The Rise of Chewy to Prove the Core Value of Any E-commerce Product
Cohen explained how he and cofounder Michael Day created an online store that was offering something Amazon wasn’t.
Chewy: It Supposed to Be a Jewelry Brand
It all started when Cohen was just weeks away from launching an online jewelry business, and on a shop-trip for his pet poodle Tylee, it dawned on him a new idea: What if he could set up an online platform that replicated the experience of shopping in a pet store, without the inconvenience of having to actually go there?
As a pet owner and lover, he did some research and well aware of how fragmented the market was at the point and how underpenetrated it was online. There came the fateful moment, where he decided to fix it.
Cohen recalling the thought of 2011 “I thought if I could deliver the same kind of personalized experience as the neighborhood pet store, but do it online and deliver a really convenient value proposition, that we could build a really a big business”.
A few months later, Cohen and his cofounder had pivoted from jewelry and were selling pet food online under the name of Chewy.com.
Ryan Cohen On Revealing the Secrete Sauce of Chewy
From zero to more than $2.1 billion in sales, Cohen brought up an empire among pet lovers. In 2018, the year he left Chewy continued to reach $3.5 billion in revenue. Today, he shares the secrete sauce for that soaring number.
The founder recalls on the early days, where the initial lack of capital did not stop him from growing the company, but forced him to be disciplined. “It wasn’t growth at any cost,” he shared on a Forbes interview. “Free cash flow was the governor of growth.”
So, by putting cash back in he focused on fueling the business growth and keeping tight expenses. His goal that time was not to force sales or to go public but rather keep the lights on, fuel the tank for the long run. “It could’ve been profitable a long time ago, many years before, and ultimately it would’ve been a much smaller business,” he adds.
The founder reveals what made Chewy exceed had little to do with the product or category, but it was how the team drives its philosophy that make impacts. “It was really just the team and the focus – the obsession – over delighting customers. It could’ve been any product.”
More on this customer-obsessed philosophy, it was when Cohen realized the only way to beat giants like Amazon was to make more connection and befriending with customers – in other words, make Chewy’s consumer the stars. So, customer services in the beginning and till now is the most important value the team has been working on.
Chewy played by Amazon’s rules for supply chain, logistics and the convenience of shopping online, but added its differentiator, the old-fashioned customer service of a neighborhood pet store, for its winning strategy.
For instance, Chewy sends customers handwritten holiday cards, sketches of their pets, and flowers when their animals pass away. A 24-hour customer service line promises to answer any call within six seconds. And, yes, the customer is always right.
“I love making customers happy,” Cohen says. “When people shop at Chewy, they really understand we care about them, we care about their pets, and they want to tell all their friends and family.”
It’s a simple model that can be replicated in every industry, he says: “I don’t know too many businesses that ended up not being successful when they did a really good job at delighting their customers.”
Looked for negative comments each night on the company’s website, Cohen admits himself to be an “obsessive, relentless and contrarian” leader, with all effort just to improve the business even in the tiniest aspect. “When customers shop with us, I want them to have the perfect experience.”
As hard work pays off, customers notices the love and value Cohen brought on the table, they started to comes in droves. And obviously, along with the problem of scaling.
As You Grew Chewy, What Were Some of Your Biggest Challenges?
On a TechCrunch interview, Cohen once shared how explosive that period was with him – a first-time entrepreneur – how he woke up that morning and realize what are rocketing business he is handling. Nothing is in place, and grand actions have to be made because it is transforming for a hyper-growth.
That was around 2014, up to which time Chewy had a third party to handle fulfilment and they could not scale anymore. It was very clear at that point the business was ripe to be brought in-house.
So, the founder started by hiring some amazing folks from competitor Amazon, which he found through LinkedIn, then launched a 400,000 square-foot building in Pennsylvania and eventually went through that process. Cohen recalls that four months of pain was the most memorable moments of the journey, for what could have gone wrong went all wrong. All and all, problems after problems, a year after that first breakthrough, he made another – launched Chewy’s second building in Reno, Nevada, and that second time just seems like the one-hundredth already.
From having no experience in fulfillment and operations and relying on a third-party company, to this becoming of a billion-dollar company. All companies sure to have to face such challenging periods. Knowing that it’s only getting more difficult day by day and take that as a praise is what you should keep in mind raising a brainchild.
Why Does He Never Stop Believing? – Idea on a Successful E-commerce Product
When Ryan Cohen was launching online pet retailer Chewy, he spent a lot of time thinking about how to compete against Amazon.
As a retailer with a regular product, how could you win this battle in an Amazon world. Chewy did it, let’s heard some insights from its founder why 100 rejections did not sway his mind?
First, Amazon actually has hole in its armor. To him as its user interface is dated, and the shopping experience has become more difficult for the consumer, with a flood of third-party merchandise and sponsored ads pushing aside organic search result, which hole competitor can exploit, Cohen explained.
And with the advertising platform for driving profitability, it is like a shift in being the most customer-obsessed retailer. When you search Amazon the default search used to be best-selling product. Now is really sponsored ads, noticed Cohen.
Second, tackle something the customer connects emotionally with. You can see Chewy scored for it connection with pet owners on a different level, mirroring customer obsessive devotion to their pets and recognizing they were pet parents not owners.
However, despite the great emotion you also need demand. No doubt emotional connection and a differentiated niche would mean nothing unless there is existing demand. There was a $75 billion market in the pet space for consumable products that people needed to order repeatedly. And he was seeing a lot of startups where they are differentiated, but there is not really existing demand.
