How Chewy Cracked The Subscription Business to Build a $10 Billion Powerhouse

You’ve probably noticed that everything these days seems to come with a subscription. From razors to streaming services, everyone’s jumping on the subscription bandwagon. But let’s be honest—some of these subscriptions are about as useful as a screen door on a submarine. Others, though? They’re worth every penny. And when it comes to value, the numbers don’t lie.

Take Chewy, for example. While some subscription models are struggling to stay afloat, Chewy has quietly built itself into a $10 billion powerhouse. They didn’t do it by offering artisanal pickling kits or surprise boxes filled with things you never asked for. No, Chewy did it by understanding what people—and their pets—really need. Their “autoship” service, where customers can set up repeat deliveries of pet essentials at a discount, is pure gold. Last quarter alone, these autoship sales accounted for (GET THIS) 78.6% of Chewy’s $2.86 billion in net sales. 

(Source: USA Today)

And that’s why Chewy’s stock is up 61% over the past six months. Which is no small feat, considering that a lot of other subscription-based businesses are struggling just to keep the lights on. Remember Peloton’s glory days? As we talked about yesterday, those days are over. But Chewy is bucking the trend. Its second-quarter results sent its stock up more than 15% in a single day. We’re talking numbers that even Dogecoin would be jealous of.

First, let’s give credit where credit is due: the pets. Pet ownership surged during the pandemic, and with great dogs (and cats) comes great responsibility—or at least, the need to keep feeding them. Chewy capitalized on this with a simple yet brilliant strategy: make it as easy as possible for pet owners to get their paws on pet food and supplies. No surprise shipments, no hidden fees, just a simple auto-ship feature that sends customers exactly what they need, exactly when they need it for between $40 and $60 a month.

According to Neil Saunders of GlobalData, Chewy’s success is about more than just smart logistics. "Chewy is a very good business that treats customers well, that’s part of their success. They operate in a segment where buying is essential and habitual, which makes auto-shipping a useful option,” he explains. And there’s another ace up Chewy’s sleeve: a killer marketing campaign. (If you’ve ever watched their “favorite child” ad, you know what I’m talking about.)

(Source: Chewy)

Oh, and did I mention that Chewy’s revenue per customer shot up to $568? In Q2, their net sales hit a whopping $2.86 billion, blowing past what the analysts had predicted. They also pulled in an adjusted earnings per share of $0.24, which had Wall Street wagging its tail in approval.According to Chewy’s CFO, Mario Marte, this financial muscle was flexed thanks to “lower-than-expected promotional activity, beefier average order sizes, and customers getting way too cozy with their app.” In other words, Chewy’s dominating.

So, what’s next for Chewy? Well, they’ve got their sights set on fattening up their margins by diving deeper into pet healthcare and raking in those advertising dollars. Analysts are practically drooling over Chewy’s future, predicting that sales growth will bounce back by 2025 and sprint toward a solid 9-10% growth by 2026. Translation: investors should keep their treat jars stocked, because Chewy’s just getting started.

Here's the big picture: Chewy has cracked the code that most subscription businesses fumble with—they’ve made it stick. They’ve turned the chaos of e-commerce into the comforting ritual of refilling your pet’s bowl. With 20.4 million loyal customers, a laser focus on high-margin areas like pet health and advertising, and a business model that’s pretty much recession-proof, Chewy looks ready to keep scoring wins in the subscription game. 

So, while other companies are peddling worthless $50 subscriptions to their cheese-of-the-month club, Chewy’s got their auto-ship on lock down. Investors, you might want to throw this dog a bone.

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Stocks.News holds positions in Chewy and Peloton.