Chewy: how customer service became the moat against Amazon

Where pet eCommerce was in 2011

In 2011, pet eCommerce was an obvious-looking opportunity that was actually structurally hard. Amazon had distribution scale that nobody could match on logistics. PetSmart had brand recognition, physical stores, and a Pets.com retail relationship that gave it the digital channel covered (badly, but covered). The conventional wisdom was that a third entrant couldn’t compete — not on price (Amazon would win), not on assortment (Amazon would win), not on brand (PetSmart was established).

Ryan Cohen and Michael Day looked at the category differently. The structural insight was that pet ownership is emotionally specific in ways that Amazon’s operational model wouldn't address well. Amazon’s customer service is generic. Amazon doesn't care about your dog’s name. A pet eCommerce company that treated each customer relationship as personal — not just as a transaction — could build trust Amazon couldn't copy at scale.

The service-as-moat strategy

Chewy launched as MrChewy.com in 2011 with a clear bet: out-service the category, even at significant cost. The early choices were unusual for an eCommerce startup chasing growth:

• Build a real customer-service organization. Chewy hired tens of thousands of customer-service representatives, predominantly based in the US, with real training and real authority to make customer-facing decisions. This was the opposite of most eCommerce companies' offshore-and-script-driven approach.
• 24/7 phone support. Unusual at Chewy's scale and even more unusual for an eCommerce company. Pet owners deal with urgent issues at all hours (sick pet, missing prescription), and being reachable when it mattered built trust.
• Handwritten condolence cards. When customers contacted Chewy to cancel orders because their pet had died, Chewy began sending handwritten sympathy cards (sometimes with flowers). The cost was negligible per customer; the emotional impact was substantial. People talked about it.
• Custom pet oil paintings. Chewy started commissioning oil paintings of customers’ pets and sending them as surprise gifts. Recipients shared the paintings on social media. The marketing reach per dollar spent was extraordinary.

What grew, and what came with it

Chewy grew faster than anyone expected. By 2017, the company was generating roughly $2 billion in annual revenue. PetSmart acquired Chewy that year for $3.35 billion — the largest eCommerce acquisition to that date. PetSmart’s rationale was straightforward: Chewy was eating PetSmart’s online business, and buying it was cheaper than competing with it.

Two years later, in June 2019, Chewy IPO'd at $22/share (NYSE: CHWY) at about a $9 billion valuation — meaningfully more than PetSmart had paid two years earlier. The IPO was a partial separation; PetSmart's parent BC Partners continued to hold a stake. Revenue grew steadily through the late 2010s and into the 2020s. By fiscal 2023, Chewy’s revenue was approximately $11 billion. The brand has remained the dominant pet eCommerce player and has expanded into pet health services, prescription medication, and connected veterinary services.

What other eCommerce companies tried to copy

Service-as-moat eCommerce strategies have been imitated across multiple categories. Some have worked (Glossier in beauty, Warby Parker in eyewear). Most haven’t produced comparable results, for a few reasons:

• The category wasn't emotionally specific enough. Service investment pays back in categories where customers have emotional relationships with the products or the people who use them. In categories where the purchase is purely transactional, service investment doesn't produce comparable LTV lift.
• The investment was too small. Chewy hired tens of thousands of customer-service reps and gave them real authority. Companies that hired a smaller team or scripted them tightly couldn't produce the same customer-facing autonomy.
• The brand voice wasn't consistent. Chewy's service voice (warm, personal, attentive to pet specifics) matched its marketing voice. Companies whose service contradicted their marketing produced cognitive dissonance that damaged the brand.
• They lost discipline at scale. Service-as-moat strategies often erode when companies scale and start optimizing for cost-per-contact rather than customer-relationship value. Chewy has held the line; many imitators haven't.

How RGM thinks about service-as-moat strategies

When clients ask whether they can compete against Amazon in their eCommerce category, the first question we ask is whether their category is emotionally specific enough for service to matter as a differentiator. In categories where customers have real relationships with the products (pets, kids, hobbies, certain health categories), service can be a genuine moat. In categories that are purely transactional, service is a cost center and Amazon will win on the cost-structure axis.

The harder honest answer is about investment commitment. Service-as-moat works only at sustained scale — tens of thousands of reps, real training budgets, real authority, willingness to absorb the per-contact cost. Companies that try to build a service moat with a small team or offshore scripts can't produce the same trust. We tell clients to either commit fully or commit to a different strategy entirely. Half-built service moats don’t generate the LTV lift that pays for the investment, and the result is a cost-structure disadvantage without the brand-equity upside.

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