TUTORIAL 5 : Tonic 4 : Retail Marketins Stratew

Case StuAv: fractor S

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rvtosr peopte have never heard of the Tiactor Supply
(TSC)^Company, a Iarge and fast growing ,etrile.
witi,
over $2 billion in annual sales and 700 ,toi.r. Its origins
date to I938, when Charles E. Schmidt Sr. establishJd
mail-order ffactor parts business. pursuant to the success
a skills training classes, (iv) semi-ar-rnual store managers,
ofhisfirstretailstoreinMinot,NorthDakota,heopened
addidonal stores to serve the needs of local farmers. But
eventually the TSC's sales sragnated because small farms
and ranches were being-acqulred by large farming and
ranching corporations. Thesi large agricuitural A.m"s Uuf
supplies and equipment direct-ly fiom manufacrurers
rathert_han through local farm supply stores like TSC.
TARGET MARKET
Since the early 1990's, TSC has targeted a growing group
qf g9ople inrerested in recreational-farminf ana,rl"Jm"f.
Called "sundowners,,,,, lJ- fi:rners,,',, hobbf farmers,,,,,ruo_
ralpolitans," "micropolitans,,,,,gentlemen frrmar,;,, rrrd
"X-urbanites," these-people have turned to farming to es_
cape the hubbub of urban and suburban life. Tfiey are
drawn to w.hat they_believe is a more privare, simple, and
stressfree lifestyle. They typically live on five to 20 acres
in a rural communiry outside a metropolitan area where
they work at a full-time profession, ,r.i.rg ,o*" of their
earnings to kee-p their farm in operationlMany of them
are the sons and daughters of traditional production farm_
ers who inherited the family farm and decided to
t".l
it
running. -fbday less thal I 0 percent of the company,s
cus_
romers classify themselves ,i foll_ti*e farrr.ers o, r"n.h-
ers, and many of its customers tlo not farm at ail.
RETAIL OFFERING
flanagement training_program which covers all aspects of
irs operarions, (ii) product lorowledge modules produced in
conjunction wirh key vendors, (iii) frequent n.,rnrg"*ent
meerings, with vendor product presenrarions, (v) veidor
sponsored-in-store training programs; and (vi) ongoing
product irformation updates at its management headquarl
ters. This extensive training, coupled with a management
philosophy that sffesses empowennent, enables .to..
"rnploy-
ees to assist customers in making their purchase decisions,
and solve customer problenx as they arise. Store employ-
ees wear highly visible red vesrs, aprons o. s*ocki ,.rd
namerags. TSC uses a variety of incentive programs that
provide the opportunity for srore employies to receive
additional compensation based on their team, store, andl
or company performance.
While TSC creates a "hometown farmer,,shopping ex_
p_erience_for customers, there is nothing,.small_iowri, or
"laid back" abou-t its operations and use oftechnology. Its
management information and control systems incllude a
point-of-sale system, a supply chain management and re_
plenishment sysrem, a radio frequency piiking sysrem in
the distribution centers, a vendor p.rr.h.r. oriei.ont.ol
system and a merchandise presentation system. These sys_
tems work rogether to track merchandise from the initial
order through to the ultimate sale.
TSC has a centralized supply chain management team
to focus on replenishment and forecasting and a buying
team that selects merchandise, develops riro.n ..rt
,-rrrI
::t:t'.-rylp:g9::-t:r{p-l:gtnlatg*g!-pyl"h$l-
orders and vendor invoices are transmitted thr.ough
electronic data interchange (EDI) sysrem.
au

The typical TSC store has 15,000 to 40,000 square feet of

inside selling space with a similar amounr of outside space
used to display agriculrural fencing, Iivestock equipment,
VALUES AF*S MISSION
and horse stalls. It tries to locate stores in the primi retaii D^espite changes to the.TSC,s retail strategy in the
pasr
corridor of rural communities two or three counties away 70 years, its values and mission have remained""onrturrt.
th.
from major metropolitan areas. Fifty percent of its stores company's values and mission statement appear on its
Web
are in previously occupied buildings.-For instance, TSC site (Exhibit 1), on cards handed out to ali imployees, and
occupies many of Wal-Mart's vacated discount store loca_ on rhe walls of.every.store. According to TSC *n.rrg.-
tions because the stores are the perfect size and h.ave gar_ ment, the first discussion with new employees centers on
den space for outdoor merchandise. the firm's values and mission because tk" irrm steadfastly
The typical store stocks about 15,000 SKUS, psing a maintains that "being a great place to work enables thl
combination of national and private label brands. TSC company to be a great place to shop and invest.
constantly tests new merchandise programs in its stores.
For instance, based on a successful iestlf expanded cloth-
ing and foorwear caregories, TSC doubled the size of
these areas of the store and added more lifestyle clothes
and workwear for both men and women.
TSC's stores are designed to make shopping an enjoy_
able experience, while at the same time maxiriizirrg salls
and operating efficiencies. Their environment IUo*,
plenry ofspace for individual departrnenrc and visual dis_
plays. Iiiformative signs assjst customers with purchasing
decisions by delineating ',good, better, best; qualitiei
po,inting o:r.the-ir "every day low,,pricing policy, and pro-
viding useful inforrnation regarding proiu.t benefits'and
suggestions for appropriate accessoriis.
TSC emphasizes custorner service. The company tries
to hire store employees rvith previous farming arrd iarr.h_
ing backgrounds. Its training programs inclicle (i) a full