If you haven’t heard of Chewy, you aren’t alone. But PetSmart, the retail giant with more than 1,500 stores across the U.S., has clearly been tracking the low-flying, five-year-old pet supplies company. According to Recode, it just agreed to purchase its young rival for a stunning $3.35 billion, just slightly more than Walmart paid for Jet.com last year.
This editor only heard of Chewy for the first time last fall, when talking with one of its earlier investors, Larry Cheng of the Boston-based growth equity fund Volition Capital; Cheng had written the company one of its first checks, $15 million for its Series A round in 2013, and the company had been quietly growing like a weed, he’d told me.
That began to change, by design, late last year, when Bloomberg wrote a long profile about the Dania, Fla., company and the $236 million it had subsequently raised from investors, including BlackRock and New Horizon, the venture arm of mutual fund T. Rowe Price.
Its chairman, billionaire e-commerce veteran Mark Vadon, told the outlet that it was on his advice that the team had kept a low profile, to better to avoid competition.
It was something of a feat. By the time Bloomberg published its story, the company had more than 3,000 employees and more than $880 million in annual revenue.
Its apparent key to success: personalization, from writing customers hand-written thank you and holiday cards to dedicating roughly one-sixth of its employees to customer service so pet owners’ questions could be answered quickly.
Free shipping on orders over $49 also seemingly helped, although Bloomberg also reported that the company was not yet profitable.
Nevertheless, as Bloomberg’s piece was hitting readers, Chewy was reportedly talking with Goldman Sachs about preparing an IPO this year. No doubt Walmart and Amazon were following its moves, too. A January profile in Forbes reported that Chewy controls 43 percent of the online sales of pet food and litter in the U.S., just behind Amazon’s 48 percent.
Apparently, Chewy’s traction proved too enticing for PetSmart to resist. It’s no wonder. The company was taken private for $8.7 billion in 2014 by the private equity firm BC Partners, and it’s been shifting more of its business online every since, in an overhaul designed to fuel its future growth. Indeed, in a statement today, company CEO Michael Massey said of the deal, “Chewy’s high-touch customer e-commerce service model and culture centered around a love of pets is the ideal complement to PetSmart’s store footprint and diverse offerings.”
The acquisition is expected to close by the end of PetSmart’s second fiscal quarter of 2017.
Chewy cofounder and CEO, Ryan Cohen — who dropped out of college in Montreal to become an entrepreneur — will continue to lead Chewy as an independent subsidiary of PetSmart.