Businessmodel of Tractor Supply

Customer Segments

TSC has a segmented market business model, with customer groups that have slightly different needs. The company targets its offerings at consumers and small businesses.

Its specific customer groups include farmers, horse owners, ranchers, part-time and hobby farmers, suburban and rural homeowners, contractors, and tradesmen.

Value Proposition

TSC offers five primary value propositions: accessibility, pricing, cost reduction, risk reduction, and brand/status.

The company creates accessibility by providing a wide variety of options. Its portfolio includes the following categories: Trailers & Accessories, Lawn & Garden Supplies, Propane & Heating Supplies, Tools & Gun Safes, Fencing Welders & Welding Supplies, Lawn Mowers & Power Generators, Dog/Cat/Pet Supplies, and Clothing & Footwear. TSC also operates veterinarian clinics inside its stores that offer vaccines to pets. It likes to say that customers can buy “everything except tractors” – all products needed to maintain their farms, ranches, homes and animals.

The company offers a pricing value proposition. It maintains an “everyday value price” philosophy, through which it offer its products at competitive prices throughout the year.

The company reduces costs in a variety of ways. It conducts frequent promotions for its merchandise through newspaper circulars, customer-targeted direct mail and email, and digital offerings. Its vendors regularly support the promotions by providing temporary cost reductions and honoring coupons. It also offers volume discounts in several categories, including agricultural, pet and livestock supplies, maintenance, and clothing. This is particularly beneficial to customers who buy products in bulk, such as farmers, fleet operators, organizations, municipalities, and pet agencies.

The company reduces risk by maintaining high quality and safety standards. It operates Tractor Value System (TVS), a business management system that emphasizes continuous improvement through data analytics. Through the program it evaluates business processes and identifies opportunities to lower costs, drive innovation, and enhance effectiveness.

The company has established a strong brand due to its success. It is the largest operator of rural lifestyle retail stores in the U.S., with over 1,575 stores in 49 states. It employs 23,000 workers and generated $6.2 billion in revenues in 2015. It has over 500,000 parts in its inventory and offers an average of 16,000 to 20,000 products per store. Lastly, it is a NASDAQ 100 and S&P 500 firm.

Channels

TSC’s main channels are its stores and its website. The company promotes its offerings through its social media pages, direct mail, e-mail, advertising, and various sponsorships.

Customer Relationships

TSC’s customer relationship is primarily of a self-service nature. Customers buy and use its products while having limited interaction with employees. Its website has a section called “Know How Central” that offers tips in various areas such as Lawn & Garden, Livestock Care, and Fencing.

The site also provides answers to frequently asked questions and access to an e-mail newsletter. Despite this orientation, there is a personal assistance component. The company operates a customer solutions center at its Store Support Center in Brentwood, Tennessee that provides phone and e-mail support.

Key Activities

TSC’s business model entails distributing products from various brands in its stores and offering related services to customers.

Key Partners

TSC’s key partners are the 800 vendors that provide it with the merchandise it needs to stock its stores. Approximately 300 of these vendors accounted for 90% of its purchases in 2015.

It also partners with suppliers that provide it with equipment it needs to run its operations, such as fixtures, signage, and point-of-purchase displays. The company operates “Open Buying Days“, an event through which it invites potential partners to pitch their products to its buyers for consideration.

Lastly, it maintains an affiliate program through which it invites third parties to promote its offerings through their platforms (websites, mobile apps, etc.) in exchange for a commission.

Key Resources

TSC’s main resources are its physical resources, namely the 1,575 stores it operates across 49 states. The typical store has 15,500 square feet of selling space. It also operates distribution facilities in several states, which have a combined capacity of 5 million square feet.

Lastly, it relies on human resources in the form of customer service personnel, store associates, and store team members that provide specialized knowledge (e.g., welders, farmers, and horse owners).

Cost Structure

TSC has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions.

Its biggest cost driver is cost of merchandise sold, a variable expense. Other major drivers are in the areas of sales/marketing and administration, both fixed costs.

Revenue Streams

TSC has one revenue stream: revenues it generates from the sales of its products to customers.