Bloomberg Businessweek - USA (2020-11-23)

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BloombergBusinessweek November 23, 2020

who’dbeenhiredbyCohenaschief

operating officer less than a year before,

was named the new CEO.

When Singh, who owns a Shih Tzu

named D, took over, the company

counted 10,000 employees. Cohen had

laid out a step-by-step plan for board

members for achieving profitability in

a few years, according to internal com-

pany documents reviewed by Bloomberg

Businessweek. Sales of private-label

products, which carry higher margins

than third-party brands, were growing.

A pet health-care and pharmacy busi-

ness was almost ready for launch, and

the company had laid groundwork for

an IPO.

But as Singh saw it, Chewy needed

more structure, better data analyt-

ics, a greater product assortment, and

stronger inventory and supply chain

management. Despite the plan prior

management set out, Singh says, “there

wasn’t a road map for sustained growth.

How do you take the company from

$2 billion to $20 billion?”

Singh, who grew up in India, has a

master’s degree in engineering from the

University of Texas and an MBA from

the University of Chicago. After 10 years

with Dell Technologies Inc., he helped

build Amazon’s grocery-delivery busi-

ness in the U.S. and three other coun-

tries. Those who interviewed him to be

Chewy’s operating chief saw a brainy

data geek with a strong background in

operationsandexperienceworkingat

largeorganizations.

SinghimprovedChewy’sautomated

forecasting and supply chain

management with machine learning

and expanded a tech-centric office in

Boston. The company’s product catalog

increased by more than half, to 67,000

items. Again mimicking Amazon, Singh

banned PowerPoints and told staff to

argue their cases in narrative prose.

He also identified key metrics and

heldexecutivestothemduringweekly,

monthly,andquarterlyreviews.“It’s

arelentless focus on data and experi-

ence that allows us to do hard things

well,” he says.

Last year, Singh learned that Chewy

15m

10

5

0

Q1’18 Q2’20

DATA:COMPANYFILINGS

wasgettinga disproportionatenumber

ofcomplaintsaboutcatlitterboxes

beingdamagedindelivery.Catlitter

is heavy,and a smallproblem can

makea bigmess.Butcustomersneed

toreorderit periodically,fittingwith

Chewy’sfocusonrecurringpurchases.

A smallteamatChewygathereddata

andtrackeddownthewarehouses,

deliveryroutes,andZIPcodeswith

themostbotcheddeliveries.Theteam

workedwithsupplierstocreatebetter

packaging,setupfulfillment-center

prepstationsforpackagesproneto

sustaining damage, and took other

steps to reduce the likelihood of prob-

lems in transit. “If you’re living in New

York on the 36th floor, and your cat lit-

ter came open on your expensive hard-

wood floor, you’re never going to order

from me again,” Singh says.

Some longtime employees strug-

gled to get along with the new boss.

The abundantly confident Singh

struck a different chord than Cohen,

an unassuming Canadian who’d never

worked at a big company before found-

ing Chewy. Singh personally involved

himself in matters Cohen had dele-

gated, and he encouraged executives

to openly challenge each other during

meetings, which some say created an

atmosphere of competition that made

some employees reluctant to speak

up. His apparent obsession with data,

big meetings, and Amazonian “six-

pager” memos grated on some under-

lings, particularly those who’d joined

Chewy because the founders’ scrappy,

just-get-it-done approach wasn’t like

that of a large corporation. “We all

knew we were just a pet store, but we

really believed we were making a big

difference in the lives of pets and peo-

ple,” says Andrea Wolfe, Chewy’s for-

mer vice president for marketing, who

left in late 2017. “It was more than just

meeting numbers and building effi-

ciency. With Sumit, you could tell he

was just a numbers guy.”

In Singh’s view, it’s all a necessary

part of getting bigger. “As Chewy con-

tinues to scale, it is critical to combine

our spirit of innovation with data and

insights,” he says. “We believe that prac-

tices like metrics and data have made us

better, faster, and more scrappy.” This

approach, Singh says, allows the com-

pany to automate routine tasks and

shorten meetings, and promotes criti-

cal thinking.

Early in his CEO tenure, Singh ques-

tioned a number of practices that had

been fundamental to Chewy’s success.

For instance, in the summer of 2018,

Amazon rolled out a 40% discount

for new customers placing subscrip-

tion orders for pet products, besting

Chewy’s standard 20% markdown.

Singh resisted immediately matching

the deal, even as his lieutenants argued

that the company’s growth stemmed

in part from its commitment to hav-

ing the lowest prices. Singh suspected

customersvaluedthesubscriptionser-

viceenoughthattheydidn’tneeda big

pricecut.Aftera weekslong analysis

and debate, Chewy eventually installed

a discount of 30%.

A year after Singh became CEO,

Chewy prepared to go public. The prof-

its interest units that senior employees

had received when PetSmart bought

Chewy were scheduled to be 40%

vested at the end of May. But Singh told

employees the units were being can-

celed because of the impending June

IPO. The value of the units was tied to

how much Chewy and PetSmart would

have been worth if they went pub-

lic together; that no longer applied,

because PetSmart wasn’t participat-

ing in the IPO. The employees instead

received restricted shares in Chewy,

only 10% of which would be vested