Homework answers / question archive / Tractor Supply Company (TSC), a large and fast-growing retailer with over $3 billion in annual sales and over 900 stores in 44 states, was the inventor of the “do-it-yourself” (DIY) trend

Tractor Supply Company (TSC), a large and fast-growing retailer with over $3 billion in annual sales and over 900 stores in 44 states, was the inventor of the “do-it-yourself” (DIY) trend

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Tractor Supply Company (TSC), a large and fast-growing retailer with over $3 billion in annual sales and over 900 stores in 44 states, was the inventor of the “do-it-yourself” (DIY) trend. Its origins date to 1938, when Charles E. Schmidt Sr. established a mail-order tractor parts business. After the success of his first retail store in Minot, North Dakota, he opened additional stores to serve the needs of local farmers. But eventually TSC’s sales stagnated because small farms and ranches were being acquired by large farming and ranching corporations. These large agricultural firms buy supplies and equipment directly from manufacturers rather than through local farm supply stores like TSC. TARGET MARKET Since the early 1990s, TSC has targeted a growing group of people interested in recreational farming and ranching. Called “sundowners,” “U-turners,” “hobby farmers,” “ruralpolitans,” “micropolitans,” “gentlemen farmers,” and “X-urbanites,” these people have turned to farming to escape the hubbub of urban and suburban life. They are drawn to what they believe is a more private, simple, and stress-free lifestyle. They typically live on 5 to 20 acres in a rural community outside a metropolitan area, where they work at a full-time profession, and use some of their earnings to keep their farms in operation. Many of them are the sons and daughters of traditional production farmers and inherited the family farm and decided to keep it running. Today less than 10 percent of TSC’s customers classify themselves as full-time farmers or ranchers, and many of its customers do not farm at all. RETAIL OFFERING The typical TSC store has 15,000 to 24,000 square feet of inside selling space and a similar amount of outside space used to display agricultural fencing, livestock equipment, and horse stalls. The company tries to locate stores in the prime retail corridor of rural communities, two or three counties away from major metropolitan areas. Fifty percent of its stores are in previously occupied buildings. The typical store stocks about 15,000 SKUs, using a combination of national and private-label brands. TSC constantly tests new merchandise programs in its stores. For instance, based on a successful test of expanded clothing and footwear categories, TSC doubled the size of these areas of the store and added more lifestyle clothes and workwear for both men and women. TSC stores are designed to make shopping an enjoyable experience and, at the same time, maximize sales and operating efficiencies. Their environment allows plenty of space for individual departments and visual displays. Informative signs assist customers with purchasing decisions by delineating “good, better, best” qualities, pointing out their “everyday low-pricing” policy, and providing useful information regarding product benefits and suggestions for appropriate accessories. TSC emphasizes customer service. The company tries to hire store employees who have farming and

ranching backgrounds. Its training programs include (1) a full management training program, which covers all aspects of its operations, (2) product knowledge modules produced in conjunction with key vendors, (3) frequent management skills training classes, (4) semiannual store managers’ meetings, with vendor product presentations, (5) vendor-sponsored in-store training programs, and (6) ongoing product information updates at its management headquarters. This extensive training, coupled with a management philosophy that stresses empowerment, enables store employees to assist customers in making their purchase decisions and solve customer problems as they arise. Store employees wear highly visible red vests, aprons, or smocks and nametags. TSC uses a variety of incentive programs that provide the opportunity for store employees to receive additional compensation based on their team, store, and/or company performance. While TSC creates a “hometown farmer” shopping experience for customers, there is nothing “small-town” or “laid back” about its operations and use of technology. Its management information and control systems include a point-of-sale system, a supply chain management and replenishment system, a radio frequency picking system in the distribution centers, a vendor purchase order control system, and a merchandise presentation system. These systems work together to track merchandise from the initial order through to the ultimate sale. TSC has a centralized supply chain management team that focuses on replenishment and forecasting and a buying team that selects merchandise, develops assortments, and evaluates new products and programs. Almost all purchase orders and vendor invoices are transmitted through an electronic data interchange (EDI) system. VALUES AND MISSION Despite changes to TSC’s retail strategy in the past 70 years, its values and mission have remained constant. The company’s value and mission statements appear on its Web site (Exhibit 1), on cards handed out to all employees, and on the walls of every store. According to TSC management, the first discussion with new employees centers on the firm’s values and mission because the firm steadfastly maintains that “being a great place to work enables the company to be a great place to shop and invest.”

DISCUSSION QUESTIONS

1. What is Tractor Supply Company’s growth strategy? What retail mix does TSC provide?

2. Why and how has TSC’s target customer changed over time?

3. How does TSC’s retail mix provide the benefits sought by its target market?

4. How vulnerable is TSC to competition? Why is this the case?

5. Why does TSC place so much emphasis on training employees?