1
00:00:10,160 --> 00:00:13,440
Speaker 1: Hello, and welcome to another episode of the ad Thoughts Podcast.

2
00:00:13,520 --> 00:00:14,960
Speaker 1: I'm Tracy Alloway.

3
00:00:14,600 --> 00:00:15,760
Speaker 2: And I'm Joe Wisenthal.

4
00:00:16,200 --> 00:00:19,000
Speaker 1: Joe, did you enjoy the tomatoes that I brought you?

5
00:00:21,040 --> 00:00:24,759
Speaker 2: For listeners? Tracy has an amazing tomato garden that she

6
00:00:24,840 --> 00:00:27,840
Speaker 2: posts pictures of and I've become tomato obsessed over the

7
00:00:27,920 --> 00:00:30,800
Speaker 2: recent years, and today she finally brought me in a

8
00:00:30,840 --> 00:00:33,199
Speaker 2: box of tomatoes. I haven't eaten them yet as of

9
00:00:33,240 --> 00:00:36,400
Speaker 2: this recording, but Tracy, they look absolutely amazing.

10
00:00:36,600 --> 00:00:37,000
Speaker 1: Thank you.

11
00:00:37,360 --> 00:00:40,080
Speaker 2: It looks so good. They exceed the hype.

12
00:00:40,360 --> 00:00:43,200
Speaker 1: Let me tell you a lot of equipment goes into

13
00:00:43,240 --> 00:00:45,960
Speaker 1: growing tomatoes. So you look at the tomato and you think,

14
00:00:46,040 --> 00:00:50,000
Speaker 1: I have probably spent maybe fifty bucks in tomato cages

15
00:00:50,360 --> 00:00:54,280
Speaker 1: and fertilizer and compost in order to grow that one tomato.

16
00:00:54,520 --> 00:00:55,840
Speaker 2: How many hours of your labor?

17
00:00:56,240 --> 00:00:59,280
Speaker 1: Well I don't count that. My labor is cheap. It's

18
00:00:59,360 --> 00:01:01,240
Speaker 1: free for tomatoes.

19
00:01:01,280 --> 00:01:03,680
Speaker 2: But yes, it's like gardening. All that stuff is a

20
00:01:03,720 --> 00:01:06,280
Speaker 2: lot of gear. And one thing I know about you, Tracy,

21
00:01:07,680 --> 00:01:09,960
Speaker 2: just and this, is that none of that as a compliment,

22
00:01:10,160 --> 00:01:12,880
Speaker 2: which is that if you get into something like growing tomatoes,

23
00:01:13,000 --> 00:01:15,200
Speaker 2: you take it very seriously. You're not just going to

24
00:01:15,280 --> 00:01:17,280
Speaker 2: like throw some seeds in the ground to do what happens.

25
00:01:17,440 --> 00:01:19,440
Speaker 2: You're gonna like buy all the right gear for it.

26
00:01:20,000 --> 00:01:22,560
Speaker 2: See what the you know, the frames and all that.

27
00:01:22,640 --> 00:01:24,320
Speaker 1: I kind of did just throw the seeds in the ground,

28
00:01:24,319 --> 00:01:27,160
Speaker 1: although actually I grew them. That's not true. I grew

29
00:01:27,200 --> 00:01:29,800
Speaker 1: I started them in an arrow garden in the kitchen

30
00:01:30,040 --> 00:01:32,640
Speaker 1: they're in like February, and then I planted them in

31
00:01:32,680 --> 00:01:35,160
Speaker 1: the ground. But my point is that there are a

32
00:01:35,200 --> 00:01:38,080
Speaker 1: lot of people nowadays who are into growing their own

33
00:01:38,120 --> 00:01:42,360
Speaker 1: food or maybe having their own chickens for eggs. Lots

34
00:01:42,400 --> 00:01:46,640
Speaker 1: of people have pets, including myself, and of course there

35
00:01:46,640 --> 00:01:51,360
Speaker 1: are businesses who cater to this particular type of thing, right.

36
00:01:51,280 --> 00:01:54,080
Speaker 2: Not me because I don't have a garden or I

37
00:01:54,120 --> 00:01:57,320
Speaker 2: don't have chickens or anything. But yes, absolutely, the sort

38
00:01:57,320 --> 00:02:01,240
Speaker 2: of small farms, large gardens, et cetera sort of seems

39
00:02:01,280 --> 00:02:05,960
Speaker 2: to be a booming era area hobbyist chicken owners like you.

40
00:02:06,120 --> 00:02:08,720
Speaker 2: Maybe one day in the future and now there's probably

41
00:02:08,720 --> 00:02:10,079
Speaker 2: a lot of money to be made and selling to

42
00:02:10,120 --> 00:02:10,640
Speaker 2: people like you.

43
00:02:10,919 --> 00:02:13,400
Speaker 1: Yeah, I am still very focused on my dream of

44
00:02:13,480 --> 00:02:16,919
Speaker 1: declaring egg independence one day, but in the meantime, do

45
00:02:17,000 --> 00:02:19,560
Speaker 1: you remember a couple months ago we were speaking with

46
00:02:19,600 --> 00:02:24,440
Speaker 1: Samuel Ryans from Corbu and he mentioned a specific company

47
00:02:24,480 --> 00:02:28,320
Speaker 1: that fits perfectly into this particular business. He talked about

48
00:02:28,360 --> 00:02:31,520
Speaker 1: Tractor Supply and he called it one of the most

49
00:02:31,560 --> 00:02:34,040
Speaker 1: interesting retailers on the planet. Right.

50
00:02:34,160 --> 00:02:37,480
Speaker 2: I've always been curious about this company because, I mean,

51
00:02:37,560 --> 00:02:40,480
Speaker 2: it's one of the most remarkable stocks. Several years ago

52
00:02:40,520 --> 00:02:43,280
Speaker 2: as a one dollar stock. As of today, when we're

53
00:02:43,280 --> 00:02:45,880
Speaker 2: recording this on August fifteenth, it's a two hundred and

54
00:02:45,919 --> 00:02:49,640
Speaker 2: twenty two dollars stock, one of the huge sectoral winners.

55
00:02:49,760 --> 00:02:52,240
Speaker 2: But also it's one of these companies where if you

56
00:02:52,280 --> 00:02:55,000
Speaker 2: live in New York City you probably never encounter them,

57
00:02:55,240 --> 00:02:58,840
Speaker 2: But for much of the country, it's just this massive

58
00:02:59,160 --> 00:03:04,080
Speaker 2: retail brand that's sort of thriving and taking over.

59
00:03:04,360 --> 00:03:07,280
Speaker 1: Yeah, it's sort of one of those sleeper hits, kind

60
00:03:07,280 --> 00:03:10,760
Speaker 1: of like Monster Beverage or Domino's Pizza. I'm happy to

61
00:03:10,800 --> 00:03:13,160
Speaker 1: say where I live in Connecticut, there is indeed a

62
00:03:13,200 --> 00:03:16,120
Speaker 1: Tractor Supply store, and I enjoy going there. They let

63
00:03:16,600 --> 00:03:19,280
Speaker 1: dogs in on a leash, so Pablo gets to come

64
00:03:19,320 --> 00:03:22,079
Speaker 1: with me and sniff all the dog treats and look

65
00:03:22,080 --> 00:03:24,400
Speaker 1: at the Baby Chicks and things like that. It is

66
00:03:24,440 --> 00:03:25,400
Speaker 1: a fun experience.

67
00:03:26,000 --> 00:03:30,040
Speaker 2: So the question is, how did this complany build a

68
00:03:30,040 --> 00:03:33,440
Speaker 2: absolute juggernaut? How did they find people like you? How

69
00:03:33,440 --> 00:03:36,440
Speaker 2: do people like you find tractor supply? And what is

70
00:03:36,480 --> 00:03:38,600
Speaker 2: it that they have that others haven't been able to

71
00:03:38,640 --> 00:03:41,360
Speaker 2: replicate or can't stomp out, Like why does it Home

72
00:03:41,400 --> 00:03:44,960
Speaker 2: Depot or Low's Oral or whatever, just or Amazon? Like,

73
00:03:45,000 --> 00:03:45,800
Speaker 2: how do they thrive?

74
00:03:45,920 --> 00:03:47,920
Speaker 1: This is exactly it? And how much of it is

75
00:03:47,960 --> 00:03:53,240
Speaker 1: them riding these sort of cottage core millennial hobby farm

76
00:03:53,480 --> 00:03:56,320
Speaker 1: wave versus something maybe a little bit different. So I'm

77
00:03:56,400 --> 00:03:58,920
Speaker 1: very pleased to say that we are finally doing our

78
00:03:58,960 --> 00:04:02,400
Speaker 1: tractor supply at theisod our long awaited tractor Supply episode,

79
00:04:02,400 --> 00:04:04,960
Speaker 1: and we do have the perfect guest. We're going to

80
00:04:05,000 --> 00:04:08,760
Speaker 1: be speaking with Michael Roberto. He is the Bryant University

81
00:04:08,800 --> 00:04:12,480
Speaker 1: Trustee Professor of Management and he has just published a

82
00:04:12,560 --> 00:04:16,360
Speaker 1: case study for Harvard Business School all on the tractor

83
00:04:16,400 --> 00:04:18,920
Speaker 1: supply store. Michael, thanks so much for coming on all.

84
00:04:18,839 --> 00:04:21,280
Speaker 3: Thoughts, thanks for having me. Chasey, So, I have.

85
00:04:21,240 --> 00:04:24,680
Speaker 1: A really basic question just to begin with. But Harvard

86
00:04:24,720 --> 00:04:27,640
Speaker 1: Business studies, I hear about them all the time, and

87
00:04:27,680 --> 00:04:31,480
Speaker 1: I think you wrote a very famous one about Trader Joe's.

88
00:04:31,680 --> 00:04:35,160
Speaker 1: But what are they exactly, and how do they come

89
00:04:35,360 --> 00:04:38,640
Speaker 1: about being created? How do you choose which companies to

90
00:04:38,680 --> 00:04:39,000
Speaker 1: look at.

91
00:04:39,160 --> 00:04:41,200
Speaker 3: So I've been writing Harvard cases since I was on

92
00:04:41,240 --> 00:04:44,120
Speaker 3: the faculty there more than twenty years ago. And cases

93
00:04:44,160 --> 00:04:47,120
Speaker 3: are supposed to put the students in the role of

94
00:04:47,160 --> 00:04:50,440
Speaker 3: a senior leader at the business and put some decisions

95
00:04:50,480 --> 00:04:52,200
Speaker 3: in front of them, put some data in front of them,

96
00:04:52,480 --> 00:04:54,520
Speaker 3: and ask them instead of listening to a lecture. The

97
00:04:54,520 --> 00:04:57,200
Speaker 3: students are supposed to grapple with a real world situation.

98
00:04:58,040 --> 00:05:00,000
Speaker 3: And the idea is that the case is not an

99
00:05:00,120 --> 00:05:04,120
Speaker 3: analysis in the sense that the professor's opinion shouldn't shine through,

100
00:05:04,600 --> 00:05:07,039
Speaker 3: and we want the student to do the analysis. So,

101
00:05:07,320 --> 00:05:09,840
Speaker 3: in the case of Tractor Supply, why is this firm

102
00:05:09,880 --> 00:05:13,239
Speaker 3: so successful? We want the student to infer that based

103
00:05:13,279 --> 00:05:15,000
Speaker 3: on an in depth reading of the case.

104
00:05:15,680 --> 00:05:17,560
Speaker 1: I feel a lot of pressure now, I feel like

105
00:05:17,600 --> 00:05:19,799
Speaker 1: I should have read the case study and come away

106
00:05:19,839 --> 00:05:21,800
Speaker 1: with a lot of conclusions. But actually I just have

107
00:05:21,880 --> 00:05:22,800
Speaker 1: a bunch of questions.

108
00:05:23,000 --> 00:05:25,440
Speaker 2: Well, I do want to get to the company. But

109
00:05:25,520 --> 00:05:27,800
Speaker 2: since we are talking about these case studies, first of all,

110
00:05:27,839 --> 00:05:31,320
Speaker 2: like how did you pick this company? But then beyond that, Okay,

111
00:05:31,360 --> 00:05:32,800
Speaker 2: you say I want it, I'm going to do something

112
00:05:32,839 --> 00:05:35,719
Speaker 2: on Tractor Supply, like what is the research, what is

113
00:05:35,800 --> 00:05:36,760
Speaker 2: the time process?

