Analysis: Chewy sharpens focus on loyalty, logistics and healthcare business

American online retailer Chewy is moving forward with a strategy centered on predictability, infrastructure and expanding services.

With more than 20 million active customers and approximately 85% of sales coming from non-discretionary categories, the company is well-positioned to benefit from continued digital penetration in the $150 billion (€133B) US pet care market.

Chewy Chief Financial Officer (CFO) David Reeder spoke at the JP Morgan Global Technology, Media and Communications Conference to share his insights on the company he has helped steer through a period of improved profitability and deeper vertical integration.

The retailer recently announced that Reeder will leave the company “in several months” to return to the semiconductor industry as a Chief Executive Officer.

Recession-resilient

Pet care has long been recognized for its resilience to economic pressures, and Reeder is clear on its advantages.

“You don’t feed your pets more or less depending on what’s happening in the economy,” he says.

With 80% of sales on subscription-based autoship and a steady rise in returning and reactivating customers, Chewy has turned emotional loyalty into a business model defined by consistency and a renewed focus on customer experience.

Using first-party technology and tailored marketing, Chewy has driven low single-digit growth in active customers, despite the overall US pet household market experiencing flat growth. The average customer spends $578 annually (€512).

Fulfillment and automation

The company is now the country’s third-largest direct-to-consumer (DTC) shipper, and its fulfillment network is strategically designed for efficient last-mile delivery.

Automation in newer facilities is already delivering a 30% productivity boost per square foot. This operational leverage has become an increasingly important factor in achieving consistent margin expansion.

“We’re getting real fixed cost leverage from the system,” says Reeder. The company delivered 150 basis points of EBITDA margin expansion in 2024 and expects to reach 5.5% this year, on track to achieve a 10% long-term goal.

Healthcare and vets

Healthcare is rapidly becoming a core focus, now accounting for 30% of Chewy’s revenue and offering significantly higher margins and faster growth.

The company runs the largest online pet pharmacy in the US and is expanding its reach through both internal vet clinics and partnerships with over 15,000 independent veterinary practices.

Initial results are encouraging. Chewy’s newly opened clinics serve existing customers and attract new ones, with more than half of them placing an order on Chewy.com within 30 days of their visit.

Looking ahead

Other initiatives, including the Chewy Plus membership program and a first-party sponsored ads platform, are still in early stages but are already showing promising signs of increasing customer engagement and order value.

The message from the company is clear: while Reeder may be stepping aside, Chewy’s broader strategy is firing on all cylinders, and the pet parent economy shows no signs of slowing down.