During a recent Goldman Sachs investor conference, analyst Matt Fassler described Tractor Supply as “one of the most unique differentiated growth stories in retail.”
That was the cue for CEO Greg Sandfort to share some of the Brentwood, Tenn.-based company’s insights into its large and growing brand of farm-and-ranch retailing. And he shredded a few myths of rural retailing in the process.
How large? Tractor Supply’s annual sales hit $4.7 billion in 2012 as store count swelled to 1,176. The company sees an opportunity for 2,100 stores in the United States, and it’s working diligently to get there.
Tractor Supply plans to open about 100 new stores this year, and another 100 next year. To illustrate the level of planning involved for that amount of growth, Sandfort said the company already knows who the store manager is going to be for each store opening through the first nine months of next year.
The chain could conceivably grow faster, he said, but why? “As a growth company, you have to feed the beast. The No. 1 thing is you have to be able to service that store base. You have to get ahead of the supply chain formula. You can’t get behind. Because catching up is very painful and very costly.”
Looking in the western region, where the company currently has 42 stores across 11 states, it sees an opportunity for 307. The company’s westernmost distribution center is in Nebraska, and that will have to change. Tractor Supply plans to add a western distribution center in 2015. Beyond that, the company is eyeing the Pacific Northwest for another distribution play.
Through its growth, the company points to its internal processes as a competitive advantage. “We’re really proud of, and stress every day, our ability to execute,” Sandfort said. “Many retailers have great ideas, but one of the things about Tractor is when we say we’re going to go and do something, we go and we do it.”
That discipline is on display as the company rolls out new products, the development of which is considered an important responsibility by Tractor Supply executives.
“It’s our job to bring in new products,” Sandfort said.
At any time and in any store, there’s probably three different types of product testing taking place — not just single SKUs, but 4-ft. sections, “center court” presentations, entire gondolas of product mix or various combinations of the above.
During his presentation, Sandfort explained that Tractor Supply does not mind seeing a test fail. In fact, that’s what the tests are designed to reveal.
The process, which involves 60-plus tests at any given time, “teaches us to fail early, often and cheaply,” Sandfort said. “If the customer doesn’t respond, I don’t want to take it to more than 25 stores if we’ll just have to liquidate it.”
Responding to a question about guns and ammunition — a category not found in Tractor Supply stores, even though a high percentage of its rural customers are known to hunt and fish — Sandfort shared another piece of tried-and-true merchandising philosophy. “If we can’t be meaningful in a category, don’t dabble,” he said.
The company’s strategy for continuous improvement includes another unusual tactic: Three times a year it holds a vendor day open only to new vendors — existing vendors need not apply — meeting with buying teams in half-hour increments. “It can be guys working out of their garage, or maybe some from Asia,” Sandfort said. “It’s another process that allows us to fill the pipeline with newness.”