114
00:05:36,800 --> 00:05:37,200
Speaker 3: What do you do?

115
00:05:37,279 --> 00:05:37,479
Speaker 2: Then?

116
00:05:37,760 --> 00:05:39,839
Speaker 3: Exactly So first, in terms of how I find them,

117
00:05:40,000 --> 00:05:42,960
Speaker 3: all sorts of different ways, very opportunistically. In the case

118
00:05:43,000 --> 00:05:46,479
Speaker 3: of Trader Joe's and Tractor Supply, they're both cases where

119
00:05:46,800 --> 00:05:49,320
Speaker 3: I worked with David Ager at Harvard on both cases,

120
00:05:49,360 --> 00:05:52,560
Speaker 3: and they're both places where I love them as a customer.

121
00:05:52,800 --> 00:05:55,600
Speaker 3: I was struck by their customer service, struck by their success,

122
00:05:55,839 --> 00:05:58,200
Speaker 3: and wanted to learn more. But in other cases, I'll

123
00:05:58,200 --> 00:06:01,000
Speaker 3: write cases about companies that I've never been a customer for,

124
00:06:01,160 --> 00:06:03,680
Speaker 3: so just finishing one up on Viking Cruise Lines. I've

125
00:06:03,680 --> 00:06:05,640
Speaker 3: never been on a Viking cruise, but I got a

126
00:06:05,680 --> 00:06:08,839
Speaker 3: mailing one day and it intrigued me, and that began

127
00:06:08,960 --> 00:06:11,960
Speaker 3: my research as for how I write these cases. In

128
00:06:12,000 --> 00:06:14,400
Speaker 3: the case of Tractor I dug around for a while

129
00:06:14,440 --> 00:06:16,880
Speaker 3: trying to find someone at the firm that I could

130
00:06:16,880 --> 00:06:19,800
Speaker 3: make contact with, and I finally did and explain to

131
00:06:19,839 --> 00:06:22,480
Speaker 3: them the process of running a case, and they were

132
00:06:22,480 --> 00:06:25,800
Speaker 3: gracious enough to invite me down to Franklin, Tennessee, just

133
00:06:25,800 --> 00:06:29,840
Speaker 3: outside of Nashville, Brentwood actually and I spent a day there,

134
00:06:30,000 --> 00:06:32,880
Speaker 3: immersed in interviews with a number of their people. And

135
00:06:32,920 --> 00:06:36,200
Speaker 3: then it's months of library research, online research, reading everything

136
00:06:36,200 --> 00:06:39,280
Speaker 3: from stock analyst reports to obviously the ten cas and

137
00:06:39,279 --> 00:06:39,599
Speaker 3: the like.

138
00:06:39,960 --> 00:06:41,479
Speaker 1: Do you go to a lot of the stores. Do

139
00:06:41,520 --> 00:06:44,280
Speaker 1: you get to look at the baby chickens and admire

140
00:06:44,480 --> 00:06:47,000
Speaker 1: some of the I don't know, fruit trees and fruit

141
00:06:47,000 --> 00:06:48,120
Speaker 1: bushes that they're selling.

142
00:06:48,360 --> 00:06:50,720
Speaker 3: Yes, So I visited a number of stores and actually

143
00:06:50,720 --> 00:06:53,600
Speaker 3: spent about a half a day with the store manager

144
00:06:53,640 --> 00:06:55,679
Speaker 3: and district manager at the store closest to my home,

145
00:06:56,040 --> 00:06:59,680
Speaker 3: interviewing them, talking to their customers, their employees, really trying

146
00:06:59,680 --> 00:07:01,599
Speaker 3: to get it an in depth understanding of a store.

147
00:07:02,279 --> 00:07:05,040
Speaker 2: So for someone who say, lives in New York City

148
00:07:05,120 --> 00:07:07,800
Speaker 2: and doesn't have any reason to buy chicken gear, if

149
00:07:07,800 --> 00:07:10,320
Speaker 2: so much, says what is Tractor Supply Company? What is it?

150
00:07:10,320 --> 00:07:13,560
Speaker 3: It is a store for the hobby farmer, okay, RBS.

151
00:07:13,600 --> 00:07:17,720
Speaker 3: A person who's not making a living off of their land, right,

152
00:07:17,800 --> 00:07:19,400
Speaker 3: this is a hobby. They have a full time job,

153
00:07:19,920 --> 00:07:22,000
Speaker 3: and they're growing tomatoes like chasey.

154
00:07:21,760 --> 00:07:24,160
Speaker 1: Are, They're raising chicken I feel seen, Yes.

155
00:07:24,720 --> 00:07:27,560
Speaker 3: Exactly, And so it's a combination of buying feed for

156
00:07:27,600 --> 00:07:31,520
Speaker 3: your animals, buying various supplies, or even buying animals themselves,

157
00:07:31,560 --> 00:07:32,280
Speaker 3: like baby chicks.

158
00:07:32,360 --> 00:07:32,520
Speaker 2: Huh.

159
00:07:32,920 --> 00:07:35,840
Speaker 3: They sold nearly eleven million chicks last year. It's a

160
00:07:35,840 --> 00:07:37,000
Speaker 3: pretty remarkable number.

161
00:07:38,000 --> 00:07:42,200
Speaker 1: So one thing I didn't realize because I'm only familiar

162
00:07:42,320 --> 00:07:45,160
Speaker 1: with the one tractor supply store where I live now

163
00:07:45,360 --> 00:07:50,720
Speaker 1: in Connecticut, but they've been quite particular about their rollout

164
00:07:50,840 --> 00:07:54,560
Speaker 1: strategy of stores. Can you explain where they tend to

165
00:07:54,640 --> 00:07:58,320
Speaker 1: be located and how that might differ from some other competitors.

166
00:07:58,520 --> 00:08:01,640
Speaker 3: It's really interesting to look. They're CEO how Lawton likes

167
00:08:01,680 --> 00:08:03,960
Speaker 3: to joke that there's not one within thirty miles in

168
00:08:03,960 --> 00:08:07,120
Speaker 3: New York City, but there's three within a twenty minute

169
00:08:07,200 --> 00:08:10,320
Speaker 3: drive of Odessa, Texas. Right, I mean. But actually, one

170
00:08:10,360 --> 00:08:11,680
Speaker 3: of the things I did in the case is I

171
00:08:11,800 --> 00:08:15,840
Speaker 3: charted the Charlotte, North Carolina metropolitan area, and if you

172
00:08:15,880 --> 00:08:18,640
Speaker 3: look there, there's an Interstate Highway forty five that kind

173
00:08:18,640 --> 00:08:22,440
Speaker 3: of encircles the city. Within that beltway, there are eight

174
00:08:22,640 --> 00:08:26,080
Speaker 3: Lows stores and not a single Tractor Supply. But on

175
00:08:26,120 --> 00:08:29,160
Speaker 3: the outskirts of that city. Now you begin to start

176
00:08:29,160 --> 00:08:32,959
Speaker 3: seeing those tractors show up in a number of smaller towns, just.

177
00:08:32,920 --> 00:08:35,480
Speaker 2: For what it's worth for listeners. A little more numbers.

178
00:08:35,600 --> 00:08:38,440
Speaker 2: Current market cap of the company twenty four billion, a

179
00:08:38,440 --> 00:08:41,520
Speaker 2: little over twenty three one hundred stores. What is it

180
00:08:41,600 --> 00:08:44,440
Speaker 2: about the sort of perimeter? Is it just they want

181
00:08:44,440 --> 00:08:47,679
Speaker 2: to be around people. Their customers have yards, Their customers

182
00:08:47,720 --> 00:08:49,840
Speaker 2: have a lot of space, basically, right, what is it

183
00:08:49,840 --> 00:08:50,800
Speaker 2: about that strategy?

184
00:08:50,960 --> 00:08:52,680
Speaker 3: They want people who have some land.

185
00:08:52,760 --> 00:08:53,360
Speaker 2: This is key.

186
00:08:53,400 --> 00:08:55,760
Speaker 3: So you've got to have some typical customer has somewhere

187
00:08:55,760 --> 00:08:58,280
Speaker 3: between one and ten acres of land. So you have

188
00:08:58,400 --> 00:09:01,400
Speaker 3: people who have the opportunity to have animals, or to

189
00:09:01,440 --> 00:09:04,280
Speaker 3: have a large vegetable garden, to have a barn or

190
00:09:04,280 --> 00:09:08,040
Speaker 3: a shed and fencing, things that would require upkeep, right,

191
00:09:08,080 --> 00:09:10,400
Speaker 3: and so they're looking for that. They also want to

192
00:09:10,440 --> 00:09:13,400
Speaker 3: have people who are interested in that rural lifestyle. So

193
00:09:13,440 --> 00:09:15,920
Speaker 3: they call some of these people rural enthusiasts. They might

194
00:09:15,920 --> 00:09:18,400
Speaker 3: not live on a farm, right, they might live in

195
00:09:18,400 --> 00:09:20,840
Speaker 3: the suburbs like me. Neighbor across the street from me

196
00:09:20,920 --> 00:09:24,040
Speaker 3: is a millennial couple and they've got chickens, right, They

197
00:09:24,120 --> 00:09:26,760
Speaker 3: built a chicken coop from tract to supply. They only

198
00:09:26,760 --> 00:09:28,559
Speaker 3: have about a half acre of land, right, So those

199
00:09:28,559 --> 00:09:31,280
Speaker 3: are what they would call rural enthusiasts. And then the

200
00:09:31,280 --> 00:09:33,840
Speaker 3: hobby farmer has a little more land. They might have

201
00:09:33,840 --> 00:09:36,079
Speaker 3: a few more animals and a lot more vegetables or

202
00:09:36,120 --> 00:09:36,640
Speaker 3: fruit trees.

203
00:09:37,000 --> 00:09:39,560
Speaker 1: So why don't we just get to that sort of

204
00:09:39,760 --> 00:09:43,760
Speaker 1: important question, which is, what is it about this business

205
00:09:43,840 --> 00:09:47,080
Speaker 1: that has made it special or successful in your mind?

206
00:09:47,559 --> 00:09:51,000
Speaker 1: And how much of it is they've discovered a niche,

207
00:09:51,120 --> 00:09:54,199
Speaker 1: a growing niche at this moment in time, the hobby farmer,

208
00:09:54,360 --> 00:09:57,680
Speaker 1: the cottage core, millennial, call it what you want, versus

209
00:09:57,840 --> 00:10:02,640
Speaker 1: they are doing something different from other rural or home

210
00:10:02,679 --> 00:10:06,200
Speaker 1: goods stores like Low's Home Depot maybe are running something

211
00:10:06,280 --> 00:10:06,600
Speaker 1: like that.

212
00:10:06,960 --> 00:10:09,800
Speaker 3: Well they're clearly. I mean John Ortis, is the head

213
00:10:09,840 --> 00:10:12,760
Speaker 3: of stores for the company, told me we clearly want

214
00:10:12,800 --> 00:10:15,320
Speaker 3: to stay out of the headlights of Low's and Home Depots.

215
00:10:15,320 --> 00:10:18,680
Speaker 3: So there's strategy, a very explicit right. David Yaffi and

216
00:10:18,679 --> 00:10:21,800
Speaker 3: Michael Kuzomano are are two business school professors who coined

217
00:10:21,840 --> 00:10:25,520
Speaker 3: this term judo strategy many years ago, and the idea

218
00:10:25,520 --> 00:10:28,240
Speaker 3: is avoid head to head competition with the big giants

219
00:10:28,640 --> 00:10:31,559
Speaker 3: and even use the giant's strength against them the way

220
00:10:31,559 --> 00:10:34,000
Speaker 3: you would in judo. And I think Tractor's done that

221
00:10:34,040 --> 00:10:37,160
Speaker 3: really well. They have this very eclectic product mix. For example,

222
00:10:37,840 --> 00:10:41,880
Speaker 3: you can't paint your kitchen with supplies from tractors to buy,

223
00:10:42,000 --> 00:10:44,720
Speaker 3: but you can paint your barn or your tractor, right,

224
00:10:44,800 --> 00:10:46,800
Speaker 3: So whereas if you go into Low's right, there's this

225
00:10:47,080 --> 00:10:50,360
Speaker 3: enormous paint section, right, So they're very careful to avoid

226
00:10:50,360 --> 00:10:52,800
Speaker 3: that direct head to head competition, and then they've got

227
00:10:52,840 --> 00:10:54,360
Speaker 3: this really eclectic product mix.

