It’s not just Tractor Supply that’s riding a wave of growth in the sector for hobby farmers and backyard ranchers.
This is not an article about Tractor Supply.
But let’s face it. You can’t write about the farm-and-ranch retail sector without referring to the Brentwood, Tenn.-based giant either as a competitor or as a role model.
“Tractor,” as competitors invariably refer to the 1,300-store chain, has very publicly mowed down obstacles to growth during the housing market downturn. The company points to its knowledge of its customer and its execution in support of that customer as two ingredients of its success. But Tractor Supply is not alone. Across rural America, and in some cases encroaching on metropolitan areas, the farm-and-ranch supply retail sector is on a roll.
Peter Benedict, managing director of Baird Research, says his company’s proprietary research shows a healthy environment for the rural retailer serving the hobby farmer, the backyard rancher and the horse-owning rural lifestyle.
“This is a good customer demographic to serve,” he told HCN. “These [customers] tend to have slightly above-average incomes combined with slightly below-average costs of living. They tend to be pretty fiscally conservative, so they didn’t get way out over their skis with a lot of debt and then had to retrench. It’s a resilient customer demographic. I would say that in general it’s good to be in farm and ranch.”
He added, with a nod toward Tractor Supply: “but certainly better for some than others.”
At the recent True Value Reunion, FRAP — farm, ranch, auto and pet — was one of the show highlights, as the co-op works to expand the segment. The business generated about $12 million in new wholesale sales for True Value, a 13% boost over 2012.
No matter how good the demographics are, a retailer in 2014 must execute, must stay ahead of the curve and must adapt continually to customer trends. Those concepts are embraced by high-performing farm-and-ranch companies in boardrooms well beyond Brentwood, Tenn.
Case in point: Marshall, Minn.-based Runnings. “The FR sector in general has done very well over the last five to 10 years,” said Dennis Jensen, director of marketing for the 30-store chain.
“We really consider ourselves pretty fortunate to make it through times when many retailers were negatively impacted by a soft economy.”
He said the company was insulated from the housing market downturn. Another secret to the sector: the products are necessities. “They need these things to run their life,” he said.
By the same token, Runnings, a member of the Do it Best co-op, is not waiting for customers to come to them.
“Our team has worked very hard over the last several years to evolve our brand,” Jennings told HCN. “To not only be known for farm merchandise but to be a retail destination known for clothing, for footwear, tools, pet, lawn and garden, toys and specifically the sporting goods category is one that is exploding for us. We offer hunting, fishing, archery supplies, and some stores under the Runnings brand carry guns, so we’ve really expanded our brand position so that it’s farm and home, and so much more.”
Even more dramatic is the footprint, both in terms of store size and geography. In Rapid City, S.D., a 34,000-sq.-ft. Runnings reopened in a converted Sam’s Club. It’s now 119,000 sq. ft. A similar story took place in New Ulm, Minn. And the company is planning a move East, where it purchased stores formerly owned by mass retailers.
Five Runnings are in the works to open in New York State and one in New Hampshire in the fall of 2014 and spring of 2015.
“We believe that because of the landscape out there in terms of the climate and type of customers, we feel we could be very competitive,” he said.
Another major initiative is e-commerce, which Jensen says will be up and running in September.
Tom Mahlke, CEO of St. Paul, Minn.-based Mid-States Distributing, a co-op, buying group and major farm-and-ranch player, said the entire channel — not just Tractor Supply — is experiencing “very good growth.”
Farm-and-ranch stores are getting larger. They’re adjusting to their customers’ needs. Technology is advancing efficiencies in the back room. And farm-and-ranch stores are going to places where they simply haven’t been before. Maybe not Midtown Manhattan, but in suburbs that one might not consider rural.
Founded in 1954, Mid-States has more recently seen members across the board step up performance in categories, such as tools, lawn and garden, and pet food and products. “They have continued to evolve the model,” he said.
“Our members continue to grow and thrive,” he said. “Ultimately, understanding your consumer better than the other guy is core to their success.”
Twenty years ago, Mid-States’ footprint was about 350 stores. It’s now about 750. That’s still a little more than half of the footprint of Tractor Supply, a retailer that Mahlke credits for “creating awareness and validity” for the farm-and-ranch supply channel. He added: “But when Tractor opens a store, that’s competition.”
Perhaps the biggest competitive advantage for the independent farm-and-ranch retailer, said Mahlke, is local knowledge that comes from being immersed in the community. “These independents are community-minded,” he said. “They understand their business. They understand and know their markets and consumers. They’re very formidable competitors.”
The growth of D&L Farm and Home supports the theory that farm and ranch is an increasingly sophisticated retail channel. The five-store retailer, based in Aubrey, Texas, is a case study for Epicor’s Mobile manager system.
“It is invaluable in moving inven tory between stores and keeping up with that,” said Lezlie MacElroy, treasurer of D&L Farm and Home. “It also helps our inventory ordering and control and making sure that maximizes our investment.”
Speaking from the Purina Expo, MacElroy said the store is equally invested in keeping up with social trends. “We’re seeing a couple different movements,” she said. “We see a lot more customers becoming a lot more interested in organic and holistic products. That’s a big interest.”
Another one is chicken ranching. “What has grown substantially for us in the last few years is in chickens. Selling chickens. People want to raise their own and get their own eggs.”
Perhaps at the farthest end of the spectrum from Tractor Supply, single-unit Burns Feed Store in Gresham, Ore., believes it’s “large enough to supply your needs and small enough to care.”
Rawley Burns, a Farm Mart store and a Horizon Distributing customer, says one of the biggest decisions for the store was to remodel. “We had a gravel parking lot. We had aisles too narrow, poor lighting and low ceilings. We bit the bullet and remodeled.”
Updating the product mix is just as important. Burns described his horse tac area (saddles and related products). “We went to a couple of really good high school riding teams and asked, ‘What do we need that we don’t stock that you’d be interested in?’ And all these girls said you need more color and animal prints and zebra prints.
“You need to listen to your customer,” he said. “You have to be willing to adjust and change.”