Chewy raised $1 billion in IPO. Meet the man who found gold in dog food:
Going to the dogs: Ryan Cohen says it was Tylee, his teacup poodle, who inspired him to sell pet food instead of jewelry. “For me, it was feeding my baby.”
Chewy has already grabbed 43% of the online sales of pet food and litter in the U.S., just behind Amazon's 48%, according to market research firm 1010data. "We want to be the No. 1 pet retailer in the world," Cohen says. He has a long way to go. Chewy has yet to turn a profit, and the way it's spending money to acquire customers, it's not clear it ever will.
Then Cohen had an"aha" moment while buying food for Tylee, his apricot-colored teacup poodle."She's my No. 1," he says,"and I'm married." Cohen, who shares his bed with Tylee and his pregnant wife, sees himself as a"pet parent." Typically, pet parents spend freely on premium foods, often made with ingredients fit for humans, like grass-fed, free-range, hormone-free New Zealand lamb, the main ingredient in K9 Natural Lamb Feast, available on Chewy.
The capital allowed Cohen to shift his plans into high gear. He decided to take fulfillment in-house, even though he and Day, now Chewy's chief technology officer, knew nothing about warehouse operations. To find experienced staff, Chewy sent out hundreds of invitations to Amazon employees on LinkedIn and managed to hire 100 of them. By mid-2014 the company had opened a 600,000-square-foot fulfillment center in Mechanicsburg, Pennsylvania.
One pet industry veteran, who says he knows three people who are familiar with Chewy's finances, doubts the company will reach profitability. He says Chewy's average sale is $75, its average margin after discounts 30% and its average cost of delivery--which Chewy offers for free on orders of more than $49--around $12.
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