228
00:10:54,960 --> 00:10:57,120
Speaker 1: Well, this actually leads into one thing I wanted to

229
00:10:57,160 --> 00:11:00,320
Speaker 1: ask you, which is why don't they compete on sort

230
00:11:00,320 --> 00:11:03,480
Speaker 1: of home construction materials? And I think you mentioned in

231
00:11:03,520 --> 00:11:06,160
Speaker 1: your case study that at one point they attempted it,

232
00:11:06,360 --> 00:11:08,520
Speaker 1: but it turned out to be something of a disaster.

233
00:11:08,800 --> 00:11:11,440
Speaker 3: They went through a near death experience not simply because

234
00:11:11,440 --> 00:11:13,240
Speaker 3: of that, but around that time, this was in the

235
00:11:13,320 --> 00:11:16,160
Speaker 3: late seventies early eighties, and they exited that market. That's

236
00:11:16,160 --> 00:11:19,400
Speaker 3: another principle of judo strategy is when you know, confronted

237
00:11:19,440 --> 00:11:23,439
Speaker 3: directly by a more formidable competitor, back away and realize

238
00:11:23,520 --> 00:11:25,760
Speaker 3: what your strengths are and what theirs are. And bottom

239
00:11:25,800 --> 00:11:28,520
Speaker 3: line is Home Depot has tremendous economies of scale. So

240
00:11:29,160 --> 00:11:31,240
Speaker 3: just looking at their sales, right, they're more than ten

241
00:11:31,320 --> 00:11:34,320
Speaker 3: times the size attractors supply. So think about trying to

242
00:11:34,360 --> 00:11:36,920
Speaker 3: buy lumber and buy a lot of those building materials.

243
00:11:37,040 --> 00:11:39,040
Speaker 3: Tractors just not going to be able to do it

244
00:11:39,080 --> 00:11:41,280
Speaker 3: the way Home Depot can do it. And so it's

245
00:11:41,320 --> 00:11:44,720
Speaker 3: trying to avoid that competition and instead compete, you know,

246
00:11:44,760 --> 00:11:47,120
Speaker 3: in these other areas. And of course one key to

247
00:11:47,200 --> 00:11:51,360
Speaker 3: this model is animal feed, because people have to buy

248
00:11:51,800 --> 00:11:56,480
Speaker 3: feed for their animals. Come recession, come boom, it doesn't matter.

249
00:11:56,760 --> 00:11:58,320
Speaker 3: And you know, as one of the executives told me,

250
00:11:58,480 --> 00:12:00,480
Speaker 3: people love to talk about their animals as much as

251
00:12:00,480 --> 00:12:02,840
Speaker 3: many people love to talk about their children. Right, So

252
00:12:02,880 --> 00:12:04,559
Speaker 3: they love their animals and they're gott to take good

253
00:12:04,559 --> 00:12:19,360
Speaker 3: care of them no matter the economic conditions.

254
00:12:22,720 --> 00:12:25,120
Speaker 2: Can I just ask one sort of more step back question.

255
00:12:25,200 --> 00:12:28,280
Speaker 2: The company was formed in nineteen thirty eight, and I

256
00:12:28,320 --> 00:12:31,320
Speaker 2: think it started as a mail order catalog. I assume

257
00:12:31,360 --> 00:12:33,839
Speaker 2: it wasn't. Did it at one point have a more

258
00:12:33,880 --> 00:12:39,480
Speaker 2: explicit professional farmer standpoint, or like, did it evolve into

259
00:12:39,640 --> 00:12:41,800
Speaker 2: this sort of Nichould found of the sort of non

260
00:12:41,840 --> 00:12:45,480
Speaker 2: professional and how did it sort of find find that groove.

261
00:12:45,840 --> 00:12:47,800
Speaker 3: They did start out, you know, as mail order and

262
00:12:48,320 --> 00:12:51,520
Speaker 3: then a store in North Dakota actually their first retail store.

263
00:12:51,760 --> 00:12:53,960
Speaker 3: They started out during the Great Depression, and they absolutely

264
00:12:54,000 --> 00:12:57,720
Speaker 3: were serving professional farmers and selling them tractor parts. Today

265
00:12:57,840 --> 00:13:00,760
Speaker 3: that's a small part of their business. They really went

266
00:13:00,760 --> 00:13:04,520
Speaker 3: through a major transition after the founder sold. They were

267
00:13:04,559 --> 00:13:07,480
Speaker 3: part of two different conglomerates, remember the big conglomerates of

268
00:13:07,520 --> 00:13:09,960
Speaker 3: the seventies, and as you know, many of them did

269
00:13:09,960 --> 00:13:13,960
Speaker 3: not thrive, and so eventually Tractor gets bought out and

270
00:13:14,000 --> 00:13:17,000
Speaker 3: a man named Tom Hennessy leads a management buyout, and

271
00:13:17,040 --> 00:13:20,480
Speaker 3: he really refashions the strategy around the hobby farmer and

272
00:13:20,520 --> 00:13:23,000
Speaker 3: that's led to four decades of remarkable success.

273
00:13:23,800 --> 00:13:26,720
Speaker 2: So when it comes to targeting the hobby farmer, it

274
00:13:26,760 --> 00:13:29,280
Speaker 2: seems like obviously part of it is, as you say,

275
00:13:29,400 --> 00:13:31,520
Speaker 2: the product mix and getting it right and sort of

276
00:13:31,559 --> 00:13:34,560
Speaker 2: just having a very different overall set of goods than

277
00:13:34,640 --> 00:13:36,840
Speaker 2: one might get at a home depot or loads. What

278
00:13:37,000 --> 00:13:40,559
Speaker 2: about the role of customer service in that and how

279
00:13:40,600 --> 00:13:44,120
Speaker 2: important is that element in terms of having staff that

280
00:13:44,240 --> 00:13:46,560
Speaker 2: really like thinks about this particular customer.

281
00:13:46,920 --> 00:13:48,319
Speaker 3: So they do a couple of inches things. One of

282
00:13:48,360 --> 00:13:51,400
Speaker 3: the most interesting things is they say we hire our customers.

283
00:13:52,160 --> 00:13:56,040
Speaker 3: They want people who Tracy don't go they got it's tempting.

284
00:13:56,559 --> 00:13:59,600
Speaker 3: It's tempting. They actually will reach out to people they

285
00:13:59,640 --> 00:14:02,280
Speaker 3: see in the stores. Often. My neighbor Scott has been

286
00:14:02,320 --> 00:14:05,439
Speaker 3: approached several times about going to work there. Really he's

287
00:14:05,480 --> 00:14:08,600
Speaker 3: a loyal customer. They want people who know and live

288
00:14:08,640 --> 00:14:11,600
Speaker 3: the lifestyle, who know about how to raise chickens, and

289
00:14:11,800 --> 00:14:15,839
Speaker 3: like they can always teach them store processes and retail

290
00:14:16,040 --> 00:14:17,920
Speaker 3: metrics and all those types of things. What they want

291
00:14:17,960 --> 00:14:20,040
Speaker 3: is someone who really understands the product.

292
00:14:20,400 --> 00:14:23,640
Speaker 2: Sorry, isn't that rare? Like in your experience of just

293
00:14:23,800 --> 00:14:26,640
Speaker 2: real quickly covering other stores, is that unique or do

294
00:14:26,760 --> 00:14:28,040
Speaker 2: other companies also do that?

295
00:14:28,320 --> 00:14:30,480
Speaker 3: I think others try to do it. It becomes more

296
00:14:30,520 --> 00:14:33,360
Speaker 3: and more difficult as companies grow, and I think Tractor

297
00:14:33,640 --> 00:14:35,480
Speaker 3: has been able to maintain that, but it is a

298
00:14:35,560 --> 00:14:38,280
Speaker 3: question going forward. You know, they're up over two thousand stores,

299
00:14:38,880 --> 00:14:41,040
Speaker 3: and that's always a question. Can we continue to find

300
00:14:41,160 --> 00:14:43,600
Speaker 3: people who have that knowledge. I think that's what the

301
00:14:43,600 --> 00:14:46,200
Speaker 3: home improvement chains used to do very very well, and

302
00:14:46,280 --> 00:14:48,000
Speaker 3: it's been a challenge as they've grown.

303
00:14:48,640 --> 00:14:48,880
Speaker 2: Yeah.

304
00:14:48,920 --> 00:14:51,840
Speaker 1: So this is one of my enduring frustrations with our

305
00:14:51,880 --> 00:14:53,960
Speaker 1: local lows, which as you go in and you ask

306
00:14:54,000 --> 00:14:57,840
Speaker 1: a question, and rarely I would say, do you get

307
00:14:58,240 --> 00:15:01,520
Speaker 1: reliable information back? But is it's different at tractor supply.

308
00:15:02,040 --> 00:15:05,000
Speaker 3: These people are incredibly knowledgeable, but they also say to me,

309
00:15:05,040 --> 00:15:07,359
Speaker 3: they told me, you know, we learned from our customers.

310
00:15:07,760 --> 00:15:10,280
Speaker 3: One great story a district manager told me was about

311
00:15:10,480 --> 00:15:14,160
Speaker 3: a customer who explained to him how he could detect

312
00:15:14,280 --> 00:15:17,960
Speaker 3: what kind of animal was attacking his chicken coop, and

313
00:15:18,000 --> 00:15:21,440
Speaker 3: so it's something he didn't know, right, But these conversations happen.

314
00:15:21,480 --> 00:15:24,520
Speaker 3: They talk about creating community, and this is a big

315
00:15:24,560 --> 00:15:26,680
Speaker 3: part of the customer service story, as they say, you know,

316
00:15:26,760 --> 00:15:28,280
Speaker 3: our customer is the kind of person who wants to

317
00:15:28,280 --> 00:15:30,240
Speaker 3: put their foot up on a bag of feed corn

318
00:15:30,320 --> 00:15:32,920
Speaker 3: and talk to other customers. And then if you listen

319
00:15:32,960 --> 00:15:37,080
Speaker 3: to those conversations, you learn a great deal about customer needs, right,

320
00:15:37,120 --> 00:15:40,320
Speaker 3: customer wants and the lifestyle of those customers.

321
00:15:40,520 --> 00:15:43,680
Speaker 1: Wait, how do you tell what's been attacking your chickens?

322
00:15:44,080 --> 00:15:46,200
Speaker 1: I guess there'd be tracks, right. I know some people

323
00:15:46,240 --> 00:15:49,440
Speaker 1: install video cameras as well to monitor, but well.

324
00:15:49,280 --> 00:15:51,000
Speaker 3: You certainly can do that. But it turns out it

325
00:15:51,040 --> 00:15:54,240
Speaker 3: has something to do with some animals will essentially devour

326
00:15:54,400 --> 00:15:56,360
Speaker 3: the chicken right there and then, and so you see

327
00:15:56,400 --> 00:15:58,920
Speaker 3: all the feathers in one place, and others will take

328
00:15:59,000 --> 00:16:01,960
Speaker 3: the chicken away, and so you'll see this trail across

329
00:16:02,000 --> 00:16:05,120
Speaker 3: your yard or property. This is beyond my knowledge chasing.

330
00:16:05,200 --> 00:16:06,280
Speaker 3: That's all I can tell you.

331
00:16:06,360 --> 00:16:08,440
Speaker 1: This is not I got to ask a tractor supplies

332
00:16:08,480 --> 00:16:08,840
Speaker 1: says not.

333
00:16:08,880 --> 00:16:14,360
Speaker 2: The Harvard Business School typical curriculum. Correct man, So many questions.

334
00:16:14,400 --> 00:16:17,160
Speaker 2: You know, you mentioned this sort of near death experience

335
00:16:17,240 --> 00:16:20,760
Speaker 2: that they've had when they've tried to go into building supplies.

336
00:16:21,160 --> 00:16:25,200
Speaker 2: They have had some history of consolidation and buying competitors.

337
00:16:25,240 --> 00:16:27,840
Speaker 2: Can you talk a little bit about the company's acquisition

338
00:16:27,960 --> 00:16:31,200
Speaker 2: strategy and how it thinks about when it's opportune to

339
00:16:31,240 --> 00:16:33,560
Speaker 2: buy and bring another company into the fold.

340
00:16:33,760 --> 00:16:36,760
Speaker 3: They have been very careful about their acquisition strategy over

341
00:16:36,760 --> 00:16:39,080
Speaker 3: the years. I think they've done two things with it, Joe.

