The most immediate threat to Chewy's margin and market share is the intensifying price competition from Amazon and Walmart, which are leveraging their scale, logistics infrastructure, and Prime/Plus membership ecosystems to capture pet consumables spending. Amazon launched its private-label pet food brand Wag in 2018 and has steadily expanded its pet assortment, leveraging its 180 million U.S. Prime members and Subscribe & Save program to compete directly with Chewy's Autoship. According to Packaged Facts, Amazon holds an estimated 45-59% of the U.S. online pet market — a share that exceeds Chewy's estimated 41% — and Amazon's pet supplies category generates over $800 million in annual revenue. Walmart, with its 32.5% share of online pet sales, has added pet telehealth services, dedicated pet centers, and same-day curbside pickup that directly challenge Chewy's convenience value proposition. In a 2024 Earnest Analytics study, Chewy lost 7.2% of customers, with 49.6% citing price and 12.5% citing delivery concerns as the primary reasons for defection — and those customers migrated primarily to Amazon (63.8%) and Walmart (32.5%).
Macroeconomic headwinds present a structural challenge. CEO Sumit Singh acknowledged in the Q4 FY2025 earnings call that the company anticipates low single-digit industry growth in FY2026, with little or no contribution from pricing. Pet household formation — the rate at which new households acquire pets — has not rebounded to pandemic-era levels, limiting the pool of new customers entering the market. The U.S. pet industry grew to $136 billion in 2023, but growth is decelerating as post-pandemic spending normalization continues. Chewy's FY2026 revenue guidance of $13.6 billion to $13.75 billion (8-9% growth) assumes the company can outgrow the industry through market share gains and customer spend expansion, but if a recession causes consumers to trade down to lower-priced brands or reduce discretionary pet spending, this assumption could prove optimistic.