I interviewed Ryan Cohen, the entrepreneur and co-founder of Chewy, the online pet retailer. Cohen also served as CEO of Chewy, which PetSmart acquired in 2017 for $3.35 billion, which at the time was the largest e-commerce acquisition ever. In our interview, we discuss a wide range of topics, including:
- why Cohen was willing to challenge PetCo, PetSmart and Amazon
- what it’s like to be rejected by 100 investors
- how he scaled Chewy with inspiration from Zappos and Jeff Bezos
- the most misunderstood thing about entrepreneurship
- his best leadership advice and advice for entrepreneurs
- what he learned from his dad, and much more
Zack Friedman: Why did you see a need for Chewy that didn’t exist with Petco, PetSmart, Amazon and other online retailers?
Ryan Cohen: I was going to the neighborhood pet store for my dog food but because I was busy building a business, I didn’t always have the time to make the trip. I tried Amazon and the big box retailers, but they were all missing the specialized experience and their customer service sucked. Try calling them.
With Chewy, I combined the best from all of them. I saw an opportunity to differentiate from the pack and convert fanatical pet parents, like myself, into die-hard customers. Our customers got the local pet store experience with the convenience of shopping online.
I focused on bringing a human element to e-commerce. We provided 24/7 US-based customer service and included small touches like handwritten holiday cards and personalized pet portraits. These were ways we could connect with customers and build loyalty over time, optimizing for a lifetime relationship, not a single transaction. Chewy’s relationship with customers was the secret sauce.
Friedman: You were rejected by 100 different investors. What did you learn from the process? What made you keep going when you kept hearing no?
Cohen: For me, each no sounded like they just didn’t understand my vision. It was frustrating at times, but never discouraging. Those “no”s never made me doubt my strategy – it was the opposite. I was motivated by all the rejections and they just got me fired up.
Most investors couldn’t get past two hurdles: competing head-on with Amazon and the pets.com failure during the dot com bubble. But I was convinced being focused on the pet category along with high-touch customer service gave Chewy unique competitive advantages. Pets.com was a good idea but a decade too soon and without sufficient scale to cover their costs. These two hurdles didn’t scare me. I never considered changing my business plan. One highly respected venture capitalist told me he would be more interested if we were selling live pets over the internet rather than pet supplies. Like most investors, he believed running into Amazon’s teeth was suicidal.
I understood that thinking big was likely going to be misunderstood along the way. I’m contrarian by nature, so being misunderstood often validates what I’m doing. It wasn’t until Chewy boxes were on doorsteps across the country that the bulk of investors started to recognize our formula.
Friedman: Let’s talk about execution and scale. You’ve said that you used Zappos as a model. You also were inspired by Jeff Bezos and Amazon’s growth and model. How do you go from idea to platform to scale? What was the process and how did you scale so quickly?
Cohen: In just three months we built a website, found a distributor and partnered with a third-party logistics company. In June of 2011 we launched. I focused on four pillars and we did them better than anyone else. We started with the value proposition of delighting our customers, which we did through amazing customer service, low prices, fast shipping, and selection. The onus was on us to create the most efficient supply chain to support that business model.
When we reached $200 million in sales, we had to insource fulfillment to be able scale to the next level. We opened our first two warehouses in 2014. By 2018 we had seven warehouses around the country and 4.7 million square feet of space. Each is the size of 13 football fields and four stories high.
I needed to hire the best people and delegate into their areas of expertise. Each employee we hired had a strong bias for action and were excited about the opportunity to disrupt the pet industry. We always hired for will over skill. One you can teach, the other you can’t. Everyone and everything revolved around being customer obsessed. We scaled from 3 employees in 2011 to over 9000 Chewtopians by 2018.
We prioritized long term growth over short term profitability. The last thing you want to be is a subscale e-commerce company. You’re a dead man walking, and Amazon will crush you. We rapidly expanded our product offering to include all pet food and supplies so there was never a reason to shop elsewhere. By 2018, 90% of our revenue was from repeat customers.