And the last question, of course you want something easy like building a direct-to-consumer brands because the barriers to entry are such that anyone can create a widget and sell it direct to consumer. But at this point, you need to be really mindful and practical, whether or not it makes sense for the consumer, or whether you should sell on Amazon or on Chewy because it’s the most convenient for the consumer. You want to have a direct-to-consumer relationship, but does the consumer want to have one with you?
Considering the above, to Cohen is crucial before entering this battle.
Entrepreneur to Entrepreneur: What Are Some Valuable Lesson I Had Learned?
More from Cohen’s journey with Chewy, through questions and answers that reveals stories and experiences worth sharing.
What Made You Keep Going When You Kept Hearing No?
Back when he was wandering around with cold-calls and when nobody believes in this one man for his strategy to stand out in the market. Cohen recalls it was exactly 100 rejections from 100 different investors. What is that all about, and the lesson from that painful process?
To Cohen, every no sounded like they just have not understood his vision. Despite how frustrating it was, it could not discourage him. Those no never made him doubt his strategy, rather the opposite. He was motivated by all the rejections and fired up to prove his point.
There were two headaches most investor could not get past: first, how he is competing head-on with Amazon; and second, the pets.com failure. Yet to his vision, there is a way out, being focused on the pet category along with high-touch customer service would give Chewy its unique competitive advantage. About Pets.com, they were good but a decade too soon and without sufficient scale to cover their costs, that’s all.
He understood how thinking bog was likely going to be misunderstood along the way. Never consider changing his direction till Chewy boxes were on doorsteps across the country that those “no-ers” that started to recognize his formula.
What Is the Most Misunderstood Thing About Entrepreneurship?
It’s not at all glamorous. Waking up stressing out, convincing people to give you money, conducting nonstop interviews, make grand decisions, that all is not fun. Do not let the pictures or magazines mislead you. It’s a constant stream of every problem.
They say being entrepreneur you inherent that Type A qualities of being competitive and loves to wins, but the day-to-day will feels like you are losing. The founder claims even while seeing sales grew into billions, circumstances and emerging problems makes he always feels behind. Whether that is the right mentality or not, that was what happened to him.
What Are Three Pieces of Advice You Would Give to an Aspiring Entrepreneur?
Firstly, know how to say no to yourself. Cohen remembers back when he first started the business, he was so wired and constantly bombarded with new ideas, in hope to do best for his brainchild. But when you are growing quickly it’s critical to stay focused, so sometimes ‘no’ is necessary and is a must. There will be time for innovation and new ideas, yet in those early days when resources are limited, it’s important to choose a handful of things and do them extremely well. That’s the game-changer!
Secondly, your biggest risk would have been not taking risk. The risk of insourcing fulfillment. The risk of spending $3 million a month on TV ads. The risk of going head-to-head against Amazon and all that. These decisions were some of the most controversial and required him being comfortable betting against conventional wisdom, which are often contrary to the advice of his board.
Last, this is an intimate story of Cohen and his dad. So, Cohen’s dad had a glassware importing business, and one day they were both talking about it was able to prosper from grandfather till now. His dad had pointed at two trucks. “You see those trucks there?” he said. “If what is in one of those trucks will make you more money, and what is in the other truck will make your customer happier, chose the one that make your customer happier, even if you make less money with it.” Since then, that served as the guiding premise for Chewy.
What Are the Three Best Leadership Advices?
Since day one with a team of only two to two hundred of them, building up a team around him. What are some principles to align along when it comes to team players?
Cohen said he have tried to follow his father’s principles. Who led from behind like a shepherd leading sheep. You could not expect your team to work hard if they did not see you hustling. You could not expect your team to send company money carefully if you were not penny-wise yourself. And you could not expect them to treat each other with respect if you were being a dictator.
At the same time, being humble is another aspect Cohen is trying to do best. At Chewy, or any other relationship you should never take employee, suppliers and most important your customers for granted. As he grew company from two people to thousands of employees and billions of dollars in sales, the commitment to delight customers never wavered.
What Is It Like When It Comes to Hiring?
Apparently, it was a lot of intuitive to him. The founder shares how he believes in Warren Buffet model of treating people with respect, honest and transparency. He recalls a lot of them was from Amazon and Wayfair, after found them on LinkedIn he tried to reach out. Through calls they talk about the vision to build the largest per retailer in the world, while focusing on delighting customers and being category experts.
Turns out all of the company management team, they came from amazing companies and stable jobs, and they pulled their kids out of school to come to south Florida, all the way because they believed in Cohen and the value he was trying to deliver.
“I was grateful they took that leap of faith, but it was also a huge responsibility, so I was going to fight even harder; I wasn’t going to let them down,” shared Cohen, on a CrunchBase interview.
The Biggest Principle That as an Entrepreneur You Hold Up Every Day?
Trust yourself it is. Entrepreneurs do not play with a handbook. Cohen addresses how his father taught him to be independent and trust his own moral compass. The founder recalls how his dad encouraged him to separate himself from the herd and think critically, that time, when Cohen said he had no desires to go to college, dad shrugged. Whether agree or not he also support Cohen and by letting him make his own decisions, dad sowed the seeds for him to become an entrepreneur.
“You need to make sure you are in a place in the world that you are ready for this. Scaling a business is going to test you physically and emotionally, it’s not for everyone. I have an 11-month-old now and scaling a startup from inception to reality is like taking a human being from infancy to adulthood in a very short period of time. It’s going to get sick in the middle of night and you are going to be up all-night taking care of it. It’s going to make mistakes and you will learn from it. It is a huge act of selflessness and dedication and if you are ready for it, it is going to be a crazy, crazy, crazy roller-coaster and it will be the journey of a lifetime.”- Ryan Cohen, Chewy’s founder.