Tractor Supply Sells The ‘Life Out Here’ Dream As More Americans Move To The Country

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has carved out a 7% market share in what investment firm Cowen estimates is a $190 billion highly-fragmented farm and ranch industry in fly-over country that many overlook or ignore.

With fiscal 2022 sales topping $14.2 billion after growing 6.3% year-over-year on top of 16.9% in fiscal 2021, Tractor Supply deploys sophisticated 21st-century retailing strategies to the age-old business of selling feed, equipment and rural lifestyle necessities for the 46.1 million Americans who live in the boonies.

“Tractor Supply’s needs-based, demand-driven business model has stood the test of time,” said CEO Hal Lawton in a statement. “As we celebrate our 85th anniversary this year, our future couldn’t be brighter. With a solid foundation, we plan to build on our momentum in 2023. We believe we have the right strategies to manage the near-term and to deliver long-term compounding growth and value creation.”

The Tractor Supply business model is built on consumers’ deep desire to return to a simpler, more sustainable and self-sufficient lifestyle.

Tractor Supply is just as aspirational as any luxury retailer, but in the other direction, coalescing around the “Life Out Here” lifestyle. It’s a lifestyle that more Americans are searching for as they flee the cities.

Urban Exodus

Christi Korzekwa, Tractor Supply’s senior vice president of marketing before her retirement in mid-2020, explained the “Life Out Here” lifestyle as that of hobby farmers, not the industrial kind, in an interview with fellow Forbes.com contributor Dave Knox.

“Typically, they have some other way that they earn an income, and their passion is really in small farm and ranch, usually one to five acres. But we’re even finding now more and more that in the suburbs, you’ll see these farm and ranch customers,” she said.

The urban exodus began in earnest with the pandemic and shows little signs of moderating. In 2021, the largest number of people left large urban counties for the first time in the past fifty years. According to the Economic Innovation Group, 78 major counties lost nearly one million residents combined.

It’s rebalancing America’s population, split nearly evenly by those who live in urban counties – 32% in large urban counties with more than 250,000 residents and 16% in small urban counties with 100,000 to 250,000 residents – and the other half living in suburban or exurban counties (27%) or rural counties (24%).

Selling A Dream

What’s pulling people to “Life Out Here”? That was the question that Sioux Falls, SD marketing agency Paulsen set out to discover. It conducted research with a small self-selected sample of 326 people who either moved to a rural area in the past two years (one-third of the sample) or currently live in the city but dream of moving there (two-thirds).

“There is an untapped entrepreneurial spirit associated with living in rural America,” Paulsen vice president Mark Smither explained in a presentation for the Association of Equipment Manufactures. “The idea of where we work and where we live has now decoupled.”

Not surprisingly, internet availability is a chief consideration about where ex-urbanites settle to fulfill their dreams. “They believe rural communities offer comparable opportunities for entrepreneurs,” he said.

Another thing pulling them to rural life is the high cost of city living, both in dollars and cents and emotional expenditure. In escaping the city’s noise, crowds and congestion, people can find a larger home for less money and get green space.

But their property-size expectations are modest. A majority (56%) envision a one to five-acre property, and 32% want just a large backyard of less than an acre. Only 12% are yearning for more than five acres.

These practical considerations aside, people are searching for a more fulfilling lifestyle. “They believe the rural lifestyle is more friendly, honest, self-reliant, innovative and environmentally conscious. They’re looking for happiness living in rural America,” Smither explained.

Or, as Tractor Supply’s Korzekwa said, “It means a lot of things to a lot of different people. I might have a little more land. I might have animals like chickens or goats. But it can be a state of mind where you just look for those values from authenticity and that ability to go back to your roots.”

How Tractor Supply Fulfills The Dream

It’s the “Life Out Here” dream that Tractor Supply sells in its 2,000+ stores, so even a customer with a suburban tract house on a third acre of land and their only livestock is a dog can vicariously live it. And the company fulfills that dream exceptionally well.

