What We'll Cover

360 VIEW TRACTOR SUPPLY COMPANY ractor Supply Company, a long-time What We’ll Cover specialty retailer, has emerged as a retail innovator and is evolving as it goes. T The company focused for decades on 38 The History of Tractor Supply 34 selling agricultural supplies to farmers, but now offers many of the same products carried by hardware stores and home centers to people choosing a rural lifestyle. 40 A Look at the Company Now6 This year, Tractor Supply reported that only a small fraction of its customers farmed full-time, and the majority are people who favor an increasingly popular 42 Looking to the Future38 lifestyle, which even in urban areas is grounded in sus- tainable, small-time farm practices and homesteading. While big-box stores’ growth seems to have crested, 44 SWOT Analysis Tractor Supply continues to boom. Its stores, which average about 16,000 square feet, are small enough for quick penetration into new markets. The company’s 45 Financial Trajectory: Growth shift from focusing on career farmers as customers has led to rapid growth within the past 18 years. In that time, Tractor Supply’s store count went up nearly 46 Exclusive Q&A with Tractor Supply 500 percent to 1,400 locations, with no stop in sight. President Greg Sandfort On the following pages, we will look at how Tractor Supply grew from a small specialty supplier to a rap- idly growing retail chain that sells a lifestyle. We will 48 Other Key Players in the Industry also analyze what makes Tractor Supply successful so you can learn from the company. To offer further understanding of the rural lifestyle industry, we also The information in this 360 overview was gathered by Hardware Retailing Photo Credit: Tractor Supply Co. highlight other large retail operations. staff from a variety of resources that are attributed throughout. 36 HARDWARE RETAILING | June 2015 June 2015 | HARDWARE RETAILING 37 360 Tractor Supply Company’s Humble Beginning Today’s largest operator of retail farm and ranch In 1967, Tractor Supply went international, stores in the U.S. is on a fast track. Booming sales opening two subsidiaries in Canada, increasing to and ambitious growth initiatives are propelling five stores one year later. Tractor Supply Company forward into neighbor- In 1969, National Industries bought Charles hoods and rural communities across the country. Schmidt’s controlling interest in the company, But before we look to Tractor Supply’s successes which came at a surprise to executives and started and future plans, we’ll review the company’s a downward turn for the company. An unclear modest beginning as a mail-order catalog company. vision—the result of acquisitions, five different In 1938, Charles E. Schmidt Sr. of Chicago presidents, two ownership groups and inventory started selling tractor parts by mail to American that strayed from its traditional niche and family farmers. confused employees and customers—resulted in “Charlie Schmidt saw an opportunity for a Tractor Supply losing $13 million in 1980. mail-order business to supply fairly priced tractor After this loss, which was substantial for replacement parts to frugal farmers whose only a company earning less than $100 million in other option was to pay a premium to the dealer or sales, Tractor Supply made changes that led to a manufacturer of their equipment,” writes Nelson break-even year in 1982. The company has been Eddy in the book Work Hard, Have Fun, Make profitable every year since. Money: The Tractor Supply Story. That first year, the At the end of 1982, Tractor Supply put company sold $50,000 in tractor supplies by catalog. ownership back in the executives’ hands. For The catalogs listed 2,000 products on 24 pages. the first time in 25 years, “Tractor Supply wasn’t Within a year, Tractor Supply had opened its either a publicly held company or a publicly first retail store in rural Minot, North Dakota, in traded company,” according to Eddy. an effort to grow the business and target potential A new leadership team, a clear vision and a customers better. return to the farm-store niche and to the people At this time, Tractor Supply’s customer base who served the land kept the business growing. was 90 percent farmers, Eddy says, but after World Tractor Supply incorporated in 1982 in Delaware War II, the company moved closer to cities due to and again went public 12 years later. In 1994, farm consolidations and growing manufacturers. Tractor Supply stock began trading on the Nasdaq This move came with a name change to TSC. under the TSCO ticker symbol for $20 per share. At the time, Tractor Supply also became pub- As of 2014, Tractor Supply operated 1,382 stores licly traded on the Over-The-Counter Market on in 49 states, opening 107 stores in 2014 alone. All January 14, 1959, with an initial offering of $12 a of these stores are company-owned and -operated. share. In less than two years, Tractor Supply was Tractor Supply’s headquarters, or