342
00:16:39,160 --> 00:16:41,480
Speaker 3: One is they've tried to use it to fill in

343
00:16:41,600 --> 00:16:46,160
Speaker 3: pockets geographically, to accelerate write their ability to saturate the

344
00:16:46,200 --> 00:16:49,160
Speaker 3: market rather than relying strictly on organic growth. But I

345
00:16:49,160 --> 00:16:51,520
Speaker 3: think the second and maybe even more important part of

346
00:16:51,560 --> 00:16:54,800
Speaker 3: their strategy has been to learn about particular categories where

347
00:16:54,840 --> 00:16:57,640
Speaker 3: certain rivals have had strength. So currently their most recent

348
00:16:57,680 --> 00:17:01,520
Speaker 3: acquisition looks to me least as an outsider like an

349
00:17:01,520 --> 00:17:04,399
Speaker 3: attempt to learn more about sporting goods. This is a

350
00:17:04,440 --> 00:17:07,240
Speaker 3: company tractor supply that doesn't have as big of a presence,

351
00:17:07,240 --> 00:17:13,760
Speaker 3: and this is and of course I think they're at

352
00:17:13,800 --> 00:17:16,520
Speaker 3: the point now though, where they may run up against

353
00:17:16,560 --> 00:17:19,120
Speaker 3: antitrust issues. Right they had to divest some of those

354
00:17:19,160 --> 00:17:21,399
Speaker 3: stores as part of that deal, and I wonder if

355
00:17:21,440 --> 00:17:23,919
Speaker 3: they'll they'll be able to do any further acquisitions in

356
00:17:23,960 --> 00:17:26,360
Speaker 3: the farm and rant store space. But up till now

357
00:17:26,400 --> 00:17:29,240
Speaker 3: it has been a nice compliment to organic growth and

358
00:17:29,640 --> 00:17:32,479
Speaker 3: this knowledge they've acquired, as I say, most recently, this

359
00:17:32,520 --> 00:17:34,639
Speaker 3: one is allowing them to dabble a bit more in

360
00:17:34,680 --> 00:17:38,359
Speaker 3: sporting goods fishing as an example of something where they

361
00:17:38,359 --> 00:17:40,959
Speaker 3: think there might be opportunity. But they know there are

362
00:17:41,000 --> 00:17:44,520
Speaker 3: some formidable, high knowledge players in that space like bass

363
00:17:44,520 --> 00:17:46,960
Speaker 3: pro shops, So they want to learn more, right.

364
00:17:47,280 --> 00:17:50,080
Speaker 1: Don't They have some partnerships as well? I think they

365
00:17:50,080 --> 00:17:51,360
Speaker 1: sell Carhart.

366
00:17:51,440 --> 00:17:53,600
Speaker 3: They have an amazing partnership with Carhart. They're one of

367
00:17:53,600 --> 00:17:56,640
Speaker 3: the most one of the largest retailers of Carhart apparel,

368
00:17:56,680 --> 00:17:59,280
Speaker 3: and the new store remodels they've been doing is part

369
00:17:59,280 --> 00:18:01,640
Speaker 3: of Project Fusion, and they've been sort of making these

370
00:18:01,680 --> 00:18:05,720
Speaker 3: Carhart store within a store little shops, consolidating the products

371
00:18:05,760 --> 00:18:09,359
Speaker 3: they sell Ariat boots for example, another great partnership that

372
00:18:09,400 --> 00:18:12,240
Speaker 3: they have. And of course they have really ridden the

373
00:18:12,359 --> 00:18:15,560
Speaker 3: Yellowstone trend. Oh yeah, you know if you read the

374
00:18:15,560 --> 00:18:18,120
Speaker 3: Wall Street Journal a few months ago, talked about how

375
00:18:18,200 --> 00:18:21,520
Speaker 3: millennial New Yorkers who've never seen a farm in their

376
00:18:21,560 --> 00:18:25,920
Speaker 3: life or running around wearing Yellowstone apparel. And so they've

377
00:18:25,920 --> 00:18:29,680
Speaker 3: partnered with Lanny Wilson, the country music sensation, who's also

378
00:18:29,720 --> 00:18:32,320
Speaker 3: a star on Yellowstone, and they do sell some Yellowstone

379
00:18:32,320 --> 00:18:33,040
Speaker 3: apparel as well.

380
00:18:33,720 --> 00:18:37,000
Speaker 2: What is their online component and how have they navigated

381
00:18:37,000 --> 00:18:37,560
Speaker 2: e commerce?

382
00:18:38,000 --> 00:18:40,800
Speaker 3: So this has been a push. Most recently, Hal Lawton

383
00:18:40,840 --> 00:18:44,000
Speaker 3: became CEO just before the pandemic began. He had been

384
00:18:44,000 --> 00:18:46,359
Speaker 3: at Macy's running e commerce for them and before that

385
00:18:46,440 --> 00:18:49,720
Speaker 3: running e commerce for Home Depot for many years, and

386
00:18:49,800 --> 00:18:52,240
Speaker 3: so how brought a lot of that knowledge with him

387
00:18:52,240 --> 00:18:54,840
Speaker 3: and so they've made a big push. They were already

388
00:18:54,880 --> 00:18:57,640
Speaker 3: starting to dabble with the idea of buy online pick

389
00:18:57,720 --> 00:18:59,760
Speaker 3: up in store, and then of course, with the pandemic,

390
00:19:00,200 --> 00:19:03,400
Speaker 3: they rushed out that process across the whole network. They

391
00:19:03,400 --> 00:19:06,040
Speaker 3: found something pretty interesting. They admitted to me that some

392
00:19:06,080 --> 00:19:09,600
Speaker 3: of the executives were skeptical about this because they thought, well,

393
00:19:09,840 --> 00:19:11,960
Speaker 3: are we going to get less store traffic and less

394
00:19:12,000 --> 00:19:14,560
Speaker 3: impulse buying if people are simply picking up at the curb.

395
00:19:15,040 --> 00:19:17,680
Speaker 3: But what they found is that people live, in some

396
00:19:17,720 --> 00:19:20,520
Speaker 3: cases a pretty long distance from a track supply store.

397
00:19:20,880 --> 00:19:22,280
Speaker 3: So what they want to do is that they want

398
00:19:22,280 --> 00:19:24,399
Speaker 3: to be able to get online see that the product

399
00:19:24,440 --> 00:19:25,919
Speaker 3: is in the store. No, they can pick it up,

400
00:19:26,000 --> 00:19:28,320
Speaker 3: let's say it's feed for their horse. But then once

401
00:19:28,359 --> 00:19:31,440
Speaker 3: they get there, right now they've made that trip, they're

402
00:19:31,440 --> 00:19:33,680
Speaker 3: going to go in and talk to their fellow customers.

403
00:19:33,720 --> 00:19:35,400
Speaker 3: They're going to go in the store buy other things.

404
00:19:35,440 --> 00:19:37,320
Speaker 3: But they don't want to make that trip unless they

405
00:19:37,400 --> 00:19:40,040
Speaker 3: know what they absolutely need is there. So they're using

406
00:19:40,080 --> 00:19:43,879
Speaker 3: the buy online, pickup in store process really interestingly.

407
00:19:44,359 --> 00:19:46,800
Speaker 1: Just to press on this point though, how are they

408
00:19:46,800 --> 00:19:50,919
Speaker 1: competing against Amazon? Because Amazon does have a pre as

409
00:19:50,960 --> 00:19:53,399
Speaker 1: far as I can tell, a pretty good network, even

410
00:19:53,640 --> 00:19:57,400
Speaker 1: in rural areas. It's not hard to get a bag

411
00:19:57,440 --> 00:20:00,480
Speaker 1: of bird seed, for instance, off Amazon, and some cases

412
00:20:00,520 --> 00:20:02,760
Speaker 1: you can get it in two or three days. So

413
00:20:02,800 --> 00:20:03,840
Speaker 1: how do they compete with that?

414
00:20:04,680 --> 00:20:08,120
Speaker 3: There's no question that the online players like Amazon are competitors.

415
00:20:08,160 --> 00:20:09,760
Speaker 3: And I think one of the things that's different is

416
00:20:09,800 --> 00:20:13,840
Speaker 3: they're selling big bulk pet food, right, much bigger bags

417
00:20:13,840 --> 00:20:16,040
Speaker 3: and you can buy, for example at the supermarket, huge

418
00:20:16,080 --> 00:20:17,800
Speaker 3: bags of animal feed, the kind of things that are

419
00:20:17,800 --> 00:20:20,680
Speaker 3: pretty hard to transport, right, And so that's a key

420
00:20:20,760 --> 00:20:23,840
Speaker 3: thing that's helping them deal with the online threat.

421
00:20:24,480 --> 00:20:28,440
Speaker 2: Out of curiosity, where's the farmer's shop, Who's like, Oh,

422
00:20:28,440 --> 00:20:30,679
Speaker 2: it's not a hobby anymore. Who's like the sort of

423
00:20:30,720 --> 00:20:32,560
Speaker 2: next above, it's like, oh, this is actually becoming a

424
00:20:32,560 --> 00:20:35,560
Speaker 2: professional thing, someone who like actually sells good maybe at

425
00:20:35,560 --> 00:20:38,040
Speaker 2: a farmer's market or something like that. Like who's their

426
00:20:38,080 --> 00:20:40,760
Speaker 2: competitor for the larger scale customer.

427
00:20:40,920 --> 00:20:44,200
Speaker 3: Yeah, there are large you know, Agway and other players

428
00:20:44,200 --> 00:20:47,280
Speaker 3: that serve farmers. Obviously, John Deere on the equipment side

429
00:20:47,320 --> 00:20:50,520
Speaker 3: has dealerships throughout the country, as to do other players

430
00:20:50,520 --> 00:20:52,560
Speaker 3: in the tractor business. So you've got people who are

431
00:20:52,560 --> 00:20:55,720
Speaker 3: serving the professional farmer on the high end that's been

432
00:20:55,800 --> 00:20:59,280
Speaker 3: consolidating over the years, very large players doing that, but

433
00:20:59,320 --> 00:21:02,199
Speaker 3: there are really it's a much more fragmented market for

434
00:21:02,240 --> 00:21:04,639
Speaker 3: the hobby farmer. Their largest competitor only has about one

435
00:21:04,720 --> 00:21:08,919
Speaker 3: hundred and eighty stores quick that's bomb Guards now, and

436
00:21:09,000 --> 00:21:11,800
Speaker 3: they've got over two thousands. So this is a formidable

437
00:21:11,840 --> 00:21:14,720
Speaker 3: advantage they have in a fragmented market. The other thing

438
00:21:14,760 --> 00:21:16,760
Speaker 3: I'd say, by the way, about the online presence is

439
00:21:16,760 --> 00:21:19,760
Speaker 3: this creating community. And they actually talk about it like

440
00:21:19,760 --> 00:21:21,600
Speaker 3: they say, you know, we're a little bit home Depot,

441
00:21:22,000 --> 00:21:24,040
Speaker 3: We're a little bit Target and that we sell stuff

442
00:21:24,040 --> 00:21:26,280
Speaker 3: for your home. We sell cool stuff like Target, but

443
00:21:26,320 --> 00:21:28,919
Speaker 3: we're a little bit Starbucks about community. And this is

444
00:21:28,960 --> 00:21:31,080
Speaker 3: the other piece that helps them against Amazon. So you

445
00:21:31,119 --> 00:21:32,480
Speaker 3: can wash your pet.

446
00:21:33,280 --> 00:21:36,240
Speaker 1: I was about to ask about the pet grooming stations. Yes,

447
00:21:36,320 --> 00:21:37,560
Speaker 1: a little bit pet Co too.

448
00:21:37,960 --> 00:21:41,800
Speaker 3: Yes, absolutely so they have self wash, pet wash stations.

449
00:21:41,840 --> 00:21:44,919
Speaker 3: You can get your pet or your animal vaccinated. But

450
00:21:45,040 --> 00:21:48,680
Speaker 3: my favorite thing they do is the chicken swap. This

451
00:21:48,840 --> 00:21:52,959
Speaker 3: is actually in many cases organized by customers, but Tractor

452
00:21:52,960 --> 00:21:56,160
Speaker 3: Supply hosts it in their parking lot and hobby farmers

453
00:21:56,200 --> 00:21:58,639
Speaker 3: come and they bring their animals and believe or not.

