Analysis: The impact of Chewy’s expansion into Canada

American online retailer Chewy recently dropped a huge announcement saying they will expand operations into neighboring Canada as its first step into international markets. 

It is believed that 23% of Canada’s pet spending is made online, while it represents around 34% in the US. This presents a favorable opportunity for Chewy to enter the market as a new player, but it will still need to adapt to a new reality.

An easy conquest?

Toronto-based e-commerce expert Ran Ravitz believes that, unlike other US companies that have tried and failed to enter the market, like Target and Nordstrom, the expansion of Chewy into Canada sounds like a “more simple conquest.”

Ravitz, the founder of e-commerce agency Ecommerce Pathways, adds that Amazon dominates Canada’s e-commerce market and believes it will stay like this after Chewy’s arrival. 

However, he predicts that the presence of the American online pet retailer will initially take market share from traditional retailers. “It will challenge and eat away at their e-commerce sales,” he comments. 

Fierce competition

It is believed that online competition will intensify as soon as Chewy enters the country with the aim of retaining as much market share as possible. 

According to Ravitz, some well-established players will promote their e-commerce stores further and leverage omnichannel strategies to capture more customers.

As for Amazon, it is possible that it will strategically strengthen its relationships with brands and vendors in the pet category. If the e-commerce giant gains more opportunities for brands to sell directly to them, Ravitz predicts this could drive the entire e-commerce pet category upwards in the near future.

The challenges 

According to Ecommerce Pathways, most pet sales in Canada come through physical stores and omnichannel retail. Online sales represent a small revenue generated mainly by pet food purchases. 

Ravitz believes there is “great potential” for the category to grow dramatically in the immediate future. 

However, one of the challenges that Chewy will face when entering the country is “the ability to secure the customers’ recurring transactions online.” Other competitors, such as Amazon, have well-established fidelity programs in place in the country, while Chewy has a similar concept in the US.

Territories

Chewy says it will start targeting Toronto, the largest metropolitan area in Canada. After the initial launch, they plan “to take a gradual and responsible approach to expanding [their] footprint.”

Ravitz warns that Chewy must be strategic with its expansion plans in the North American country.

Following Toronto, Ravitz suggests that the online pet retailer extends its presence to the capital’s greater metropolitan area and then expands its footprint to encompass Vancouver and Montreal.

E-commerce boom

Since 2020, e-commerce has become a more convenient option for Canadian consumers. 

Ravitz points out that Canada’s e-commerce used to lag behind the US, but in 2020, the country’s online purchasing channels exploded by 75%. Meanwhile, the US only experienced 36% growth that same year.

The numbers have returned to normal rates after the pandemic, but he explains that Canada still remains closer to the US in the share of e-commerce out of total retail sales. Ravitz says that e-commerce in Canada could represent around 14.6% of total sales this 2023.