TSC: A Radical Under the Radar

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For the past three years, the Robin Report has recognized retail brands that have had exceptional results each year, powered by teams that are redefining innovation and reshaping the future of retail.  We have worked in collaboration with SAP to focus on identifying radical thinkers and doers (innovators and entrepreneurial leaders that are clearly driving the major transformation and have risen to the challenges of delivering high performances during an unprecedented global pandemic. Tractor Supply Company is a role model for other retailers and a poster child for putting customers first.

[callout]Many of TSC’s employees are also customers, living in rural and exurban communities, where delivering livestock calves in the middle of the night is not unusual.[/callout]

From 1938 until the beginning of January of 2020, just before Covid-19 struck, Tractor Supply Company could arguably have been called retailing’s best kept secret. Robin Report contributor, Warren Shoulberg, described TSC this way: “Even if you knew of TSC, you’ve probably never been in one of their stores and most likely envisioned it as something along the lines of a cross between a farm vehicle repair garage and Drucker’s General Store on the old Green Acres TV show.”

Its fiercely loyal customers know the true value of TSC and interact with the brand on a personal basis. TSC’S relationship with its customers redefines “experience.” Many of TSC’s employees are also customers, living in rural and exurban communities, where delivering livestock calves in the middle of the night is not unusual. And TSC’s managers go beyond the call, helping out neighbors by delivering critical supplies on an emergency basis.  In my interview with CEO Hal Lawton, LINK he explains TSC’s core principles and mission, personifying the humane, empathetic nature of the brand. Compassion and respect ring true, and the TSC community is real and meaningful.

Hal Lawton was named new CEO in January 2020, following C-level stints at eBay, Home Depot and Macy’s. He was running when he hit the ground at TSC. The business was solid, but Lawton brought skills with him that would take TSC to the next level and position it away from “under the radar.” Almost overnight, the slogan “life out here” became the core brand positioning of an aggressive marketing campaign.

Lawton’s past roles gave him deep knowledge about technology and how to use it to drive personalization and localization through AI and superior understanding of data analytics. An immediate target was TSC’s very low online sales of roughly one percent.  There was nowhere to go but up.

The results were fantastic. Tractor Supply Company recorded triple-digit growth in ecommerce sales in 2020. That significantly increased ecommerce\’s contribution to its total sales. Brick-and-mortar sales growth also accelerated despite the pandemic, as the company\’s focus on livestock and pet products, hardware, and outdoor-focused seasonal items lined up well with consumers\’ pandemic-era spending priorities. And strong demand helped Tractor Supply Company cut back on discounting in 2020, boosting gross margin and overall profitability.

Lawton says, “The strength and resilience of our Team Members was my biggest insight from our experience with the pandemic. Throughout the pandemic, our 45,000+ Team Members – including nearly 13,000 who are new to the Tractor Supply family in the last 20 months, demonstrated courage, determination, and passion to be the dependable supplier to our customers. They kept our doors open, made sacrifices, and worked harder than ever to meet our customers’ needs and take care of each other. They lived our Mission and Values and persevered through record-breaking sales to be there for our neighbors.”  He adds that the biggest surprise about his customers during this challenging time was, “With increased sales among existing customers, new customers, and reacquired customers, we’ve had more customers shop with us than ever before since the pandemic began. The self-reliant lifestyle is becoming more and more ingrained in our new and existing customers’ lifestyles. They are adopting new hobbies like backyard poultry, hunting, gardening, and bird feeding. We are also seeing growth in our millennial customers as there has been a rural revitalization.  It is an exciting time.”

Today, the publicly-traded company has annual revenues of over $10 billion, a 27 percent increase over $8 billion in 2019. The brand has over 1900 stores in 49 states. TSC has a product assortment that runs from farm supplies, animal food and power tools to lawn and garden supplies and apparel (10 percent of its sales, by the way), the company website says that it sells (ironically), “everything except tractors.”

With a stronger digital business and rapidly rising brand awareness, Tractor Supply Company is poised to build on its 2020 successes. The retailer has opened about 80 new stores annually in recent years. It could continue at that pace for many more years by pushing further into suburban areas and expanding its presence in underpenetrated regions. Meanwhile, strong customer loyalty and the company\’s broad merchandise selection give it a big opportunity to grow wallet share among current customers.

TRC has deeply ingrained values as Lawton explains, “Being passionate about Life Out Here also means committing to the necessary steps to preserve this way of life for future generations. Back in September of this year, we announced new Environmental, Social and Governance (ESG) goals that are the next step in our journey to help preserve and protect Life Out Here.  Our new targets focus on achieving net-zero emissions across our operations by 2040 and the establishment of tangible goals for our Diversity, Equity & Inclusion practices. These new goals are meaningful to our business and are designed to drive positive environmental and social impact within Tractor Supply and our communities. As a purpose-driven company, our ESG goals are a natural extension of our Mission and Values in action as we work to help ensure a sustainable future for all our stakeholders.”

Looking forward, he sees the strongest headwinds in the industry as, “The retail cost environment is something the entire industry is working through right now. The cost environment remains elevated across imports, domestic freight, commodities, and labor wages. Our merchant team has been aggressively advocating for our customers and our supply chain teams are navigating this challenging and disruptive environment very well. Finding offsets and productivity measures is our top priority to advocate for our customers and be the everyday low price they count on to live life out here.”

Matt Laukaitis, EVP and Global GM, SAP Consumer Industries says “Tractor Supply’s obsession with putting the customer first continues to pay dividends for the company.  Customers see TSC as a dependable supplier and partner, regardless of which channels they choose to engage with them. TSC’s continued execution on its core values has driven incredible growth and deep customer loyalty, exactly what we’d expect to see from a Retail Radical.”

When the Covid pandemic brought the economy to a halt, TSC remained relevant and responsive increasing sales and customer loyalty. This accomplishment blending high performance with compassion reflects the work of a radical retail leader.  TSC soundly deserves a place in the pantheon of The Robin Report Retail Radicals.

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