Between dog chew toys, cat scratching posts, water bowls, and collars, the typical American pet owner spends $13,320 on their cats or dogs over ten years—or about $111 each month to keep their pets fed, healthy, and happy. Such steady spending by pet parents on their fur babies is a significant subscription-based business opportunity for companies offering regular deliveries of food and toys, prescription medication, telehealth appointments with on-call veterinarians, and even GPS tracking services in case Milo or Fido wanders off.
While pet owners are very involved in making decisions about their four-legged family members, the rapidly growing number of pet care subscription services means customers have many choices to pick from and switch to if needed. The long-term challenge for pet care companies is transforming fickle customers with many options into loyal subscribers.
Successful subscription companies typically pull on three levers to grow their share of wallet. They provide value through pricing, the convenience of one-stop shopping & delivery, and strive to drive deeper engagement through personalized experiences with the brand. One company leading the pack in pet care subscriptions by deftly working all three levers is the eCommerce upstart Chewy.
Compared to traditional retail chains like Petco and PetSmart, Chewy has made a name for itself as a one-stop online shopping destination for bulk orders of pet foods, toys, prescription medication, and other supplies. The centerpiece of Chewy’s business model is its “Autoship” subscription that offers exclusive subscriber discounts of up to 35 percent or $20 on the first order—subsequent orders include 5 percent discounts on “select brands.”
Customers can also place one-time orders. But the exclusive subscriber discounts seem to have encouraged many to try out Chewy’s Autoship subscription. In the past year, Autoship customers accounted for 70 percent of Chewy’s net sales by August 2021—up from 68 percent one year ago. Revenue from Autoship customers alone grew from $1.1 billion earned during the second quarter of 2020 to more than $1.5 billion earned during the second quarter of 2021.
While many major pet retailers have seen online sales rise during the pandemic, Chewy’s exclusive focus on e-commerce has allowed it to outpace its brick-and-mortar competitors Petco and PetSmart as it gnaws away at competitors’ relative market share for online sales, according to a Cardify.ai report. That has positioned Chewy to compete head-to-head with even retail giants such as Amazon and Walmart for online sales:
- The U.S. Pet Market Outlook 2021-2022 report shows that online sales grew to 30 percent of pet product sales in 2020, with Amazon having the overall lead in online market share of pet products at 59 percent.
- Chewy ranks second behind Amazon in online market share at 41 percent, followed by Walmart’s 33 percent market share and then Petco.com and PetSmart.com.
But Chewy’s success as an online leader among pure-play pet care companies does not come solely from its subscription program discounts. Both Petco and PetSmart offer subscription programs with practically identical savings for customers, and Amazon and Walmart each have their own subscription program discounts too.
In addition to pricing and convenience, Chewy has found ways to wrap its subscription model in a personalized package with a delightful bow of stellar customer service designed specifically to make customers feel like family.
Stories abound online about how Chewy’s customer experience goes above and beyond. Each week, the company sends out more than 1,000 free oil paintings of cats, dogs, and other animals to customers who had uploaded the photos of their pets to their Chewy accounts. Customer service agents who are available 24/7 are empowered to order flower deliveries that may celebrate a customer’s wedding mentioned during a call or commemorate a beloved pet’s passing. All this leads to consumers having a deeper and more personal engagement with the Chewy brand.
While many companies charge for veterinary telehealth services, Chewy even offers “Connect with a Vet” online chats or video consultations as a free perk for its Autoship subscribers. It’s yet another way that Chewy adds value to its subscription package.
To become sustainable businesses in the long run, subscription services need customer satisfaction and brand loyalty to reinforce customer habits around paying recurring fees or having monthly deliveries on auto-renewal. By keeping customers constantly engaged and thrilled with their subscription experience, brands can turn customers into reliably loyal subscribers for years to come.
Pet care companies have deployed a wide variety of perks to incentivize consumers to sign up for subscriptions. But in a market where competitors can readily learn new tricks from rival subscription models, no single subscription perk is likely to provide the winning edge.
Instead, a holistic approach to creating a memorable customer experience around their subscription packages separates the leaders from the pack.
- In the pet care market, many subscription packages are based on the value proposition of accessing multiple products and services, along with the convenience of home delivery.
- A subscription service that competes only on convenience and price is constantly at risk of being undercut in a competitive market filled with rivals—especially if customers can easily switch from one service to another.
- Personalized customer experiences and a focus on customer satisfaction can help build a community around the brand and turn customers into brand evangelists on social media.
- In the long run, companies want high customer satisfaction and brand loyalty to both reinforce consistent, habit-forming usage of their subscription services.
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