Origins
Tractor Supply Company was founded in 1938 by Charles E. Schmidt as a mail order business distributing machinery and parts to farmers. It is an 85-year-old business.
In the 1930s, during the great depression, farmers were short of cash and unable to buy new equipment. However, they had to buy replacement parts for ageing tractors. Schmidt’s strategy was to run a low-overhead, mail order operation supplying essential parts and passing the savings to customers via lower prices.
This was an early implementation of a business model Nick Sleep calls Scale Economics Shared (SES) which we discussed on this Substack, in a note on Amazon which is here. SES is a strong long -term business model as it creates a positive feedback loop of ever-lower prices that competitors with less scale are unable to match. Amazon, and Costco have both used SES to great success.
In 1939, Tractor Supply opened its first retail location in Minot, North Dakota, a rural town fifty miles south of the Canadian border. This store performed well and led Mr. Schmidt successfully replicated the same model in new locations. Essentially, this replication is what TSC has been doing ever since.
First Tractor Supply store in Minot, North Dakota
Source: The Rational Walk
After World War II, farm consolidations led to a sharp reduction in the number of farms. TSC responded by moving store locations closer to cities and change its retail brand name to TSC which now stood for Town, Suburb and Country. It was a diversification away from its Farm and Ranch roots.
In 1969 Schmidt sold the business National Industries. National Industries was multi-division conglomerate which just milked TSC for cash. After a few years, TSC began losing money. TSC was sold to another conglomerate, Fuqua Industries.
Fuqua sent in Tom Hennesy to fix it or sell it. Hennesy became CEO and succeeded in returning the company to its roots. He instituted everyday low prices, made great customer service a priority, and refocused the target customer back to farms, ranches, and rural living. The losses were eliminated by 1982 and Hennesy led a management buyout in 1983.
After a decade of progress returning the company to its profitable growth trajectory, Hennesy took TSC public for the second time in 1994.
TSC Today
Today TSC owns and operates over 2,414 stores in 49 states under the names Tractor Supply Company and Petsense by Tractor Supply Company. Over the past five years, the number of stores has grown strongly, from 1,940 stores at the end 2018 to 2,414 stores (2,216 TSC and 198 Petsense retail stores) at the end of 2023. This is an expansion of about 4% per year. The company has 50,000 employees or team members as they call them. TSC has no collective bargaining agreements. TSC believes there is scope to increase to 3,000 stores, 25% above the current number.