By Neil Saunders
In-store kiosks offer Tractor Supply’s full product range, improving conversion rates and customer satisfaction. It also allows Tractor Supply to optimize ranges and better capitalize on sudden weather changes.
As a standalone set of results, today’s numbers from Tractor Supply are strong. But when set against the robust trading from last year—when net sales rose by 11.6% and comparables by 6.6%, this is an exceptional performance. The bottom line result was also pleasing, with net income rising by a solid 27.1%.
Tractor Supply is being aided by the stronger economy. Demand from outdoor hobbyists and consumers with smallholdings is up sharply, as is demand from the professional segment of the market. The weather also played ball, with good summer conditions helping to fuel outdoor activity and, therefore, purchasing. But it would be unfair to attribute the entirety of the firm’s success to prevailing macroeconomic or climatic conditions. Tractor Supply has done much to engineer good numbers.
A clear success story has been the investment put into the online proposition and the supporting supply chain. With an easier-to-use website and mobile site, online has become a key channel for research and order placement, both of which help busy customers save time. New simple solutions, like the ability to register to make tax-free purchases, appeal to the outdoor business community.
Just over 70% of online orders are fulfilled in Tractor Supply stores. This is convenient for the customer, is cost-effective for the company, and helps drive incremental purchasing. It also demonstrates the importance of physical shops in the rural lifestyle segment—something that online-only competitors will struggle to imitate.
Tractor Supply has also used online functionality to increase the appeal of its stores. Kiosks offer the full range of 100,000 products (the average store holds 15,000 to 20,000 items). This has helped to improve both conversion rates and customer satisfaction. It also allows Tractor Supply to optimize ranges and better capitalize on sudden changes in weather, which often occur during the overlap between seasons.
The company has built up its Neighbor’s Club loyalty program, which is on track to reach some 10 million members by the end of this year. This is impressive growth given that the program is just over a year old. Spend among members is high, and there is also a strong engagement rate. This allows Tractor Supply to forge close links with its customer base, making it the destination of choice for outdoor products.
Positive changes also were made on the merchandise front. Increased penetration of Tractor Supply’s own label in feedstuffs has helped margins. Selective expansion of popular lines like Wrangler work clothing has boosted sales. And a strong assortment across areas like winter heating products shows a determined attempt to maximize seasonal opportunities.
Tractor Supply is on the front foot and is increasing its appeal in the rural lifestyle niche.
Neil Saunders is managing director of research firm GlobalData Retail.