store support traded on the New York Stock Exchange. center, is located in Brentwood, Tennessee. Three Quick Facts About Tractor Supply Company 1 2 3 Tractor Supply operates under Mission statement: “Work In 2014, comparable-store three different store names hard, have fun and make sales for Tractor Supply in the U.S.: Tractor Supply money by providing legendary increased 3.8 percent over Company, Del’s Feed & Farm service and great products at 2013, for a 21st consecutive Supply and HomeTown Pet. everyday low prices.” quarter of growth. Source: Tractor Supply Company 2014 Annual Report 38 HARDWARE RETAILING | June 2015 360 A Closer Look at Tractor Supply Company Customers executive vice president of merchandising and Logistics Tractor Supply’s customers are home, land, marketing, in a 2014 earnings call. “We are A substantial investment for Tractor Supply has pet and livestock owners, as well as DIYers who continuing to refine what we’re doing,” he says. been in logistics. Currently, Tractor Supply owns “live a conservative and self-reliant lifestyle,” Therefore, products will be different in new seven distribution centers with locations in Geor- according to the company’s 2014 Annual Report. stores opening out west than those in the north- gia, Indiana, Kentucky, Maryland, Nebraska, Texas The customer base is also loyal, consistent and west. For example, a store in Utah carries bee- and Washington. Combined, these distribution growing, the company says. keeping supplies. centers have a capacity of 4.2 million square feet. “We went out there; we researched the market,” Construction is under way for an eighth dis- Product Categories Barbarick says. “We saw it in a lot of our com- tribution center in Casa Grande, Arizona, which Tractor Supply is the largest seller of products petitors and thought, well, we better put our best will be completed by the end of 2015. This center for the rural lifestyle, and the company has a foot forward when we move out there.” will support Tractor Supply’s western expansion. multitude of core categories to choose from. Trying various product assortments is part Nearly 70 percent of the company’s merchan- of Tractor Supply’s test-and-learn philosophy, dise flows through these centers, while vendors These categories are: which company leadership describes in numer- deliver the other 30 percent of products directly • Equine, livestock, pet and small animal ous company reports. to the stores. products, including items necessary for their health, care, growth and containment. Vendors Customer Service • Hardware, truck, towing and tool products. Tractor Supply uses both domestic and inter- Tractor Supply prides itself on its customer ser- • Seasonal products, including lawn and garden national vendors. It purchases products from vice. The company states in its annual report that Photo Credit: Tractor Supply Co. items, power equipment, gifts and toys. 800 vendors and, according to its 2014 Annual it is “committed to providing our customers reli- • Maintenance products for agricultural and Report, no single vendor represents more than able product availability and a high level of in- rural use. 10 percent of its inventory purchases. About 300 store service through our motivated, well-trained Omnichannel is an initiative that Tractor Supply • Work/recreational clothing and footwear. core vendors accounted for nearly 90 percent of store team members.” will continue to invest in. company purchases made in 2014. Tractor Supply strives to hire employees with “We ship about 30 percent of our products to Tractor Supply is also focused on localizing its Tractor Supply also offers private-label products farming and ranching backgrounds. the store, which… we think is great because it product mix to cater to regional needs. As more made to provide alternatives to national brands. To maintain employees who are courteous, will take our customer to the store and could stores are added out west, with locations farther Selling these exclusive brands “helps provide highly motivated and well-trained, Tractor lead to potential increase in sales at the store apart, Tractor Supply is trying to offer unique value for our customers and positions us as a Supply has implemented comprehensive training level,” Tony Crudele, executive vice president product mixes specific to locations. destination store,” according to the company’s programs. The programs include a thorough and CFO, says in the company’s fourth-quarter “You’re going to see a lot of localized 2014 Annual Report. In 2014, 31 percent of total on-boarding process, new store training, customer 2014 earnings call. products,” according to Steve Barbarick, sales were from the company’s private-label brands. service and selling-skills training, product knowledge training, management training and Brand Percentage of Sales by Each Major Product Category leadership development programs.

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