Tractor Supply Co. tills rich field as 1998 sales hit $600 million

Discount Store News, July 12, 1999 by Debbie Howell

NASHVILLE, TENN. -- In the survival of the fittest world of category killers and one-stop-shopping behemoths, serving a small customer base might appear to be suicide.

But for Tractor Supply Co. meeting the basic needs of hobby farmers and ranchers has become a steadily growing business.

The 253-store chain in 26 states reported $601 million in sales for fiscal 1998, an 18% increase from the prior year. Net income rose an impressive 25.8% to $14.8 million. All this while its biggest competitor, Quality Stores, has been gobbling up smaller retail farm store chains and increasing its own market strength.

Staying abreast of technology, changing consumer demands and providing excellent customer service are key to the chain's success, according to ceo Joe Scarlett.

"We have carved out a very special niche in the market to take care of the maintenance needs of our customer and we work very hard to be the very best," Scarlett told DSN.

Part of being the best means keeping up with the big players in retailing, who maintain their edge by using state-of-the-art systems and slick marketing Tractor Supply is no different; it implemented SAP retailing systems last year and reels in customer loyalty through print, radio and television advertising with popular celebrity spokesmen.

And like other smart retailers, Tractor Supply recently launched electronic commerce through its 3-year-old corporate Web site, initially offering equine equipment and supplies through a partnership with vendor BMB Tack.

"Our expansion into the world of e-commerce is extremely important for our company," said Blake Fohl, vp, marketing and advertising. "We offer about 15,000 different items in our current locations; we expect to be able to offer our customers more than 500,000 unique items."

The average age of the Tractor Supply customer is 50; 66% are male. Scarlett said the majority are part-time or hobby ranchers and farmers who own a few acres of land and live in a rural area. And route mailboxes in rural areas are expected to grow 40% this decade.

Equine products, fencing and lawn and garden tractors are among the chain's s strongest categories, but the stores also carry a unique assortment of other farm-related merchandise such as veterinary supplies, tractor parts and Westernwear, plus general hardware-type merchandise such as welders, pumps, tools and electrical products.

Because of their unique assortment, including a breadth of lawn and garden tractor parts, the stores do quite well in the vicinity of discount stores like Wal-Mart or home improvement warehouses, Scarlett said, despite their much smaller size at roughly 13,000 sq. ft. of inside selling space.

Even though selling space is limited with such a small box, Scarlett said each year his store managers review the product mix and will change it in the slower months of January and February in response to customer preferences. This year, more than half of each store was remerchandised in hardware, plumbing, electrical, paint, truck accessories, towing accessories, lubricants, electrical fencing and tractor parts. In 1998, the focus was on revamping animal care products.

Some of the specific changes included expanding paint, animal feed, pet products and chain, cable and rope; doubling the equine product assortment; adding ladies' work clothing; and trimming plumbing and electrical assortments.

Tractor Supply also carries a small assortment of candy and snack foods and refrigerated soft drinks near the checkout.

Because employees are encouraged to take risks, Tractor Supply has ventured from its core products from time to time, Scarlett said. Such was the case that resulted in the retailer selling a limited selection of paddle boats and go-carts.

"That's one of the those things where a buyer took a risk. We encourage gutsy moves like that," he said.

Although many retailers have a values system that stresses customer service, Tractor Supply encourages its employees to take "customer satisfaction guaranteed" to its highest level, "We encourage our people to take risks, to make things happen," Scarlett explained.

With healthy sales gains and comp store sales up 11% last year, the chain will continue to grow its store count at a rate of roughly 12%. Scarlett said Tractor Supply plans to open 30 stores this calendar year and 33 in 2000, filling in areas in its existing 26-state market. This year, approximately one-third of the stores will open in Texas and another third in North or South Carolina.