Chewy founder Ryan Cohen: “We put together a team that was obsessed with delighting our customers”
An Interview with Chaya Weiner
We put together a team that was obsessed with delighting our customers. We truly believed in the philosophy that the customer was always right. We didn’t just say those words; we lived them. If an angry customer called to complain about a late shipment or a case of exploded cat litter, we used those opportunities to turn them into brand advocates. We figured we could turn their anger into passion for our company. It was all about taking care of our customers and optimizing a relationship, not a transaction. If they needed something faster than we could ship it, like that day, we told them to go to a local store and buy it and we’d reimburse them. It was fairly common to see calls with customers go on for four hours. That was a good thing because we knew that meant someone was happy. Who can argue for four hours? We empowered our customer specialists to do anything they could to wow the customer. Our customers would send us photos of their pets all the time. We hired artists to turn those photos into personalized portraits of their pets, which we sent to our customers. These are high-quality drawings, something you’d want to hang in your bedroom. Today, thousands of those portraits get shipped out every month.
In 2017, 32-year-old Ryan Cohen made history when he sold the company he founded and built, Chewy.com, to PetSmart for $3.35 billion in the largest e-commerce deal ever in the U.S. In 2018, the company surpassed $3.5 billion in sales. Earlier this year Chewy went public and today has a market cap over $12 billion.
Thank you so much for joining us Ryan! What is your backstory?
I have been an entrepreneur since I was 13, when I began building websites for money. My first client was my father, who ran a glassware importing business. I also built sites for other local companies. That was how I began to understand business and the importance of delivering the best customer experience. Then I moved on to affiliate marketing and met my co-founder (who became Chewy’s CTO) in an online chat room discussing website design and computer programming, and we hit it off.
Where did the idea for your business come from?
The original idea was to build an online jewelry store. I thought we could make shopping for jewelry more convenient and deliver a better experience than what customers were used to. We liked that it was a large market and under penetrated online. Admittedly, we weren’t that passionate about jewelry. It just seemed like a good opportunity. We went to a trade show and invested in a bunch of jewelry inventory. As we were about to launch the business, I happened to visit a local pet store to get food for my five-pound poodle, Tylee. I had always enjoyed going to neighborhood stores because of the personalized customer service and advice. As I was checking out, an epiphany hit me. Why didn’t we sell pet supplies instead? We could replicate the intimate experience of shopping at a local pet store, only doing it online and at scale. We also saw that pet supplies were a bigger and better opportunity than jewelry. We were fortunate the vendors who sold us the jewelry agreed to buy it back. We then hired a third-party logistics firm in Pennsylvania to help us ship products for our new business — which we originally called Mr. Chewy and then became Chewy.com.
Can you tell us a story about the hard times that you faced when you first started your journey?
The entire journey was hard. Vertically integrated e-commerce requires flawless execution across many fronts — marketing, supply chain, merchandising, and everything in between. But it was hard for good reason. We took the path of most resistance because we set a high bar and obsessed over delivering the best customer experience. We bootstrapped Chewy and it took a couple years before we were able to raise capital. Eventually we had to bring our warehousing and fulfillment in house, which meant hiring more people and finding more financing, which wasn’t easy being based in Florida. Over 75% of venture capital goes to three states: California, New York, and Massachusetts. We were also doing everything with no credentials. I never went to college. I had no background in retail. I didn’t have a network or a rich uncle I could ask for a loan. Every day was a fight.
Tell us more about your decision to bring fulfillment in house?
2014 was a pivotal year. If we wanted to pursue my vision of building a multi-billion-dollar company, we couldn’t rely on a third party to fulfill our customers’ orders. We had to make logistics our core competency so that we could deliver the best customer experience. The catch was that if we wanted to build our own warehouses, it required more capital and people to make it work. Several of my investors and board members thought it was risky. But it was a binary decision for me. We had to develop the world-class fulfillment capabilities needed to scale the business or we would fail. For me, the riskier decision would have been to stay the course and keep the status quo. It was a do-or-die moment for the company. Ultimately, I made the decision to bring fulfillment in house. We opened our first warehouse in early 2014 in Pennsylvania. It was harder and more expensive than we anticipated. Everything that could have gone wrong went wrong. Consultants told us it would take 18 months. We did it less than six. We built a team who worked like Navy Seals around the clock, blocking and tackling issue after issue until we got it right. Later that year, we opened a second warehouse in Nevada. This time it was like riding a bicycle. We now had the recipe and an amazing team to execute on our plan. Every warehouse we opened after that was easier. Today, Chewy has seven warehouses and 4.7 million square feet of warehouse space and is world class in operations and logistics.
Where did you get the drive to continue even though things were so hard?
