The online-only pet supplies retailer Chewy (CHWY 0.57%) has experienced a boost in sales since the onset of the pandemic. Folks brought home more pets than ever as they sought out companionship while spending days (and evenings) stuck at home.
But those furry companions need food to eat, beds to sleep on, and toys to destroy, and many people turned to Chewy.com to fill those needs. Now, Chewy aims to tackle an even bigger slice of the pet market by offering a pet health service to its existing customers.
Pet health is a $30 billion market
As a result of sales moving online since the start of the pandemic, Chewy has rapidly been taking market share. And management estimates it will claim over 50% of incremental e-commerce sales for the pet category in 2021.
The U.S. pet market is estimated to be worth $100 billion annually. Within that broad market is pet health, which Chewy estimates to be worth roughly $30 billion. In an effort to establish a presence in the pet health space too, Chewy announced a new offering -- Connect with a Vet. Primarily a tele-triage service, it will allow customers to connect with licensed veterinarians and ask questions concerning the health of their pets.
The initial launch went so well that the company expanded hours and added a video chat feature. Despite only launching in the last few quarters, Chewy has completed 30,000 sessions with customers. Early results indicate that folks love the service, giving it a net promoter score above 85%.
The service is free, for now, to Autoship customers on Chewy.com. However, management does believe in eventually monetizing the service and offering it to all Chewy.com customers. Here is what CEO Sumit Singh had to say on the matter in the company's fiscal fourth-quarter conference call:
Today, the service continues to remain available to Autoship customers for free. We do believe in the monetization of the service and availability of it to our entire customer base, and I will come and share that with you closer to the time when we're ready to do that.
As with many other things in the world today, seeing a vet online is more convenient than going to their office in person. As an exclusive perk right now for Autoship customers, it should help drive Autoship growth and adoption for Chewy. In the fiscal first quarter, Autoship sales increased to 69.3% of total sales (up 140 basis points year over year). Similar to Amazon's subscribe and save, Autoship offers customers the ability to sign up for recurring deliveries in return for a small discount.
In the long run, when Chewy eventually monetizes the service, the company benefits from yet another revenue stream, and it can build off of its strong brand to establish a similarly dominant position in pet health. Investors should keep an eye on this growth stock as it adds another layer to its expansion.