Recommended Reading: Happy Customers Push Chewy to Profits

This is part of a series of posts, written with my Bain colleague Maureen Burns, exploring the pioneering firms that are implementing Net Promoter System principles to make “digital frontline” experiences more human and delightful.

In our last post, we highlighted Chewy, the online pet supply retailer with a Net Promoter Score that crushes Amazon’s by 28 points in the pet category. Promoters build strong businesses, so while it may have been a surprise to Wall Street, it was no surprise to us that Chewy blew away earnings expectations when it reported earnings for the quarter ended Jan. 31, including its first quarter of positive net income, an important milestone for any e-commerce start-up. 

Sales grew almost 40% year-over-year, and while Chewy most certainly benefited from the increase in pet ownership driven by Covid-19, there was ample evidence that this performance was no pandemic fluke. 

Chewy’s net sales per active customer increased from $360 in 2019 to $372 in 2020, and engagement from new customers was 12% higher than previous groups, while marketing expenses as a percentage of revenue declined by almost 2 percentage points. Chewy also reported investing $60 million in higher wages and increased benefits for its employees.  

Highlighting these specific data points suggests that Chewy (like Amazon) understands that the surest path to financial success is delighting customers with the products and services they need, to the point that they want to give you more of their business.  

The fact that loving your customers goes hand-in-hand with financial performance hasn’t been lost on investors. Over the past 12 months, Chewy’s stock performance has been nearly three times that of the S&P 500.   

“Chewy Announces Fiscal Fourth Quarter and Full Year 2020 Financial Results,” investor.chewy.com. 

“Chewy Turns Quarterly Profit as Covid-19 Boosts Online Sales,” by Maria Armental, The Wall Street Journal.

“Chewy Q4 2020 Earnings Call Transcript,” Fool.com. 

I hope you’re enjoying reading this newsletter as much as I am putting it together. As a big believer in the word-of-mouth recommendation, I hope you’ll consider spreading the word about Customer Obsession by sharing the newsletter’s link with your LinkedIn network.

Thank you,

Fred