454
00:21:58,800 --> 00:22:02,800
Speaker 3: They swap, and they swap knowledge, and tractor, of course,

455
00:22:02,880 --> 00:22:05,920
Speaker 3: is out there hosting the event. This is the kind

456
00:22:05,960 --> 00:22:10,000
Speaker 3: of experiential retail that online players can't compete with as effectively.

457
00:22:10,080 --> 00:22:12,159
Speaker 2: Trasey, I think we should film. We should do a

458
00:22:12,200 --> 00:22:14,680
Speaker 2: live video episode at a chicken swap.

459
00:22:14,960 --> 00:22:18,639
Speaker 1: Yeah, I would love to, Joe. Yes, let's all do

460
00:22:18,680 --> 00:22:21,560
Speaker 1: a field trip to my local tractor supply for the

461
00:22:21,640 --> 00:22:22,080
Speaker 1: chicken slap.

462
00:22:22,119 --> 00:22:24,320
Speaker 2: Let's do it, you know. I gotta say I did

463
00:22:24,359 --> 00:22:27,320
Speaker 2: not expect to get like sort of watery in my

464
00:22:27,440 --> 00:22:30,679
Speaker 2: eyes reading a Harvard Business School case study, but I

465
00:22:30,760 --> 00:22:34,840
Speaker 2: did at the intro of yours because it starts with

466
00:22:34,920 --> 00:22:37,040
Speaker 2: an anecdote I guess of like a farmer who like

467
00:22:37,119 --> 00:22:39,280
Speaker 2: delivered a calf in the middle of the night and

468
00:22:39,359 --> 00:22:43,040
Speaker 2: needed so they ride away and called the manager. What happened?

469
00:22:43,119 --> 00:22:44,160
Speaker 2: Tell the story?

470
00:22:44,200 --> 00:22:47,399
Speaker 3: These stories are incredible that I heard from around the country,

471
00:22:47,520 --> 00:22:49,760
Speaker 3: you know, And this one was the manager hears that

472
00:22:49,800 --> 00:22:52,280
Speaker 3: a calf is being born. They go to the store,

473
00:22:52,400 --> 00:22:54,640
Speaker 3: they get the materials the farmer needs at like one

474
00:22:54,640 --> 00:22:56,520
Speaker 3: am in the middle of the night. They go there

475
00:22:56,520 --> 00:22:59,159
Speaker 3: and deliver the product to the farmer's home, and the

476
00:22:59,160 --> 00:23:01,720
Speaker 3: farmer wants to pay, and they were like, listen, the

477
00:23:01,760 --> 00:23:03,760
Speaker 3: cast needs to be born. You need to deal with that.

478
00:23:03,880 --> 00:23:05,359
Speaker 3: Just come in later in the week and pay, and

479
00:23:05,720 --> 00:23:07,119
Speaker 3: they took care of the customer. Or one of my

480
00:23:07,200 --> 00:23:10,280
Speaker 3: other favorite stories is this. This grandmother was walking through

481
00:23:10,280 --> 00:23:13,000
Speaker 3: the store looking to buy feed for her granddaughter's horse,

482
00:23:13,640 --> 00:23:16,840
Speaker 3: and one of the associates in the store realizes that

483
00:23:16,880 --> 00:23:19,119
Speaker 3: this poor grandmother is kind of lost because usually the

484
00:23:19,160 --> 00:23:22,080
Speaker 3: girl's dad, her son, would be buying it, but he

485
00:23:22,200 --> 00:23:26,000
Speaker 3: died a few days earlier. The store manager runs out,

486
00:23:26,119 --> 00:23:28,560
Speaker 3: buys a sympathy card, has all the team members sign it,

487
00:23:28,560 --> 00:23:30,120
Speaker 3: and puts a two hundred and fifty dollars gift card

488
00:23:30,160 --> 00:23:32,639
Speaker 3: in there for the grandmother before she walks out the

489
00:23:32,640 --> 00:23:34,879
Speaker 3: door that day. These are kind of these, you know,

490
00:23:34,920 --> 00:23:38,320
Speaker 3: as they call it, going the country mile efforts, which

491
00:23:38,320 --> 00:23:40,199
Speaker 3: are a key part of their sort of cult. If

492
00:23:40,200 --> 00:23:41,040
Speaker 3: you will, can we.

493
00:23:41,000 --> 00:23:43,400
Speaker 2: Talk a little bit more about that and maybe even

494
00:23:43,520 --> 00:23:49,359
Speaker 2: beyond trector, because I imagine lots of companies would like

495
00:23:49,440 --> 00:23:52,360
Speaker 2: to instill something like this in their workforce, right. I

496
00:23:52,359 --> 00:23:55,320
Speaker 2: imagine every manager would love it if their employees had

497
00:23:55,320 --> 00:23:58,600
Speaker 2: to wherewithal to identify that buy the card, get the

498
00:23:58,640 --> 00:24:00,880
Speaker 2: other people in the store to it. But I also

499
00:24:00,880 --> 00:24:04,760
Speaker 2: imagine that is not easy to engender, and it's probably

500
00:24:04,880 --> 00:24:07,760
Speaker 2: not easy at a time of high labor turnover in

501
00:24:07,800 --> 00:24:09,640
Speaker 2: which you have a lot of new people who don't

502
00:24:09,640 --> 00:24:12,760
Speaker 2: have that. Are there any patterns that are like from

503
00:24:13,080 --> 00:24:17,440
Speaker 2: tractors specifically or other companies that sort of predict whether

504
00:24:17,520 --> 00:24:20,639
Speaker 2: a company is able to get this out of their workforce.

505
00:24:21,080 --> 00:24:23,840
Speaker 3: You know, you mentioned earlier the other case that I've

506
00:24:23,920 --> 00:24:26,440
Speaker 3: become well known for that I wrote with David as well,

507
00:24:26,520 --> 00:24:28,800
Speaker 3: David Ager, and that's Trader Joe's. Yeah, And I think

508
00:24:28,840 --> 00:24:32,280
Speaker 3: about those two companies and boy, they have incredibly passionate

509
00:24:32,320 --> 00:24:36,520
Speaker 3: customers who often become passionate employees. They treat them well,

510
00:24:36,800 --> 00:24:39,240
Speaker 3: they pay them well, they offer them good working conditions.

511
00:24:39,440 --> 00:24:42,200
Speaker 3: But it's much more than that, in my opinion, because frankly,

512
00:24:42,400 --> 00:24:44,840
Speaker 3: they can get the same payer better at another retailer

513
00:24:44,880 --> 00:24:47,520
Speaker 3: in many cases. But it is about the kind of

514
00:24:47,600 --> 00:24:51,120
Speaker 3: environment where they give them some autonomy to really engage

515
00:24:51,119 --> 00:24:53,520
Speaker 3: with the customer. They're not working off a script, they're

516
00:24:53,520 --> 00:24:57,520
Speaker 3: not necessarily always doing the exact same task. They cross

517
00:24:57,560 --> 00:25:00,000
Speaker 3: train them at Trade or Joe's, they cross train them.

518
00:25:00,200 --> 00:25:03,040
Speaker 3: Tractors apply this ability to kind of do a variety

519
00:25:03,040 --> 00:25:06,000
Speaker 3: of tasks to find meaning in your work because you're

520
00:25:06,040 --> 00:25:09,520
Speaker 3: passionate about what you're doing. These are really important things.

521
00:25:09,720 --> 00:25:12,880
Speaker 1: Yeah, I wanted to ask a related question. I'm trying

522
00:25:12,920 --> 00:25:15,639
Speaker 1: to think how to phrase this, but how much of

523
00:25:15,640 --> 00:25:19,640
Speaker 1: that dedication has to do with the actual material you're

524
00:25:19,680 --> 00:25:24,400
Speaker 1: dealing with, so feed for animals and grarian equipment and

525
00:25:24,480 --> 00:25:28,119
Speaker 1: growing things, versus the business model and the things the

526
00:25:28,160 --> 00:25:33,399
Speaker 1: company is doing to engender I guess employee dedication. Could

527
00:25:33,440 --> 00:25:36,879
Speaker 1: this be replicable at a place like home depot or

528
00:25:36,920 --> 00:25:39,480
Speaker 1: does it take a specific type of person to really

529
00:25:39,520 --> 00:25:39,800
Speaker 1: do it?

530
00:25:40,600 --> 00:25:43,600
Speaker 3: I think you know, this can apply to other retailers

531
00:25:43,640 --> 00:25:45,920
Speaker 3: as well, in different spaces. But I think this common

532
00:25:46,480 --> 00:25:49,040
Speaker 3: tie among these kinds of players that I've seen is

533
00:25:49,080 --> 00:25:52,200
Speaker 3: that they are finding these sort of very passionate customers.

534
00:25:52,240 --> 00:25:56,240
Speaker 3: People already care deeply about the product or the lifestyle.

535
00:25:56,400 --> 00:25:58,560
Speaker 3: I mean, the people at Trader Joe's. There's no more

536
00:25:58,600 --> 00:26:01,200
Speaker 3: cult like brand, right, the line up, I mean, I

537
00:26:01,200 --> 00:26:03,800
Speaker 3: remember when they opened the store and your Columbus Circle,

538
00:26:03,840 --> 00:26:07,399
Speaker 3: the lines were incredible, right. So that certainly helps, But

539
00:26:07,440 --> 00:26:10,280
Speaker 3: I think it's also about telling your employees that they're

540
00:26:10,320 --> 00:26:13,600
Speaker 3: not robots, right, They can actually engage and have some

541
00:26:13,680 --> 00:26:15,639
Speaker 3: ability to think on their own about how can we

542
00:26:15,680 --> 00:26:16,520
Speaker 3: serve that customer.

543
00:26:16,720 --> 00:26:18,399
Speaker 1: Well, the other thing I want to ask you about

544
00:26:18,560 --> 00:26:21,359
Speaker 1: is I guess the pay structure at Tractor Supply and

545
00:26:21,400 --> 00:26:26,600
Speaker 1: how much does that feed into engendering employee loyalty and dedication.

546
00:26:26,840 --> 00:26:28,960
Speaker 1: And I was reading the business case and one of

547
00:26:29,000 --> 00:26:32,280
Speaker 1: the unusual things it seems that Tractor Supply is doing

548
00:26:32,480 --> 00:26:36,200
Speaker 1: is they're providing profit shares for not just managers, but

549
00:26:36,280 --> 00:26:38,280
Speaker 1: for even part time employees.

550
00:26:38,760 --> 00:26:41,400
Speaker 3: This is unique, right, So many of the store managers

551
00:26:41,440 --> 00:26:43,960
Speaker 3: I talked to said that at prior retailers where they worked,

552
00:26:44,200 --> 00:26:46,719
Speaker 3: the managerial staff would get profit sharing, but you wouldn't

553
00:26:46,720 --> 00:26:49,520
Speaker 3: see it flow all the way down to the store employees,

554
00:26:49,600 --> 00:26:52,520
Speaker 3: even part timers. And here last year, I think they

555
00:26:52,560 --> 00:26:55,360
Speaker 3: paid more than a dollar per hour extra as part

556
00:26:55,400 --> 00:26:58,719
Speaker 3: of profit sharing to your frontline team member in the store.

557
00:26:58,840 --> 00:27:01,240
Speaker 3: That's pretty significant someone. I think. The other thing they've

558
00:27:01,280 --> 00:27:04,000
Speaker 3: done is they've had to because the marketing conditions raise

559
00:27:04,040 --> 00:27:06,879
Speaker 3: wages pretty considerably during the pandemic. So you've seen a

560
00:27:06,920 --> 00:27:09,639
Speaker 3: thirty five percent increase in wages, and that's just to

561
00:27:09,720 --> 00:27:11,959
Speaker 3: keep up with Walmart and Target and others who've been

562
00:27:11,960 --> 00:27:14,440
Speaker 3: increasing wages, so they've had to do that, but they've

563
00:27:14,440 --> 00:27:17,840
Speaker 3: also extended benefits and improved benefits for people. And then

564
00:27:17,840 --> 00:27:21,280
Speaker 3: they did some very pandemic specific things. For example, they

565
00:27:21,320 --> 00:27:24,239
Speaker 3: offered employees who had kids who were being schooled at

566
00:27:24,280 --> 00:27:27,360
Speaker 3: home who didn't have a good personal computer, and they

567
00:27:27,400 --> 00:27:30,320
Speaker 3: bought them chromebooks or other personal computers, about three thousand

568
00:27:30,359 --> 00:27:33,160
Speaker 3: of these for the children and grandchildren of their associates.

