As online retail subscriptions gain share from physical stores, Chewy is leveraging its Autoship auto-fill program to win customers from its more traditional competitors.
The company shared in a letter to shareholders accompanying its fourth quarter and full year fiscal 2023 financial results Wednesday (March 20) that its Autoship subscription program yielded highly positive results, generating about $8.5 billion in customer sales throughout 2023.
“I’m incredibly excited about the company’s opportunities, we have a highly predictable, attractive business model where more than 75% of our approximately $11 billion 2023 sales was driven by Autoship customer sales, resulting in a subscription-like revenue stream,” recently appointed CFO David Reeder noted on a call with analysts.
The program’s primary value proposition lies in its convenience for pet owners, while also serving to increase customer retention for Chewy. Autoship customer sales outpaced overall company growth, rising 8% year over year in the quarter and nearly 15% for the full year 2023, solidifying Chewy’s competitive stance within the pet care market.
The company’s subscription offerings enable it to gain share from brick-and-mortar retailers, catering to consumer demand for ease and convenience, per the PYMNTS Intelligence report “The Replenish Economy: A Household Supply Deep Dive,” created in collaboration with sticky.io and drawing from a survey of more than 2,000 U.S. consumers. The study revealed that, among the 15% of retail subscribers participating in Chewy’s Goody Box pet food and toy subscription program, 53% now shop in stores less often. Plus, 11% of participants in the program no longer shop in stores for these items at all.
Indeed, pet parents show disproportionate levels of digital engagement. Findings from the PYMNTS Intelligence study “Changes in Grocery Shopping Habits and Perception” revealed that only 27% of those who purchase pet supplies primarily do so in physical stores. This share is lower than the cross-grocery-category average of 44%.
In an effort to further drive digital engagement and sales, the retailer is looking to improve the eCommerce experience for consumers, reducing friction from the customer journey.
“We are … excited by the launch of many customer-facing shopping features such as our mobile app, and additional customer-friendly payment and basket-building mechanisms, which are forthcoming in the first quarter of 2024,” Chewy CEO Sumit Singh told analysts.
Changes such as these can certainly make a significant difference in consumer loyalty. The report “The Online Features Driving Consumers to Shop With Brands, Retailers or Marketplaces,” a PYMNTS Intelligence and Adobe collaboration, revealed that 50% of consumers consider how easy a merchant’s checkout process is when deciding where to shop. Plus, 40% take into account how easy a merchant’s online store is to navigate.
Overall, it seems to be a good time to be a digitally focused pet care retailer. Not only is it a highly eCommerce-driven category, but consumers also prove to be less likely to scrimp on pet care than other retail categories, per PYMNTS Intelligence findings.
“The pet category is a recession-resilient, above-GDP-growth industry that is increasingly moving online,” Singh said. “Chewy has been and remains a key driver and beneficiary of this trend.”