How Ryan Cohen Turned Chewy into a $3B Business

What's up everyone? This is Alex Lieberman, co-founder and executive chairman of Morning Brew. Welcome back to Founder's Journal, my personal audio diary, where I give you, the business builder, the tools you need to think better in order to build better, whether that's building a business, a team, or a new product. If you're a business nerd, you need to know this crazy business story. Let's hop into it. Let's rewind to 2011. Ryan Cohen was a 25-year-old college dropout living in Dania Beach, Florida, looking to follow in his father's footsteps as an entrepreneur. He was a week out from starting an online jewelry store with his buddy Michael Day when he had a change of heart. Cohen was standing in a pet store talking to an employee about food for his toy poodle named Tylee, and he thought to himself, there are millions of people around the globe with pets who care about what their pets eat. And so that was how the idea for Chewy.com, or better yet, Mr. Chewy, the OG name of the business, was born. And the idea was simple, a pet parent's go-to online destination for pet products. Ryan and his co-founder Michael sold the jewelry inventory and the safe that they had already purchased to start that original business, and they started going deep on the pet industry. The two founders originally fueled the business with their own cash and small business loans, but they needed to raise more capital if they wanted to scale Chewy quickly. There was a big issue, though, or actually two big issues. The first was this little company called Pets.com. Pets.com was arguably one of the most memorable collapses during the dot-com bubble burst. The company launched in 1998. It was a darling of Silicon Valley. raised $82.5 million in an IPO, and it closed up shop just 9 months later. It's a tough act to follow when your value prop is basically the exact same as a company that is now sitting in the startup graveyard. But then there was also issue number 2, this other little company called Amazon. Most investors couldn't buy into Ryan's vision when big daddy Bezos was sitting on Chewy's doorstep with all things e-commerce. But Ryan was unwavering, and the vision was crystal clear. Deliver the type of high-touch customer service your local pet store gives you, but at scale. And over the years, Chewy has found all sorts of ways to do this, from hand-painted portraits of pets that have been sent to thousands of customers over the years, to a 3,000-person customer care team that answers most calls in less than 4 seconds. Next-level customer service at scale has been the winning strategy for Cohen and Day. The company has been a straight up rocket ship since 2011. In 2014, sales hit $205 million. Then in 2015, they doubled to $423 million. And guess what? They doubled again in 2016 to $901 million. By 2017, the company was responsible for 51% of all online pet sales in the US with $2 billion in revenue, another year of 100% growth. So Cohen was prepping for an IPO in 2017 when giants of the pet space started knocking on Chewy's door. First came Petco, which Chewy said no thank you to, and then was PetSmart, who sealed the deal in April of 2017. Cohen and Day sold Chewy in an all-cash deal for $3.35 billion. This was the largest e-commerce acquisition in history at the time. But Chewy and Cohen's story does not end there. Under the leadership of Chewy's new CEO, Sumit Singh, the company has continued to crush it. Chewy now has 18,000 employees across 2 headquarters. It sells more than 40,000 products, and in 2020 alone, it gained 5.5 million customers. In February of 2021, Chewy stock hit an all-time high, Valuing the company at $49 billion. But this story started, and it has to finish with our boy Ryan Cohen. After leaving his post at the helm of Chewy, Cohen took off his founder hat and put on his activist investor hat. His strategy was simple: take big stakes in downtrodden physical retail businesses and breathe life into them with his e-commerce wizardry. And Cohen's first target as a young Carl Icahn was was GameStop. The plan was to transform GameStop into the Amazon of video games. And so Cohen bought $76 million of GameStop shares, or roughly 11.8% of the company, back in December of 2020. Thanks to GameStop's run-up in the WallStreetBets meme stock bonanza, that original $76 million is now worth a billy. So today, our guy Ryan Cohen is flying high. He's sitting atop the GameStop board as its chairman while continuing to capitalize on this playbook of bringing old-school businesses back to life with a smart digital strategy. And so that is the story of Ryan Cohen and how he built Chewy into a $3.35 billion beast. If you want to hear the story of other big business people, shoot me an email to alex@morningbrew.com and let me know who you want me to tell the story of next. Our show is produced and engineered by Dan Bauza. Our associate producer is Bella Hutchins. Brian Henry is our executive producer, Alan Haberchak is Morning Brew's director of audio. Holly Van Leeuwen is our fact-checker. Emily Milliron is our video producer and editor. And I'm your host, Alex Lieberman. Thanks so much again for listening, and I'll catch you all next episode.