Online pet supply retailer Chewy is currently testing a new marketplace for veterinarians to help them grow clinic revenues and improve experiences for pet owners, with the goal of rolling out the service to more providers later this year.
Through Practice Hub, vets will be able to choose items to list on Chewy’s website, set prices, create pre-approved prescriptions and earn revenue when customers place an order in-clinic or via Chewy. The service is an extension of Chewy’s Petscription platform, which is used by 8,000 clinics across the U.S. to review and approve prescriptions.
CEO Sumit Singh said Chewy’s research has shown that one-third of pet owners don’t take their animals to the vet regularly; by launching a platform on top of the Chewy website, vets get access to the retailer’s 20 million customers and pet parents get reduced friction in finding care.
“It just creates a lucrative flywheel for the veterinarians … and it opens up the marketplace for not only … the veterinarians to participate, but also consumers in a way that will improve compliance,” Singh told investors and analysts on a conference call.
It remains to be seen whether Chewy will be able to entice vets to use the Practice Hub. Singh said the initial invite-only phase has included independent clinics and a “nationally recognized” vet group, with plans to roll out the offering to its 8,000 partner clinics later this year. Still, that encompasses only about a quarter of the clinics in the U.S., according to the American Veterinary Medical Association — and that assumes they all sign on.
Chewy also is planning to open a third pharmacy in Pennsylvania to provide fulfillment services for pet medications and special dietary food, allowing customers in the Northeast and Mid-Atlantic to receive these items more quickly.
Singh said Chewy is pleased with its progress in building a full pet healthcare ecosystem, including its recent launch of fresh and prepared pet foods. “With every innovation that improves customer or vet experience, we progress one step closer to fulfilling our mission to make that healthcare more affordable and accessible … and we are doing so by keeping veterinarians at the center of the equation,” he noted.
Investing in the Supply Chain
The Florida-based eCommerce pet company said its second-quarter sales rose nearly 27% year over year to $2.2 billion. Active customers increased by 21% in the second quarter to just over 20 million, with net sales per active customer surpassing $400, up over 13% compared to the same period last year.
While gross customer additions are higher than pre-pandemic levels — year to date, Chewy has acquired 20% more new customers than it did in the first half of 2019 — the retailer is still below the record levels seen last year during the peak of the pandemic.
Last month, Petco reported $1.4 billion in net revenue for its second quarter, up 19% year over year. The pet health and wellness retailer recently partnered with Klarna to begin offering buy now, pay later (BNPL) to customers looking to split purchases into four interest-free installments.
Labor market challenges persisted for Chewy in the second quarter, Singh said, impeding the company’s ability to stock fulfillment centers and achieve “optimal productivity.” The CEO added that Chewy has continued to increase its investments in wages, benefits and hiring incentives to attract and retain workers.
Chewy is also investing in opening a new fulfillment center near Nashville, Tennessee in the fall of 2022, the company’s 14th facility overall and fourth automated fulfillment center. It has also begun using technology to create custom boxes for customers’ orders, which is faster, cheaper and better for the environment than manual pack-and-ship, as well as new software to streamline order routing and allocation across the fulfillment network.
“Collectively, once these automated facilities and efficiency measures are fully ramped, we expect that increased fulfillment productivity … will reduce our future exposure to labor market volatility,” Singh said.
Chewy CFO Mario Marte noted that out-of-stock levels also remained elevated in the second quarter, but had improved compared to the first quarter as a result of better supply chain conditions. Some items, however, such as wet dog food, are still being affected by industry-wide production capacity limitations.