This week, PetSmart announced its intention to acquire fast-growing pet food and product site Chewy.com in a deal alleged to fetch $3.35 billion, surpassing Walmart’s $3.3 billion purchase of Jet.com to become the biggest e-commerce deal ever.
What makes the deal even more interesting is that traditional bricks-and-mortar retailer PetSmart was itself valued at just $8.7 billion in 2015 when it was taken over by private investors. Despite this, it’s clear to see just how the five-year-old Chewy caught PetSmart’s eye given it has become one of the fastest growing e-commerce websites in the world, registering almost $900 million in revenue last year alone.
Founded by Ryan Cohen and Michael Day, Chewy has managed to build a solid following and has even developed cult status due to its dedication to maintaining exceptional levels of customer service, large product selection, low prices and speedy delivery. There’s also the added fact that the company has raised at least $236 million in venture capital from investors including BlackRock, Volition Capital and T. Rowe Price.
Despite the sheer scale of PetSmart with its $7 billion in revenues and more than 1,500 stores in the USA, it’s been reported that sales for the 30-year-old company have remained flat. It’s widely acknowledged that even though PetSmart still attracts customers into stores thanks to its grooming and on-site vet services, competition from online pet product retailers, such as Amazon and, of course, Chewy, have placed them under significant pressure to evolve.
With consumer spending continuing to shift to online, it’s likely more traditional retailers will chase the tail of PetSmart by identifying opportunities to enter this lucrative market and take back some of the market share they may have lost over the years.
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