Internal Environment Analysis of Chewy
Chewy’s Resources
Chewy operates as an online e-business providing pet products. The website and mobile application of the business provide information about all products and services. The two platforms are user-friendly. As an online business Chewy does not operate through any physical sales location; rather uses telephone and digital mediums to operate. The website has a very large variety of products to offer. Some of the important features of the website include scheduling deliveries, pet pharmacy, and getting connected with a vet. The feature of “connect with a vet” offering telehealth service led to the creation of a new customer base and increased website traffic. This feature was launched in 2020 with the COVID pandemic making it impossible for pet-parent to reach out to pet health services. Chewy’s CEO in an interview recently, said that the company understands that pets/parents do need not only food and toys but also health care and services that the company is obliged to bring on to their platform (Wahba, 2021).
The surge in pet adoption and closure of pet-affiliated services during the pandemic increased website traffic. This required improvement in the technology infrastructure is to meet demand. It also required increasing the capacity of the supply chain and inventory. (Hamstra, 2021). Regular customers can also use the option of “Autoship” for their frequent orders once details have been saved in the account. The business also has a live chat option where customers can get in touch with the telephone sales and support team to ask about products and services. Customer service is available 24/7 on both the telephone and website. As of January 2021, the company had approximately 18500 team members that ensure the business was running.
Considering Chewy’s model of online retail business, it requires third-party channel networks to operate. The business has relationships with many suppliers and vendors that provide various pet products that are available for the customers. The website maintains a portfolio of 45000 products. To maintain the supply of the products are kept in the warehouse. For distribution and delivery of the items ordered by customers, Chewy employs the services of FedEx. Chewy has partnered with non-profit organizations such as pet shelters and pet rescue organizations in various projects (Chewy, 2016).
For Chewy its customer service is the core of all its operations. The business has evolved and customized with the changing needs of pets and pet parents especially during the pandemic. CEO Singh has also mentioned in a recent interview that “adaptability and flexibility are going to be very important.” (Hamstra, 2021). Chewy provides customer care 24/7 and in the most prompt manner. It replaces any products that the customers complain about without any hassle. It provides free delivery services for orders amounting above $45. It has been ranked as no. 1 with an overall 8.90 score on America’s best customer service 2021(NEWSWEEK, 2020).
Developing a sustainable competitive advantage is necessary for survival in markets where retail giants such as Amazon lead the competition. Considering that the telehealth feature as called “Connect with a Vet” is a sustainable competitive advantage as it is valuable. This feature was added to the service in the year 2020; can be deemed valuable as pandemic restriction made many services unavailable. This is an additional service that Chewy has merged with its main retail business, it can be considered a rare combination until it is followed by major online pet stores. The third aspect of sustainable competitive advantage is the cost to initiate, as once a relationship of trust between the vet and the pet parent is made they will not switch to an alternate unless that trust is broken. And lastly is the substitution, the alternative to this is to visit a pet clinic. The pet parents are well aware of the struggles of taking a pet to a physical pet clinic. Therefore, even though a pet clinic is an alternate native, the preference of receiving a quality service at home may make the alternate less tempting.
Considering Chewy’s resources it can be summarized that their technological infrastructure, their website, and the telephone sales team provide a platform for its smooth operations. Accompanied with an extensive supply chain, and logistic arrangements, and a network of warehouses they have built a large product portfolio (Chewy, 2016). These strengths of the company can provide it an opportunity to compete with retail giants.
Financials
The following section will analyze the financial ratios for the years 2019 and 2020 for Chewy (Chewy, Inc. – Financials, n.d.).
Net profit margin
| Net profit margin | 2019 | 2020 |
| net profit/ revenue | (252370)/ 4846743
= -5.2% |
(92486)/ 7146264
= -1.3% |
Net profit margin represents the amount of net profit generated for every dollar of sale. As Chewy has been experiencing losses for the years 2019 and 2020, both net profit ratios show that the costs are higher than the net profit. However, for the year 2020 with increased sales, the loss for every dollar of sale has come down. (Chewy,-Inc.-FY2020-Annual-Report.Pdf, n.d.)
It is of importance to note that due to the pandemic Chewy had to beef up its technology infrastructure therefore, it has losses to show during these two years. As reported in October 2021, its revenue increased by 47% (Wahba, 2021).
Current Ratio
| Current ratio | 2019 | 2020 |
| current assets/ current liabilities | 448585/ 814030
= 0.55 |
629789/ 1100538
= 0.57 |
The current ratio represents a company’s liquidity to pay its short-term liabilities. For Chewy the value of the current ratio is below 1, for both years 2019 and 2020. This means that its short-term debts and liabilities are greater than its available current assets. The ratios show that from the year 2019 it has increased in the year 2020, which means that the gap between current assets to cover short-term liabilities has reduced. (NC10011622x1-CHEWY-INC._10K_2020_V2-Bookproof.Pdf, n.d.)
Debt- Equity Ratio
The debt to equity ratio shows the financial picture of the business. It shows how much of business finances are raised through debt and compared to own finance. A negative debt-equity ratio represents high liabilities as the following figures show for Chewy.
| Debt equity | 2019 | 2020 |
| total liability / shareholders equity* | 877564/ (335942)
= -2.6 |
1336295/ (403974)
= – 3.3 |
shareholder equity= total assets – total liablities
*2019
541622- 877564 = (335942)
*2020
932321- 1336295 = (403974)
Total Asset Turnover
| Total asset turnover | 2019 | 2020 |
| total revenue / total assets | 4846743/ 541622
= 8.9 |
7146264/ 932321
= 7.7 |
Total asset turnover describes how efficiently the company uses its assets to convert them into revenue. The ratios show that Chewy is efficiently converting its assets into sales, as a positive value above 2.5 is considered a good indicator of efficiency.
Conclusion
Chewy is innovating the business of pet products and services. It may be questioned that a company that seems to offer such a wide variety of products and services keeps showing losses. However, world businesses have faced setbacks and challenges due to the covid pandemic. It is worthwhile to note that the losses reported are mainly because of the business expansion and repositioning. The brand has a huge customer base because of its prompt response system and quick product delivery across the country.
References
Chewy. (2016, October 11). Cleverism. https://www.cleverism.com/company/chewy/
Chewy, Inc. – Financials. (n.d.). Retrieved December 11, 2021, from https://investor.chewy.com/financials/annual-reports/default.aspx
Chewy,-Inc.-FY2020-Annual-Report.pdf. (n.d.). Retrieved December 11, 2021, from https://s23.q4cdn.com/610444331/files/doc_financials/2020/ar/Chewy,-Inc.-FY2020-Annual-Report.pdf
Hamstra, M. (2021, February 22). How Pet Products Company Chewy Is Repositioning Its Brand. Https://Www.Uschamber.Com/Co. https://www.uschamber.com/co/co/good-company/the-leap/chewy-repositions-for-growth
NC10011622x1-CHEWY-INC._10K_2020_V2-Bookproof.pdf. (n.d.). Retrieved December 11, 2021, from https://s23.q4cdn.com/610444331/files/doc_financials/2019/ar/NC10011622x1-CHEWY-INC._10K_2020_V2-Bookproof.pdf
NEWSWEEK. (2020, October 6). America’s Best Customer Service 2021. Newsweek. https://www.newsweek.com/americas-best-customer-service-2021
Wahba, P. (2021, October 25). Chewy CEO Sumit Singh on pets, the pandemic, and profits. Fortune. https://fortune.com/longform/chewy-ceo-sumit-singh-interview-pandemic-pets-puppies/
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