Chewy and Petco target growth through AI, loyalty and recurring sales

The largest pet retailers in the US, Chewy and Petco, are pursuing top-line growth and margin gains through a combination of technology, recurring purchases and integrated services.

Executives from both pet specialty operators discussed their strategies at the recent Goldman Sachs Global Consumer and Retail Conference, with several areas of common focus, such as AI integration, revamping of their Autoship programs and simplification of private-label branding, while expanding product lines. 

AI moves into customer-facing products

Both retailers are investing in artificial intelligence (AI), although they are at different stages of development.

After launching an AI-powered assistant, Chewy AI (CAI), CEO Sumit Singh said the next step is to introduce customer-facing AI products to improve search and discovery, ultimately increasing conversion. 

“We are building agents that essentially unify customer signals and manage each customer relationship on a one-on-one basis without us spending broad marketing dollars on customers,” he explains. “We are internally testing beta modes, but we haven’t yet announced public market launches.”

Petco is taking a more gradual approach. The retailer is already using AI to improve efficiency in customer service and chat and expects the technology to play a larger role in productivity in 2027. However, CEO Joel Anderson said the development of revenue-generating applications is still in the early stages.

“We have been experimenting with agentic, and we have been watching it, but the customer adoption to it is still very small as it relates to our space,” Anderson told investors.

The next step for Autoship

Both retailers are investing to improve Autoship. At Chewy, the program is crucial to offset decreased demand due to inflation, as the average order value (AOV) for Autoship orders is mid-single-digit percentage higher than AOV from non-Autoship orders, management said. 

Chewy is also using customer data to predict when an order is due and intervene with reminders when purchasing behavior deviates from the expected pattern. Another initiative aims to use signals from pet profiles to add more merchandise categories to the Autoship program beyond food and medicines.

To capture more customer spending, the company is aiming to incorporate personalized insights into the program. “Our effort now is ingesting those [consumer signals] and getting the customer to attach other lines of merch categories into the Autoship product, expanding Autoship beyond food and meds,” the CEO said. 

Petco has also strengthened its Autoship service. According to Anderson, Petco’s in-stock on Autoship is approaching 100%, meaning supplies cover all recurring demand. “We’ve added Buy Online, Pick Up in Store capabilities, so you can now have your Autoship sent to the store. We’re adding in all the omni-channel capabilities,” he said, stating that this decision has improved delivery speed.

The retailer notes that customers who shop across stores, services and online generate 5 times the net sales per active customer (NSPAC) of those using fewer parts of its ecosystem. 

Loyalty 

Both companies are working to revamp their loyalty programs. Petco, for instance, is simplifying its Petco Perks, while increasing the integration between retail and services to drive personalization. 

“Now we can really see across all the ecosystem, what services they are using, what products they are buying. With Petco Perks now, we can reactivate old customers. We can encourage grooming customers to buy food from us or food customers to use our vet services,” Anderson said.

The program will also help raise awareness of veterinary services. “We know every customer that walks in a store that has not used our vet services. Let’s share that knowledge through our Petco Perks and entice them to use vet services,” he explained. 

Chewy’s CEO said the company is “about to go to market with a new and improved Chewy+” membership program but did not provide details about the changes.

Investments and pricing

After acquiring Modern Animal in April, a fully integrated veterinary platform, Chewy said it is not actively pursuing any other M&A opportunities at the moment. “But if we do, it will be in the health space,” the CEO clarified.

Singh also stated that the company is not entering a broad investment cycle, but focusing on accelerating growth in-house. “When you hear the word investment, I do not want you to hear promotions. I mean durable, non-dilutive growth type of investments,” he said, highlighting health clinics and AI savings particularly as two of the levers. 

Petco’s leadership also signaled that the company is not investing in promotions to drive sales. “As a specialty retailer, price is important. But it is not how we are going to win. So we have got to stay close on price, but it is not a winning strategy for us to go up against Amazon and Walmart and try and lead our way through price,” Anderson explained.

At the same time, management does not expect any increases, forecasting instead stable prices for the rest of 2026.

Health, veterinary services and prescription medicines are also focus areas for the retailer, which says it is keeping more prescriptions within its own ecosystem. Management said this can support sales while allowing vets to maintain visibility into the medicines their patients use.

Owned brands reboot

Petco is putting greater emphasis on its own-brand portfolio as part of a strategy to improve margins. The retailer plans to reduce its number of owned brands to 7 in the next 12 to 18 months, with several smaller labels being rebranded under the Petco name. 

“When you have that many different brands, you have to put marketing dollars into it. So this will make our marketing spend more efficient,” the CEO notes.

Consumer trends

Beyond health services, where performance is exceeding Chewy’s forecasts, the retailer also sees opportunities in fresh and frozen pet food, where it says it has already built the supply needed to support growth.

Petco is also investing in fresh and frozen food offerings, having added fridges to its stores in the first half of the year and rolling out the recently launched fresh food rolls for dogs from Hill’s Pet Nutrition Science Diet line.