569
00:27:33,600 --> 00:27:36,199
Speaker 3: So they did take these extra steps to care for

570
00:27:36,240 --> 00:27:38,920
Speaker 3: their employees during the pandemic that I think have paid

571
00:27:38,960 --> 00:27:41,960
Speaker 3: off as well. The other thing I think they've done

572
00:27:42,440 --> 00:27:45,760
Speaker 3: is they've tried not to extend themselves, so they've been

573
00:27:45,840 --> 00:27:49,040
Speaker 3: hiring aggressively. They say they've tried to keep revenue per

574
00:27:49,080 --> 00:27:53,320
Speaker 3: full time equivalent roughly equal, even as revenue has exploded,

575
00:27:53,760 --> 00:27:56,760
Speaker 3: rather than trying to drive margin improvement in a dramatic way.

576
00:27:57,000 --> 00:27:59,960
Speaker 3: They've reinvested both in the workforce and then in storymodel,

577
00:28:00,560 --> 00:28:02,920
Speaker 3: so it's a nicer place to work. As they've improved

578
00:28:02,920 --> 00:28:03,679
Speaker 3: the stores too.

579
00:28:20,440 --> 00:28:24,240
Speaker 2: Let's talk more about the pandemic and how they've navigated

580
00:28:24,280 --> 00:28:26,399
Speaker 2: the last few years, because this has been a really

581
00:28:26,480 --> 00:28:29,679
Speaker 2: tough environment for anyone for obvious reasons. But I have

582
00:28:29,760 --> 00:28:33,880
Speaker 2: to imagine there are some added complications or maybe that's

583
00:28:33,880 --> 00:28:35,919
Speaker 2: not the right word, but with the tractor supply, in

584
00:28:36,040 --> 00:28:39,760
Speaker 2: part because it's been hard to know and it may

585
00:28:39,800 --> 00:28:42,880
Speaker 2: be still did TBD about like the degree to which

586
00:28:42,880 --> 00:28:45,840
Speaker 2: certain lifestyle patterns that came about in twenty twenty and

587
00:28:45,920 --> 00:28:48,480
Speaker 2: twenty twenty one are going to persist. And so obviously

588
00:28:48,840 --> 00:28:50,920
Speaker 2: there are probably a lot of people that in twenty

589
00:28:51,000 --> 00:28:54,360
Speaker 2: twenty like I'm gonna get chickens. I'm going to do this,

590
00:28:54,520 --> 00:28:56,200
Speaker 2: and then in twenty twenty three it's like, damn, I

591
00:28:56,200 --> 00:28:58,320
Speaker 2: have a full time job. I don't have time for chickens.

592
00:28:58,360 --> 00:29:00,800
Speaker 2: These are like hard things to navigate and it's hard

593
00:29:00,800 --> 00:29:02,719
Speaker 2: to know like what's going to last and what's going

594
00:29:02,760 --> 00:29:05,080
Speaker 2: to be persistent and so forth. Talk to us a

595
00:29:05,080 --> 00:29:08,760
Speaker 2: little bit about like the pandemic shock, the consumption boom,

596
00:29:08,760 --> 00:29:11,160
Speaker 2: and how they've sort of managed to balance things out.

597
00:29:11,280 --> 00:29:13,240
Speaker 3: This is the big question to me, and the big

598
00:29:13,320 --> 00:29:16,080
Speaker 3: question in the case. We've seen the companies that have

599
00:29:16,160 --> 00:29:18,800
Speaker 3: flamed out, right, We've seen the Pelotons of the world, right,

600
00:29:19,080 --> 00:29:22,400
Speaker 3: but we've also seen some firms that have flamed out

601
00:29:22,480 --> 00:29:25,120
Speaker 3: but they've seen a reset. Right. So home Depot just

602
00:29:25,120 --> 00:29:28,760
Speaker 3: this morning announcing Earniers right, and comps are down two percent,

603
00:29:28,880 --> 00:29:31,480
Speaker 3: so not dramatically, but this is a company that was

604
00:29:31,520 --> 00:29:34,840
Speaker 3: recording pretty incredible comps Home Depot and lows were. As

605
00:29:34,880 --> 00:29:38,400
Speaker 3: for Tractor, I mean, comps peaked over twenty percent during

606
00:29:38,400 --> 00:29:41,440
Speaker 3: twenty twenty. That's a crazy number. You know, I worked

607
00:29:41,480 --> 00:29:44,040
Speaker 3: at Staples before I became an academic. I mean, twenty

608
00:29:44,080 --> 00:29:46,680
Speaker 3: percent comps. I never heard of such a thing. And

609
00:29:46,760 --> 00:29:48,640
Speaker 3: yet you know, last year they were a little over

610
00:29:48,680 --> 00:29:51,360
Speaker 3: six percent. Now this recent quarter they were like two

611
00:29:51,400 --> 00:29:53,680
Speaker 3: and a half percent, So they've settled down, but they're

612
00:29:53,760 --> 00:29:57,040
Speaker 3: still positive. The question is how much of a reset,

613
00:29:57,120 --> 00:30:00,080
Speaker 3: you know, is happening and are these trends permanent? And

614
00:30:00,120 --> 00:30:02,280
Speaker 3: as you say, well, people continue to raise the chicks,

615
00:30:02,600 --> 00:30:05,040
Speaker 3: and I think this is the challenge they're navigating going

616
00:30:05,080 --> 00:30:07,840
Speaker 3: forward that will be really important for them to navigate.

617
00:30:08,160 --> 00:30:10,440
Speaker 3: So far, they've done a pretty good job relative to

618
00:30:10,440 --> 00:30:13,800
Speaker 3: a lot of the other i'll call them pandemic flashes

619
00:30:13,840 --> 00:30:16,480
Speaker 3: in the pan right at retaining customers.

620
00:30:16,000 --> 00:30:18,880
Speaker 2: And the stocks way up since twenty twenty, so clearly

621
00:30:18,920 --> 00:30:21,440
Speaker 2: it's not one of these mountaintops. That's just back to

622
00:30:21,480 --> 00:30:21,880
Speaker 2: the base.

623
00:30:22,080 --> 00:30:24,520
Speaker 1: So when you spoke to management, did you get any

624
00:30:24,760 --> 00:30:28,160
Speaker 1: inklings or clues about what's next in terms of the strategy,

625
00:30:28,200 --> 00:30:30,240
Speaker 1: because for the past few years it has just been

626
00:30:30,320 --> 00:30:33,280
Speaker 1: you know, expansion, managing through the pandemic and trying to

627
00:30:33,320 --> 00:30:34,520
Speaker 1: match supply with demand.

628
00:30:34,920 --> 00:30:36,760
Speaker 3: Well, one of the biggest things they've been doing is

629
00:30:36,920 --> 00:30:39,520
Speaker 3: transforming their side loots. I think this is a really

630
00:30:39,560 --> 00:30:43,479
Speaker 3: interesting play. It comes with some risks, right, So if

631
00:30:43,520 --> 00:30:45,920
Speaker 3: you know the sidelot, maybe the one you go to Tracy,

632
00:30:46,360 --> 00:30:49,720
Speaker 3: it's got a lot of large agricultural equipment, big fencing

633
00:30:49,760 --> 00:30:52,680
Speaker 3: for example, for your goats, right, and it's spread out

634
00:30:52,720 --> 00:30:55,520
Speaker 3: typically in the sort of side parking lot. And what

635
00:30:55,560 --> 00:30:58,160
Speaker 3: they've realized is a lot of wasted real estate there, right,

636
00:30:58,200 --> 00:31:00,880
Speaker 3: because you've really spread that stuff out. And they've looked

637
00:31:00,880 --> 00:31:04,160
Speaker 3: to actually build some small garden centers. They've opened a

638
00:31:04,160 --> 00:31:06,880
Speaker 3: few hundred of these around the country. But holl Looten

639
00:31:06,920 --> 00:31:10,240
Speaker 3: told me, we want to over index on certain kinds

640
00:31:10,440 --> 00:31:12,920
Speaker 3: of gardening, right, So in other words, they're looking to

641
00:31:12,960 --> 00:31:15,440
Speaker 3: sell more fruit trees than you would get at many

642
00:31:15,480 --> 00:31:20,160
Speaker 3: other places. They're going to sell less flowers and more vegetables, right,

643
00:31:20,600 --> 00:31:22,960
Speaker 3: because they don't want to compete head to head again

644
00:31:23,160 --> 00:31:25,720
Speaker 3: with some of those big players in the home improvements So.

645
00:31:25,720 --> 00:31:28,800
Speaker 1: Home Deepot and Lows sell all the annuals and perennials.

646
00:31:28,920 --> 00:31:30,479
Speaker 3: So they're going to have a little bit of that tracy,

647
00:31:30,520 --> 00:31:33,000
Speaker 3: but they're going to over index. They said, So, now,

648
00:31:33,000 --> 00:31:36,600
Speaker 3: why is this potentially a risk? Well, I mean, I

649
00:31:36,600 --> 00:31:38,520
Speaker 3: think it's appealing. It's appealing for me as someone with

650
00:31:38,560 --> 00:31:40,400
Speaker 3: a big garden, the notion that I can go to

651
00:31:40,440 --> 00:31:42,760
Speaker 3: tractor now where I go anyway for a lot of things.

652
00:31:43,440 --> 00:31:46,960
Speaker 3: But this does nudge them closer to head to head competition.

653
00:31:47,200 --> 00:31:47,320
Speaker 1: Right.

654
00:31:47,400 --> 00:31:50,520
Speaker 3: Even with that over indexing, their product mix is now

655
00:31:50,560 --> 00:31:52,719
Speaker 3: going to overlap just a little bit more with some

656
00:31:52,760 --> 00:31:55,360
Speaker 3: of these other players. And this is an issue I

657
00:31:55,440 --> 00:31:58,360
Speaker 3: think as firms try to drive comps as they mature,

658
00:31:59,080 --> 00:32:02,360
Speaker 3: is even if they start out not competing very directly

659
00:32:02,560 --> 00:32:07,520
Speaker 3: with other players, they encroach gradually. Think about Starbucks and Duncan,

660
00:32:07,720 --> 00:32:10,920
Speaker 3: two firms that thirty years ago looked radically different, and

661
00:32:11,000 --> 00:32:15,120
Speaker 3: yet Duncan sells lattes right. Starbucks has drive throughs. They've

662
00:32:15,160 --> 00:32:18,520
Speaker 3: grown more like we call this strategy convergence, and that

663
00:32:18,640 --> 00:32:20,800
Speaker 3: is the risk, but I think that's one key area

664
00:32:20,840 --> 00:32:23,920
Speaker 3: and then the other key area Joan Tracy is is obviously,

665
00:32:23,960 --> 00:32:27,120
Speaker 3: I think the idea of exploring sporting goods. As a

666
00:32:27,120 --> 00:32:29,360
Speaker 3: result the recent deal, I will note that the store

667
00:32:29,360 --> 00:32:31,440
Speaker 3: nearest me, the store manager said they've he's had a

668
00:32:31,480 --> 00:32:35,400
Speaker 3: lot of success, for example, selling Kayaks already in his store.

669
00:32:35,720 --> 00:32:37,920
Speaker 2: I mean it's interesting, you know, you talk about, okay

670
00:32:38,160 --> 00:32:42,160
Speaker 2: when it comes to the outdoor space that they want

671
00:32:42,160 --> 00:32:44,520
Speaker 2: to some more plants, but maybe fruits and vegetables is

672
00:32:44,560 --> 00:32:48,520
Speaker 2: a way to differentiate themselves from the big flower sellers.

673
00:32:48,920 --> 00:32:51,800
Speaker 2: Is there a way in sporting goods that it can

674
00:32:51,840 --> 00:32:55,680
Speaker 2: differentiate itself from a bass Pro shop, like a way

675
00:32:55,720 --> 00:32:57,760
Speaker 2: so that they could sell sporting goods but in a

676
00:32:57,800 --> 00:33:00,000
Speaker 2: way that's more tractor and keeping to their true life.

677
00:33:00,720 --> 00:33:03,600
Speaker 3: I wish I knew. I don't know, because I mean

678
00:33:03,680 --> 00:33:06,040
Speaker 3: I am a big bass Pro customer. My son loves

679
00:33:06,120 --> 00:33:09,080
Speaker 3: to fish. The knowledge the folks at bass Pro have

680
00:33:09,280 --> 00:33:11,840
Speaker 3: and the selection, I mean, I can't imagine Tractor in

681
00:33:11,880 --> 00:33:13,560
Speaker 3: their small stores is ever going to be able to

682
00:33:13,600 --> 00:33:15,200
Speaker 3: offer that kind of selection.

