PetSmart is acquiring online pet supplies retailer Chewy for a reported $3.35 billion. While neither company confirmed the acquisition price, the sum (as reported by Recode) makes this the biggest e-Commerce acquisition ever.
The reported total outstrips Walmart’s $3.3 billion acquisition of Jet.com, but it plays out in a similar scenario: the brick-and-mortar leader acquires a valuable, rapidly rising e-Commerce brand that enhances its reach to consumers. Like Walmart and many other big box counterparts, PetSmart aims to adapt to shifting consumer demands and expectations by positioning itself to generate revenue and gather insight from a younger, online-savvy merchant.
PetSmart’s chief rival, Petco, also is expanding its online offerings by acquiring digital pet services company PetCoach. The service provider is designed to connect pet owners with veterinarians to collect personalized pet advice, adding value that is increasingly important in today’s retail climate. With PetSmart and Petco running neck-and-neck in store counts, at 1,500+ and 1,400+ respectively, the brands are going beyond the in-store experience to bolster their brand offerings.
Advertisement
Chewy has fulfillment centers in Indiana, Nevada, Pennsylvania and Texas, allowing it to offer one- and two-day shipping on approximately 25,000 different items. In addition, the retailer incentivizes repeat pet food orders with a discounted “autoship” option that automatically dispatches food shipments, with scheduling set by customers.
Chewy.com says it took in nearly $900 million in revenue last year in what was only its fifth year in operation, and that it expects to increase revenue to $1.5 billion in 2017. However, the retailer has not made a profit. The brand raised at least $236 million in venture capital from investors including Volition Capital, T. Rowe Price and BlackRock.
Co-Founder Ryan Cohen will continue as CEO of Chewy upon the deal’s closing. The brand will operate largely as an independent subsidiary of PetSmart, focusing on its current business strategy, while PetSmart will continue to execute its strategic initiatives across the combined company.
The acquisition is subject to customary regulatory approvals and is expected to close by the end of PetSmart’s Q2 2017.