Being the category leader in its space, Tractor Supply has negotiating power with its vendors so it can be the low-cost provider for its product offerings. And it has a state-of-the-art supply chain infrastructure to keep stores in 49 states stocked, including meeting regional and market-specific needs.

Beginning in 2020, Tractor Supply implemented a major store remodeling effort, called Project Fusion, combined with a Side Lot expansion that adds an outdoor lawn and garden selling spaces and BOPIS drive-through lanes.

Project Fusion enhances the customers’ in-store shopping experience with new fixtures and product adjacencies, and it also improves store efficiency and sell-through.

Pet food gets prime selling space as it is essential to its consumable, usable, edible (CUE) merchandising strategy that drives repeat business. Fusion remodeled stores also offer pet services, including washing, grooming and veterinary services.

At the end of the last year, Tractor Supply had completed its 500^th Project Fusion remodel, and about 1,000 more locations are on tap for a Side Lot buildout.

In addition to its flagship Tractor Supply banner, it operates about 200 small-box Petsense by Tractor Supply stores, specializing in pet food, supplies and pet services in small-to-mid-sized communities. It plans to open 10 to 15 Petsense stores in 2023.

Last year the company acquired the 166 store Orschein Farm and Home mid-western chain for $320 million. After wrangling with the FTC, Tractor Supply had to sell off 85 stores and Orschein’s headquarters and distribution center, but kept 81 stores which it will finish rebranding to Tractor Supply by the end of this year.

Tractor Supply expects to reach between $15 to $15.3 billion in sales this fiscal year on projected 3.5% to 5.5% comparable store growth. And it plans to add 70 new Tractor Supply stores this year.

Getting Customers To Come Back

As important as product is in retail, retailing is really a people business and Tractor Supply serves its people well.

A measure of its success is its Neighbor’s Club loyalty program, which now has 28+ million members and grew nearly 50% in the past two years.

When you think that slightly more than 46 million Americans live in truly rural communities, it proves that Tractor Supply’s reach extends well beyond that.

Reward members get 5% back on what they buy plus financing options for major purchases. And the company also offers a co-branded VISA credit card that adds extra rewards and gives members credit for purchases at other retailers. The company reported over $1 billion in private label card purchases last year. And the reward program is also offered at Petsense.

Neighbor’s Club is pivotal to capturing the spending power and loyalty of next-generation Millennial customers on whom the company’s future depends.

“This group will make up nearly a quarter of the U.S. population by 2032, just ten years from now,” CEO Lawton reported in the recent earnings call. “Our sales comps for Millennials have outpaced non-millennials at Tractor Supply for five consecutive years. Millennials over-index on sales per customer, units per customer and average ticket.”

And whether customers shop online or visit the store, they are served expertly by the company’s 50,000+ team members, who treat customers well because the company treats them well. Tractor Supply was just named to Forbes list of America’s Best Large Employers, rising from number 329 in 2022 to 177 this year.

Lifestyle Is All

Many retailers claim to be a lifestyle brand, but Tractor Supply has earned the title.

“Many of the hobbies pursued by the Millennials fit with our Out Here lifestyle,” Lawton shared. “Tractor Supply enables passions and hobbies pursued by Millennials, whether it is a pursuit as simple as making memories with family and friends or caring for pets and animals, or getting outside to hunt fish or camp, or being more self-sufficient and sustainable.”

And he concluded, “Millennials are increasingly choosing to move out here. This is not just a phenomenon of the pandemic but rather a decade-long trend of net migration out of urban areas that skewed disproportionately among this younger generation.

“The rural lifestyle appeals to Millennials and it offers greater affordability, safety, self-sufficiency at a slower pace, and the ability to pursue hobbies and passions. Tractor Supply serves as a key resource in our local communities for Millennials to come to for trusted advice and expertise.”