683
00:33:15,360 --> 00:33:18,040
Speaker 2: Why isn't best Pro publicly traded? Who owns that?

684
00:33:18,120 --> 00:33:20,520
Speaker 3: Johnny Morris, the founder still owns them. Oh really, I

685
00:33:20,600 --> 00:33:22,360
Speaker 3: might be wrong there, Joe, but I believe he still

686
00:33:22,400 --> 00:33:25,360
Speaker 3: owns the company. And that's a very much a destination

687
00:33:25,600 --> 00:33:28,640
Speaker 3: retail kind of place people drive. I think I wrote

688
00:33:28,640 --> 00:33:30,960
Speaker 3: in the case that in in four or five states

689
00:33:30,960 --> 00:33:33,200
Speaker 3: in the US, a bass Pro is the biggest tourist

690
00:33:33,280 --> 00:33:36,560
Speaker 3: destination a state. That's amazing, pretty incredible.

691
00:33:36,680 --> 00:33:39,560
Speaker 2: I've always wanted what's it is it in Memphis? Right?

692
00:33:39,560 --> 00:33:42,040
Speaker 2: They have? There's the bass Pro shops pyramids. You always

693
00:33:42,080 --> 00:33:42,840
Speaker 2: wanted to go to that.

694
00:33:43,040 --> 00:33:46,080
Speaker 3: I do think there's a few things. For example, tractor

695
00:33:46,160 --> 00:33:49,800
Speaker 3: sells gun safs, right. The tractor near me doesn't sell guns,

696
00:33:49,920 --> 00:33:53,080
Speaker 3: but like so that's like an interesting niche thing. And

697
00:33:53,160 --> 00:33:54,600
Speaker 3: by the way, I think they said to me, you

698
00:33:54,640 --> 00:33:57,120
Speaker 3: know people buy them for things other than guns, right,

699
00:33:57,160 --> 00:33:59,440
Speaker 3: So they just happen to be called gun saves, right,

700
00:33:59,480 --> 00:34:02,560
Speaker 3: So they fund a little niche. This is this eclectic

701
00:34:02,680 --> 00:34:05,800
Speaker 3: product mix, right, that they've found. I mean, my favorite,

702
00:34:05,800 --> 00:34:08,680
Speaker 3: of course is the toolboxes for the trucks that are

703
00:34:08,760 --> 00:34:12,239
Speaker 3: branded tractor Supply. I mean, people are literally advertising for

704
00:34:12,320 --> 00:34:15,359
Speaker 3: the company and they just somehow spot Tractors.

705
00:34:15,120 --> 00:34:17,719
Speaker 1: Supply baseball hats as well. Those are all over.

706
00:34:17,880 --> 00:34:20,360
Speaker 3: You know what did they think they do? Million?

707
00:34:20,600 --> 00:34:23,279
Speaker 1: I'd be glad to bring you with any excuse to

708
00:34:23,320 --> 00:34:24,680
Speaker 1: go to the tractor supply store.

709
00:34:24,800 --> 00:34:28,400
Speaker 2: Are buying decisions made at the local level, like is

710
00:34:28,440 --> 00:34:32,120
Speaker 2: there a store buyer or regional buyer, like who who

711
00:34:32,160 --> 00:34:34,600
Speaker 2: is empowered to make these choices? And I imagine that

712
00:34:34,640 --> 00:34:37,080
Speaker 2: the good mix must be different in different locations in

713
00:34:37,120 --> 00:34:37,640
Speaker 2: the country.

714
00:34:37,760 --> 00:34:41,080
Speaker 3: It is. So they are working from their store support

715
00:34:41,200 --> 00:34:45,239
Speaker 3: center in Tennessee, but they are in close communication with

716
00:34:45,280 --> 00:34:49,759
Speaker 3: the local markets, and there's quite significant differences you could imagine, right,

717
00:34:49,800 --> 00:34:52,919
Speaker 3: I mean the Northeast have much colder temperatures. Yeah, so

718
00:34:53,120 --> 00:34:55,719
Speaker 3: not raising chicks, for example, looks really different in the

719
00:34:55,760 --> 00:34:59,279
Speaker 3: Northeast than it does in Texas, for example, simply because

720
00:34:59,280 --> 00:35:02,000
Speaker 3: of the temperatures, but also in terms of the types

721
00:35:02,040 --> 00:35:04,320
Speaker 3: of things that you have. Right, So you're not having

722
00:35:04,560 --> 00:35:08,359
Speaker 3: cattle in the Northeast generally speaking, right, but you might

723
00:35:08,400 --> 00:35:11,799
Speaker 3: have someone with a few cows or a few bulls

724
00:35:11,800 --> 00:35:15,239
Speaker 3: in Texas, for example. So they very much work on

725
00:35:15,280 --> 00:35:18,319
Speaker 3: their team to tailor their products around the country. So

726
00:35:18,360 --> 00:35:20,399
Speaker 3: the stores look a little different as you go around

727
00:35:20,400 --> 00:35:20,880
Speaker 3: the country.

728
00:35:21,200 --> 00:35:24,120
Speaker 1: Is that very different to how some other big box

729
00:35:24,160 --> 00:35:25,080
Speaker 1: stores operate.

730
00:35:25,680 --> 00:35:27,560
Speaker 3: No, I don't. I think the good ones all try

731
00:35:27,600 --> 00:35:29,640
Speaker 3: to tailor you know. I know that at Trader Joe's

732
00:35:29,680 --> 00:35:32,440
Speaker 3: they certainly try to deal with the fact that, for example,

733
00:35:32,440 --> 00:35:35,600
Speaker 3: the demographic composition of the population looks very different in

734
00:35:35,600 --> 00:35:38,680
Speaker 3: southern California than it does in Boston, right, And so

735
00:35:39,239 --> 00:35:42,040
Speaker 3: I think Trader has been very effective at trying to

736
00:35:42,160 --> 00:35:46,200
Speaker 3: understand that. So you'll see some differences. Obviously in Trader's case,

737
00:35:46,200 --> 00:35:49,080
Speaker 3: it's always that same private label strategy, right, So they're

738
00:35:49,080 --> 00:35:52,080
Speaker 3: not messing with that that's really fundamental to them. But

739
00:35:52,320 --> 00:35:54,560
Speaker 3: the mix of the product's going to look different based

740
00:35:54,600 --> 00:35:58,480
Speaker 3: on their assessment of the demographic composition of the population. Right.

741
00:35:58,880 --> 00:36:02,760
Speaker 1: So, just going back to the purpose of the Harvard business,

742
00:36:02,800 --> 00:36:06,280
Speaker 1: can you study, if you're a student reading this document,

743
00:36:06,560 --> 00:36:10,320
Speaker 1: what managerial conclusions do you think they should come.

744
00:36:10,160 --> 00:36:13,680
Speaker 3: Away with here? Oh? Boy, I guess I'm asking for them.

745
00:36:13,719 --> 00:36:17,680
Speaker 3: If you're a student, don't listen to this, Yeah, No,

746
00:36:17,760 --> 00:36:19,120
Speaker 3: I mean for me. I am going to teach some

747
00:36:19,200 --> 00:36:21,760
Speaker 3: of these principles of judo strategy. How does a smaller

748
00:36:21,800 --> 00:36:25,280
Speaker 3: player compete against players that are ten times their size,

749
00:36:25,840 --> 00:36:27,799
Speaker 3: find a way to not compete head to head or

750
00:36:27,840 --> 00:36:31,279
Speaker 3: try not to and even use the strengths of those

751
00:36:31,360 --> 00:36:33,799
Speaker 3: rivals against them. Think about it. Can a large Hume

752
00:36:33,880 --> 00:36:37,280
Speaker 3: improvement chain or can a pet Co do the chicken swaps?

753
00:36:37,640 --> 00:36:40,279
Speaker 3: I think that's hard to do actually, right? You know,

754
00:36:40,400 --> 00:36:43,400
Speaker 3: store models are incredibly rigid. That's one thing you know

755
00:36:43,520 --> 00:36:46,560
Speaker 3: you note about retail. Think about how many retailers, for example,

756
00:36:46,640 --> 00:36:50,480
Speaker 3: large retailers have tried to open a smaller format stores

757
00:36:50,520 --> 00:36:51,080
Speaker 3: and failed.

758
00:36:51,960 --> 00:36:52,840
Speaker 2: Why do they fail?

759
00:36:53,760 --> 00:36:55,600
Speaker 3: It turns out it's like a machine. When you run

760
00:36:55,600 --> 00:36:58,520
Speaker 3: a retailer. You have two three thousand and four thousand stores,

761
00:36:58,760 --> 00:37:01,520
Speaker 3: they're all roughly the same size. They're cookie cutters, right,

762
00:37:01,719 --> 00:37:04,240
Speaker 3: and now suddenly you want to operate a very different

763
00:37:04,840 --> 00:37:08,279
Speaker 3: store format, much smaller, much more neighborhoody. It turns out

764
00:37:08,280 --> 00:37:11,360
Speaker 3: it's really difficult. And what firms do is they we

765
00:37:11,440 --> 00:37:15,400
Speaker 3: call this straddling. So give an example Trader Joe's. No

766
00:37:15,520 --> 00:37:18,200
Speaker 3: one has been able to copy them. Well, remember Whole

767
00:37:18,200 --> 00:37:21,520
Speaker 3: Foods tried that little experiment with the three sixty five

768
00:37:21,560 --> 00:37:24,640
Speaker 3: by Whole food stores. These were these small little stores

769
00:37:24,640 --> 00:37:27,240
Speaker 3: that only sold the Whole Foods private label. Total debacle.

770
00:37:27,280 --> 00:37:29,520
Speaker 3: They closed them all right, Why because they were not

771
00:37:29,560 --> 00:37:32,120
Speaker 3: as good as a whole foods right, and not as

772
00:37:32,160 --> 00:37:33,880
Speaker 3: good as a Trader Joe's. They were sort of this

773
00:37:34,239 --> 00:37:37,920
Speaker 3: hybrid four humped camel right that they tried to create.

774
00:37:38,200 --> 00:37:40,480
Speaker 3: This is the same thing Delta did when they created

775
00:37:40,600 --> 00:37:43,160
Speaker 3: Song right. Not as good as Delta, not as good

776
00:37:43,160 --> 00:37:45,760
Speaker 3: as Southwest, some kind of weird thing in between.

777
00:37:46,160 --> 00:37:48,880
Speaker 2: What is another maybe in a different industry or something

778
00:37:49,160 --> 00:37:52,360
Speaker 2: where a company that you would teach is an example

779
00:37:52,400 --> 00:37:54,960
Speaker 2: of a Judah, a successful.

780
00:37:54,560 --> 00:37:56,359
Speaker 3: Judas Yeah, I mean the other one. As I say,

781
00:37:56,360 --> 00:37:58,960
Speaker 3: I'm just finishing up as a case on Viking Cruise Lines. Okay,

782
00:37:59,040 --> 00:38:00,359
Speaker 3: this is a really interest company and they I'll tell

783
00:38:00,360 --> 00:38:02,360
Speaker 3: you how I got interested. I got a brochure that

784
00:38:02,480 --> 00:38:04,560
Speaker 3: was really mad Joe and I got the brochure because

785
00:38:04,920 --> 00:38:11,040
Speaker 3: Viking targets mature couples. And I was like, wait a second,

786
00:38:11,360 --> 00:38:11,879
Speaker 3: I'm not al.

787
00:38:14,160 --> 00:38:15,960
Speaker 1: And that's how you know you're getting old when you

788
00:38:16,000 --> 00:38:19,000
Speaker 1: start ticking you know, different boxes for demographics and you

789
00:38:19,040 --> 00:38:20,840
Speaker 1: start getting targeted ads.