We raised six rounds of financing and more than $350 million over seven years. We grew sales from $2 million in 2011 to $3.5 billion by 2018, a 190% annual growth rate.
Friedman: What’s the most misunderstood thing about entrepreneurship?
Cohen: Don’t let the pictures or magazines mislead you, it’s not at all glamorous. Negotiating with vendors, reading long contracts, conducting nonstop interviews, convincing investors to give you money, combined with a constant stream of everyday problems, is not fun.
The Type A in me is competitive and loves to win, but the day-to-day feels like you’re losing. If you think you’re winning you’re probably not doing a great job building your company. Even as our sales grew into the billions, I always felt behind. Whether that’s the right mentality or not, that’s how I’m wired.
Friedman: What are three pieces of advice you would give to an aspiring entrepreneur?
- I’d be remiss to say my way is the ‘right’ way. It’s simply what worked for me. My dad had a glassware importing business, and he told me about how he was talking with his dad one day. His dad had pointed at two trucks. “You see those trucks there?” he’d said. “If what’s in one of those trucks will make you more money, and what’s in the other truck will make your customers happier, choose the one that makes your customers happier, even if you make less money.” That served as the guiding premise for Chewy.
- Second, I was never afraid to say no. I was constantly bombarded with new ideas, and when you’re growing quickly it’s critical to stay focused, so I said no to almost everything. There’s a time and place for ideation, but in the early days when resources are finite, it’s important to choose a handful of things and do them extremely well.
- Third, my biggest risk would have been not taking risk. The risk of going head-to-head against Amazon. The risk of insourcing fulfillment. The risk of building a company in Florida rather than a popular tech hub. The risk of spending $3 million a month on TV ads, more than Home Depot HD ‘s budget. The risk of hiring expensive executives even though we weren’t profitable. These decisions were some of the most controversial and required me being comfortable betting against conventional wisdom, and were often contrary to the advice of my board. Suffice it to say, I was not the most popular board member.
Friedman: You’ve said that your dad, Ted, has been an important mentor in your life. My deepest condolences to you and your family. What did you learn from your dad?
Cohen: My father was my best friend. I never went to college and instead learned by following his example. His unconditional love gave me the confidence to be misunderstood, to walk away from things that didn’t feel right, and to learn from my mistakes.
Dad showed me how the best decisions come from intuition, and he was careful not to bias me with his opinion. He always asked me endless questions, and those questions triggered me to find my own solutions.
Through watching him work, I learned many things, one of which was to double check everything, to read through every detail of a contract, to triple check all my numbers so I knew them inside out.
Dad also showed me discipline, by being the most disciplined person I ever knew. He ran six miles every morning. It didn’t matter if it was below zero and he had to chip off the ice from his face mask when he got home. He was then at the office by 6 a.m., the first to open the doors, and the last one to leave. He especially respected those who made a living through physical labor and admired the blue-collar worker. Dad didn’t take sick days. He told me, “If I don’t go to the office there is no company.” I’ll never be as good as him.
Friedman: You served as CEO of Chewy and built a team around you. What are your three best pieces of leadership advice?
- I’ve tried to follow my father’s principles. Dad led from behind like a shepherd leading sheep. I learned from watching him that I couldn’t expect my team to work hard if they didn’t see me hustling. I couldn’t expect my employees to spend company money carefully if I wasn’t frugal. And I couldn’t expect them to treat each other with respect if I was being a dictator.
- Second, Dad never swayed when he believed in something. I never compromised my vision, regardless how many investors turned me down I was not going to give up on building Chewy into the world’s biggest online pet retailer. I love to be challenged, and I’m flexible on details, but I’m never willing to give up.
- Third, Dad was the most humble man I have ever known. At Chewy, we never took our employees, suppliers, and most important, our customers for granted. As we grew the company from three people to thousands of employees and billions of dollars in sales, our commitment to delighting customers never wavered. Our net promoter score, a common measure of customer satisfaction, was always 87 and above.
Friedman: What’s your favorite thing that you like to do with Tylee, your dog?
Cohen: I like to take a few minutes every day and sit with her in the sun. It’s my time to unplug and smell the fresh air.
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