I have always been someone who doesn’t take no for an answer. I wanted to build the largest pet retailer in the world. Once I set my mind to it, I wasn’t going to stop. I knew intuitively that if you wanted to do something great, there were going to be serious challenges. That didn’t scare me. But it did require many sacrifices. There was no time for friends or vacations. I had no hobbies. I know nothing about work-life balance. I was focused 24/7 for seven years on building this business. I don’t think you can be extremely successful in life and not be all-in. Look at the people who have really changed the world: Bill Gates, Steve Jobs, Jeff Bezos, and Elon Musk. They are all extremists. We live in a competitive world. If you’re not working your tail off, that means someone else is working harder than you are. There is too much competition not to be all-in all the time.
How did grit and resilience lead to your eventual success?
It was our determination, tenacity, focus, and being customer obsessed from day one that made us successful. Chewy is the world’s biggest online retailer of pet supplies. To get there, we had to beat the odds when everything was stacked against us. We were competing with the strongest company in the world, Amazon, which had an incredible infrastructure, established relationships with customers and suppliers, and endless capital. All we had to begin with was our sheer will and determination. Add our maniacal focus to the mix and you get an astonishingly powerful combination.
How did you eventually find the capital you needed to scale the business?
We knew right from the beginning, based on the size of the business we wanted to build, that we needed an investor. The first step I took was to research all the venture capitalists and early-stage investors. I visited their websites, sent them emails, and even cold-called them. This was not the best way to go about raising capital. Most investors want to be introduced to entrepreneurs and startups by common acquaintances. I would have loved a warm introduction to an investor. But I didn’t know anyone. So, I kept calling. At first, people I did connect with said no. They told me that they wouldn’t invest because we were like Pets.com and competing against Amazon. One investor (a highly respected one) told me we weren’t differentiated enough and that he would be more interested if we were selling live pets over the internet instead of pet supplies. They didn’t believe in us. But I kept calling. I was turned down more than 100 times. After years of hearing no, Larry Cheng from Volition Capital in Boston called me back. We had a good discussion. I sent him our financial projections. When he followed up with us six months later, we had crushed our plan. We believed it was better to under-promise and over-deliver. We didn’t check many boxes of being differentiated and there was no shortage of competition, but we were growing fast and our customers loved us. After they came to visit us in Florida, Larry made the decision to invest. Ultimately, we raised six rounds of financing and more than $350 million. We went from $200 million in sales in 2014 to $3.5 billion in sales by 2018.
What do you think makes your company stand out?
We put together a team that was obsessed with delighting our customers. We truly believed in the philosophy that the customer was always right. We didn’t just say those words; we lived them. If an angry customer called to complain about a late shipment or a case of exploded cat litter, we used those opportunities to turn them into brand advocates. We figured we could turn their anger into passion for our company. It was all about taking care of our customers and optimizing a relationship, not a transaction. If they needed something faster than we could ship it, like that day, we told them to go to a local store and buy it and we’d reimburse them. It was fairly common to see calls with customers go on for four hours. That was a good thing because we knew that meant someone was happy. Who can argue for four hours? We empowered our customer specialists to do anything they could to wow the customer. Our customers would send us photos of their pets all the time. We hired artists to turn those photos into personalized portraits of their pets, which we sent to our customers. These are high-quality drawings, something you’d want to hang in your bedroom. Today, thousands of those portraits get shipped out every month.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
My father taught me the value of hard work. He was never afraid to roll up his sleeves. His business was based in a warehouse that had an office in the front. He would wear a suit when he worked in the office and talked to customers. But when a truck came into the back with a shipment of glassware, he would take his jacket off, roll up his sleeves and start unloading pallets. He worked harder than anyone and before long, his entire shirt would be soaked through with sweat. Then, he would put his jacket back on, and go back to the office and start working there. Watching him, I learned the value of hard work and being a jack of all trades, and that you should never be afraid to do things yourself.
Why did you decide to step down last year?
It wasn’t an easy decision to leave the company. After seven years of hard-fought battles, the company was at a significant scale, the strategy was sound and the vision was set. Chewy surpassed $3.5 billion in sales last year. As an entrepreneur, I felt my work was complete. I left knowing we built a durable business that would prosper.
Do you have any sense of what you might do next?
I burn easily, so I can’t hang out at the beach all day, and I’m not the best golfer. I’m only 34, so I certainly haven’t peaked as an entrepreneur yet. Stay tuned.
Thank you for all of these great insights!
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About the author:
Chaya Weiner is the Director of branding and photography at Authority Magazine’s Thought Leader Incubator. TLI is a thought leadership program that helps leaders establish a brand as a trusted authority in their field. Please click HERE to learn more about Thought Leader Incubator.