790
00:38:20,880 --> 00:38:22,960
Speaker 3: And my wife really rubbed it in. She goes, she's

791
00:38:22,960 --> 00:38:24,400
Speaker 3: a fewyears younger than me, and she goes, well, I

792
00:38:24,400 --> 00:38:27,080
Speaker 3: didn't get the brochure, but I you know, there's a

793
00:38:27,120 --> 00:38:30,720
Speaker 3: page in the Viking brochure and it says what Viking

794
00:38:31,160 --> 00:38:34,719
Speaker 3: doesn't do. And this intrigues me because this is what

795
00:38:34,840 --> 00:38:36,680
Speaker 3: I teach. The idea of you know what Michael Porter

796
00:38:36,719 --> 00:38:38,960
Speaker 3: wants rite, the idea of the essence of strategy is

797
00:38:39,040 --> 00:38:42,280
Speaker 3: choosing what not to do, making trade offs right trader,

798
00:38:42,400 --> 00:38:44,759
Speaker 3: you know, not selling branded goods and not doing self

799
00:38:44,840 --> 00:38:47,919
Speaker 3: checkout and not doing traditional TV ads, all the things

800
00:38:47,920 --> 00:38:51,440
Speaker 3: Trader Joe's doesn't do, right Tractor not doing a lot

801
00:38:51,480 --> 00:38:53,080
Speaker 3: of the things the big homer fruit change to you, Well,

802
00:38:53,080 --> 00:38:55,160
Speaker 3: what about Viking. No one under the age of eighteen

803
00:38:55,200 --> 00:38:57,840
Speaker 3: can go on one of their ships. I love it,

804
00:38:57,920 --> 00:39:00,080
Speaker 3: so it is truly for the mature couple. They do

805
00:39:00,160 --> 00:39:03,520
Speaker 3: allow you to bring your family. The no casinos, right,

806
00:39:03,800 --> 00:39:07,560
Speaker 3: they over index on river cruising, dominate in river cruising,

807
00:39:07,719 --> 00:39:11,719
Speaker 3: smaller boats much more intimate. So they found a way,

808
00:39:11,880 --> 00:39:14,480
Speaker 3: right and as it turns out, World Caribbean right all

809
00:39:14,480 --> 00:39:17,120
Speaker 3: about the big boats. Wait, holy cow, we got to

810
00:39:17,160 --> 00:39:19,840
Speaker 3: compete in the river segment. By the time they realized

811
00:39:19,880 --> 00:39:22,920
Speaker 3: what was going on, Viking had established a dominant presence

812
00:39:22,960 --> 00:39:25,640
Speaker 3: on the European rivers with these smaller boats. And it's

813
00:39:25,719 --> 00:39:27,960
Speaker 3: just another example of a firm that really did this

814
00:39:28,040 --> 00:39:28,520
Speaker 3: quite well.

815
00:39:28,640 --> 00:39:30,400
Speaker 1: Here's the important question, are you going to go on

816
00:39:30,440 --> 00:39:31,160
Speaker 1: a viking cruise?

817
00:39:31,160 --> 00:39:34,040
Speaker 3: Now? So now I'm intrigued, but I think I'm still

818
00:39:34,080 --> 00:39:37,560
Speaker 3: too young, Tracy. I hope so, but I'm intrigued.

819
00:39:38,239 --> 00:39:41,080
Speaker 2: There's like what twenty one hundred or somewhere two thousand

820
00:39:41,239 --> 00:39:45,239
Speaker 2: somewhere of these locations, Like how much more space is

821
00:39:45,320 --> 00:39:47,920
Speaker 2: there in this country for for tractors.

822
00:39:47,960 --> 00:39:51,720
Speaker 3: So Tractor just announced with their recent quarterly earnings release

823
00:39:52,000 --> 00:39:55,200
Speaker 3: that they've raised their target for stores to three thousand

824
00:39:55,280 --> 00:39:59,080
Speaker 3: across the country. Analysts reacted really positively to that. I

825
00:39:59,160 --> 00:40:02,520
Speaker 3: always worry about aggressive growth targets, but that's not a

826
00:40:02,640 --> 00:40:05,360
Speaker 3: you know, dramatic number. They're already over two thousand. But

827
00:40:05,400 --> 00:40:08,879
Speaker 3: you always worry about that saturation issue when you're trying

828
00:40:08,920 --> 00:40:11,560
Speaker 3: to growth locations, no question about it. So but yes,

829
00:40:11,600 --> 00:40:13,080
Speaker 3: they are going to try to get to three thousand,

830
00:40:13,160 --> 00:40:14,880
Speaker 3: but not overnight. I think it looks to be a

831
00:40:14,880 --> 00:40:17,920
Speaker 3: fairly gradual plan, and I think it's interesting some of

832
00:40:17,920 --> 00:40:22,000
Speaker 3: the retailers who've taken that slow, gradual approach. That's hard

833
00:40:22,000 --> 00:40:24,719
Speaker 3: to do. You know, management gets antsy sometimes, ye see

834
00:40:24,760 --> 00:40:26,719
Speaker 3: if they stick to it. But right now the plan

835
00:40:26,840 --> 00:40:29,360
Speaker 3: is a gradual growth to three thousand.

836
00:40:29,920 --> 00:40:32,520
Speaker 1: All right, Well, Michael, thank you so much for coming

837
00:40:32,560 --> 00:40:36,319
Speaker 1: on Odd Lots and explaining the tractor supply business case.

838
00:40:36,360 --> 00:40:37,759
Speaker 1: Really appreciate it. That was fun.

839
00:40:37,840 --> 00:40:39,239
Speaker 2: That was so good. Thank you so much.

840
00:40:39,320 --> 00:40:48,680
Speaker 3: Thanks Joe, Thanks Chasey.

841
00:40:53,320 --> 00:40:56,120
Speaker 1: So Joe, have you been a hobby farm pilled?

842
00:40:56,800 --> 00:40:59,680
Speaker 2: I'm really excited about our live video episode from the

843
00:40:59,719 --> 00:41:03,120
Speaker 2: chick Swap. So yes, one hundred percent. And in the meantime,

844
00:41:03,640 --> 00:41:05,399
Speaker 2: I am putting in an order for a hat. I'll

845
00:41:05,400 --> 00:41:07,279
Speaker 2: put you back. You don't have to buy it for me,

846
00:41:07,360 --> 00:41:09,799
Speaker 2: but next time, please pick me up a tractor supply hat.

847
00:41:09,880 --> 00:41:11,919
Speaker 1: Are I already told you I am grateful for any

848
00:41:11,960 --> 00:41:15,759
Speaker 1: excuse to go to my local tractor supply. Well, the

849
00:41:15,800 --> 00:41:18,280
Speaker 1: other thing is I wonder if we could expense chicken

850
00:41:18,320 --> 00:41:21,360
Speaker 1: purse purchases of Bloomberg in the name of all thoughts.

851
00:41:21,480 --> 00:41:22,960
Speaker 2: Yes, we definitely can. Yes, excellent.

852
00:41:23,320 --> 00:41:26,400
Speaker 1: Well, no, that was really interesting. I think Also the

853
00:41:26,560 --> 00:41:30,680
Speaker 1: sort of Judo strategy analogy of sort of like zigging

854
00:41:30,719 --> 00:41:33,480
Speaker 1: where other companies are zagging, makes a lot of sense.

855
00:41:33,719 --> 00:41:37,480
Speaker 1: And trying to compete, you know, essentially competing in the

856
00:41:37,520 --> 00:41:39,600
Speaker 1: same space but in a slightly different way.

857
00:41:39,719 --> 00:41:42,200
Speaker 2: Can I say I would not mind if we did

858
00:41:42,239 --> 00:41:45,319
Speaker 2: a lot more of these sort of like business strategy episodes, Yeah,

859
00:41:45,440 --> 00:41:48,839
Speaker 2: which we have. We've done some company episodes Monster. Did

860
00:41:48,880 --> 00:41:51,200
Speaker 2: we ever do a dominot We did a Dominoes? Yeah

861
00:41:51,239 --> 00:41:54,120
Speaker 2: we did. But like, you know, thinking about these things like, oh,

862
00:41:54,160 --> 00:41:56,440
Speaker 2: the essence of strategy is like what you don't do?

863
00:41:56,480 --> 00:41:59,799
Speaker 2: Are these certain ideas are the judo strategy? Or why

864
00:41:59,880 --> 00:42:02,799
Speaker 2: is it that retailers have a hard time moving from

865
00:42:02,840 --> 00:42:05,360
Speaker 2: large format to small format? You know, Walmarts tried this,

866
00:42:05,760 --> 00:42:08,080
Speaker 2: Amazons tried a bunch of like physical stores. I never

867
00:42:08,160 --> 00:42:10,839
Speaker 2: know that they work. I could see us doing way

868
00:42:10,880 --> 00:42:13,600
Speaker 2: more like this episode because it seems like a fruitful

869
00:42:13,600 --> 00:42:15,839
Speaker 2: area to learn how these companies actually operate.

870
00:42:15,680 --> 00:42:18,120
Speaker 1: Well totally, and also just getting an opportunity to ask

871
00:42:18,120 --> 00:42:21,280
Speaker 1: more questions about pricing as well, because I'm still really

872
00:42:21,320 --> 00:42:25,640
Speaker 1: interested in how individual corporate pricing decisions are feeding into

873
00:42:25,640 --> 00:42:26,880
Speaker 1: the bigger macro picture.

874
00:42:27,440 --> 00:42:29,839
Speaker 2: I'm also just a certain like how do you get

875
00:42:29,920 --> 00:42:33,600
Speaker 2: that like right mix because it's not like totally intuitive

876
00:42:33,600 --> 00:42:37,799
Speaker 2: to me. That's like, okay, vegetables and guns, safes and

877
00:42:37,920 --> 00:42:42,239
Speaker 2: kayaks and a certain size feed but like obviously that's

878
00:42:42,280 --> 00:42:45,279
Speaker 2: what the company's like, special Sauces is getting that, and

879
00:42:45,320 --> 00:42:47,440
Speaker 2: then how do you also, like I imagine every company,

880
00:42:47,480 --> 00:42:49,799
Speaker 2: like I said, would love to have employees who would

881
00:42:49,840 --> 00:42:52,120
Speaker 2: be that attentive to customers, but it's got to be

882
00:42:52,120 --> 00:42:53,200
Speaker 2: like really hard to build.

883
00:42:53,480 --> 00:42:55,799
Speaker 1: Well, I will tell you I plan to put in

884
00:42:56,200 --> 00:42:59,239
Speaker 1: some blueberry bushes this fall, hopefully, and I plan on

885
00:42:59,320 --> 00:43:02,759
Speaker 1: getting them from tractor Supply and getting some recommendations for

886
00:43:02,800 --> 00:43:05,560
Speaker 1: which ones might work. Anyway, shall we leave it there?

887
00:43:05,640 --> 00:43:06,399
Speaker 2: Let's leave it there.

888
00:43:06,520 --> 00:43:09,920
Speaker 1: Okay, this has been another episode of the Audlots podcast.

889
00:43:10,000 --> 00:43:13,440
Speaker 1: I'm Tracy Alloway. You can follow me at Tracy Alloway.

890
00:43:13,160 --> 00:43:16,000
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.

891
00:43:16,239 --> 00:43:20,360
Speaker 2: Follow our guest Michael Roberto at Michael A. Roberto, follow

892
00:43:20,400 --> 00:43:23,680
Speaker 2: our producers Carmen Rodriguez at Carmen Arman and dash Ol

893
00:43:23,680 --> 00:43:26,520
Speaker 2: Bennett at Dashbot. And check out all of the Bloomberg

894
00:43:26,560 --> 00:43:31,160
Speaker 2: podcasts under the handle at Podcasts, and for more Oddlots content,

895
00:43:31,200 --> 00:43:33,920
Speaker 2: go to Bloomberg dot com slash odd Lots, where we

896
00:43:33,960 --> 00:43:38,000
Speaker 2: have transcripts, a blog, and a newsletter, and check out

897
00:43:38,000 --> 00:43:40,800
Speaker 2: our discord really fun place to hang out on the web.

898
00:43:40,960 --> 00:43:43,640
Speaker 2: Listeners chatting twenty four to seven about all these topics.

899
00:43:43,920 --> 00:43:47,080
Speaker 2: Go there, discord dot gg, slash odlogs.

900
00:43:47,200 --> 00:43:50,280
Speaker 1: Oh we also share pictures of our respective tomato.

901
00:43:50,360 --> 00:43:53,920
Speaker 2: There's an HGTV channel that Tracy's set up where she

902
00:43:54,000 --> 00:43:55,000
Speaker 2: posts photos We're.

903
00:43:54,880 --> 00:43:58,239
Speaker 1: Doing and if you like Audlots, please leave us a

904
00:43:58,320 --> 00:44:01,719
Speaker 1: positive review on your face for a podcast platform. Thanks

905
00:44:01,760 --> 00:44:02,200
Speaker 1: for listening.