewy has done a nice job finding ways to enhance and expand its offering, including a pharmacy, connection to pet adoptions, and great customer service. Amazon may be a tactical choice, but Chewy’s relationship will be harder to compete with.

Gene Detroyer
BrainTrust

Pet Day is all about trial and conversion. The Amazon retail business is based on developing one “go too” place. They see the weakness (particularly out-of-stocks) in the Chewy business as an opportunity to convert Chewy customers. Unlike Chewy, Amazon is not known for pet products yet leads in the share of online business. This salvo will not only grab share from Chewy but any other player that stumbles.

The pet care business is hugely desirable for retailers. It carries a high degree of loyalty and it seems to be inflation- and recession-proof. It is a perfect target for Amazon.

DeAnn Campbell
BrainTrust

If you’re an e-commerce business it’s hard to consistently compete with Amazon’s low pricing, fast delivery and vast stock. Amazon’s Pet Day has the potential to siphon off even more customers from Chewy at a time when shoppers are drifting back to old work routines that place more demands on their time.

Mohamed Amer, PhD
BrainTrust

Amazon uses its massive infrastructure investments to lock in customers using sales events. The company elevates and delivers on ever-higher expectations that others must match: variety, in-stock position, date-specific deliveries, easy and transparent tracking, and intuitive order placement and flow. Amazon’s Pet Day will put pressure on Chewy, who has to continue investing in their supply network while upping even higher their customer service chops.

Lisa Goller
BrainTrust

Yes, Amazon has an opportunity to drive growth in the pet category by satisfying the whole family.

In the pet category, Amazon has advantages due to:

  • Affordable pricing as inflation rises;
  • Wide variety, including private labels;
  • Reliable product availability despite supply chain snarls;
  • Ease and convenience of fast home delivery (especially for big, heavy bags of pet food).

As many of us return to the office, we have less time to devote to pet care. By saving shoppers time (and money), Amazon has a chance to take on Chewy and Walmart to boost sales, share and loyalty.

Ryan Mathews
BrainTrust

On one end of the pet category the “advantage” always goes to the lowest cost supplier. On the other end of the spectrum however the advantage falls to the retailer who can establish the greatest sense of trust and intimacy. For many folks buying for their pet is as – or more – important than buying for their child. I remember an interview with a woman living in a box in a park when I was working on my first book. The woman bought her cat the most expensive food available, even if it meant she had to go without. It seems Amazon is a solid favorite with the price set, but I have to hand it to Chewy – for now at least – when it comes to the customer relationship piece. One thing to watch is which company is better at building relationships with veterinarians and adoption shelters, i.e., who builds the most effective person-to-person recommendation market.

Paula Rosenblum
BrainTrust

I think Amazon’s share will come from other players. I must be unique, because I didn’t have any actual out-of-stocks on my pet products from Chewy during the pandemic. Sure they ran late a couple of times, but I try not to run too lean anyway.

I actually left Amazon for Chewy because Chewy packs the products better. I got tired of throwing away dented cans of food. In order for Amazon to outperform Chewy over the long haul it will have to:

  • Appeal to vets;
  • Take better care of its shipments and ensure they pack correctly (this is a long running problem across all categories at Amazon);
  • Be more precise in arrival dates.

Then there’s a story. If Chewy sacrificed profits for timeliness, that’s fine with me. I know I got a lot of split shipments, which obviously cost the company money.

If Amazon gains share, it will mostly gain it from other store-based players, who were never in stock consistently to start with.

Dave Wendland
BrainTrust

As pets continue to be at the center of an increasing number of households, access to products and key attributes are resonating with shoppers (Corey Paske of HRG and I are presenting on this very topic tomorrow as part of ECRM’s Pet Program).

I believe Amazon’s Pet Day indeed puts pressure on Chewy. The energy across this segment for both brick-and-mortar and online retailers is continuing to heat up creating a true dog-eat-dog marketplace.

Richard J. George, Ph.D.
BrainTrust

Despite Amazon’s recent union and stock price issues, I would not bet against them on this initiative. There’s no reason to believe the company won’t perform and take share from this one-day de facto trial event. Considering Amazon’s success in other categories, e.g., books, household products, electronics, etc. there is every likelihood the pet category will perform the same. Chewy rightfully needs to be concerned.

Dave Wendland
BrainTrust

Agreed, Richard. Great insight.

Doug Garnett
BrainTrust

Amazon has no clear reason to do this. Chewy does. I’m surprised at the estimated penetration online since most of our purchases for pets are food – heavy to ship bags. The question of “first mover” advantage is interesting. There is a lot of evidence currently that moving first doesn’t necessarily deliver any advantage.

Ricardo Belmar
BrainTrust

Prime Day has shown us that Amazon absolutely has an opportunity to compete in almost any category online. With pet food, Chewy’s advantage is the great relationship they have built with their customer base. Amazon will try to entice those shoppers to buy during Pet Day with the hope they build a muscle memory and just keep coming back to Amazon as they do with other product categories. Definitely something to watch and see. I expect Amazon will have a successful Pet Day based on their own customer base that may not have tried Amazon to order pet products before, but less likely to succeed winning those loyal Chewy customers. The real question here is how Chewy will continue to grow their customer base and take share away from Amazon. It is an uphill battle, and we may see Chewy more focused on taking share from other sources in the near term.

Paula Rosenblum
BrainTrust

You like Prime Day? As a consumer? I found mostly junk.

Ricardo Belmar
BrainTrust

For me, it’s hit or miss. Not every Prime Day has had something I found worth buying. But going just by the sales figures, Prime Day has been a success for Amazon. Frankly, we should be asking, why didn’t Chewy come up with Pet Day first?

Scott Norris
Guest

I have a dog food subscription with Amazon Prime and I’m only learning of this event now … why did they not market the heck out of this to me?

Putting “compare Chewy to Amazon for Lucky’s kibble” on my to-do list for the week. All things equal, I’d rather do business with someone who lives and breathes the segment rather than a generalist with no emotional connection.

Anil Patel
BrainTrust

Online pet product spending is expected to rise, and Amazon is well able to capitalize on this potential. No store can compete with Amazon’s pricing and high-speed last-mile fulfillment while remaining profitable.

wpDiscuz
Braintrust
"Amazon’s Pet Day will put pressure on Chewy, who has to continue investing in their supply network while upping even higher their customer service chops."

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