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Are we competing against our neighbor? | Tractor Supply & Messick's Mt Joy

 

New Building and New Neighbors

We've just completed a move from our main store in Elizabethtown, just six miles down the road to Mount Joy. And it has been an enormous move. The amount of things in a dealership that have to get transferred down here, parts and equipment and all the stuff that's sold, things that are being repaired. It's a monumental task. And while we're here and operating here now and serving customers here, we still have some unpacking to do.

One thing you might notice, which is kind of unique about this location, is we kind of have a funny neighbor. You may not expect it, but when we look out across our driveway here and look out the front windows, right behind us is Tractor Supply. So today we're going to talk about Tractor Supply and the perception that we would have of them as an equipment dealer. Are they a friend or a competitor?

Our local farm supply chain here in the Northeast is Tractor Supply. And you've got other retailers of a similar concept around other parts of the country. But as far as what I gather, all of them are kind of the same. Tractor Supply as the name of this company is actually kind of a little funny to me because when you walk into their stores, supplying tractors doesn't seem to be their primary concern. It's not really what they seem to be all about.

When I went and walked around our neighboring store here earlier today, the very first thing that you come to when you walk in that front door is clothing. Over a quarter of the store is dedicated to clothing. Now, to like a rural lifestyler type customer or maybe a small farmer that these stores try to appeal to, having a place to shop for that rugged kind of outdoor clothing is nice. It's a nice thing that they offer. But putting aside 25% of their store space to something like clothing sure doesn't seem to put a real priority towards tractors and equipment.

If you continue back in further in that store, the next quarter in the back and a lot of the merchandising space out in front of the store is dedicated to feed for small animals. Things like stuff for your rabbits and your hamsters, a couple hay bales out front maybe for your horses. Another quarter of that store there is selling those kinds of products. Probably lucrative for them. That's usually a pretty high margin item. It's something that keeps you coming in the store over and over in order to buy that replacement stuff and creates good foot traffic. So probably a great item for them as far as their profitability goes. But again, another thing that has nothing to do with supplying tractors.

One place that we do overlap with Tractor Supply in the smallest of ways is in parts. As you walk through some of their aisles, you'll find a limited supply of fairly generic parts, things like rotary cutter blades, or 3-point hitch hardware. Now, if you go through and you look at those items, those are not OEM parts, which is primarily what we deal with. They tend to come from aftermarket companies like Stan's or A&I or Tisco. Those are all companies that we work with as well. And we can source and supply very much the same items at very much the same pricing.

It is a challenge when you walk around and you look and try to buy parts in that way. To go through and take these aftermarket parts and see them hanging there on a shelf, to know that that's going to fit your implement is awfully challenging. Those are not necessarily the parts that are sold for even their own line of implements, the CountyLine stuff that is sold there in the store. They're often parts that are a little bit more generic for a little bit more of the other machinery that might be out there in the market. But knowing what fits is next to impossible.

Did a little bit of price checking of those items. They're very comparably priced to what you're going to find in a dealership. And looking at those shelves, you're going to see definite signs of a lack of turn of that inventory. A lot of it is very dusty. The packaging is starting to discolor. A lot of it was tossed into a discount bin. So clearly not something that they've built their business around.

Another place that we have a little bit of overlap is in some of the implements that they offer for small tractors. So walking around their yard, you're going to find sometimes a little selection of rotary cutters and box blades and those kinds of items. Did a little bit of spot checking. Checking out the competition here. Some of these items can be priced okay. Some, sometimes aren't. They tend to come from a lot of domestic suppliers here that a lot of dealerships are actually able to use as well. You're going to see the name brands like Tarter and stuff on the side of a lot of those implements. Dealerships can go and buy from those same companies too if we desire to. We do not tend to. We have relationships with similar companies, but different names.

Did a little bit of spot checking of some of the pricing. The 48-inch box blade that was out there as priced at 9.99. Incidentally, we tend to sell the 48-inch Land Pride of about the same build quality for 9.19. So our Land Pride, which is that premium brand, is actually coming through a little bit less expensive. And most of the time you're getting a further discount off of that price when you're bundling it along with a tractor. So our dealership side implements actually can be the same or better value than what you're going to find from some of those box stores.

Again, this is another situation where you look at the inventory that's sitting outside here. You could tell this is not their bread and butter, right? Handful of them around. Obviously things are not well organized. You see a lot of weathering and stuff on things. It's not a bread and butter type thing for them.

So all of those things said, I actually shop at Tractor Supply with some amount of regularity. It is a really kind of unique niche in a hardware store. If you're somebody who does outdoor projects and you work on your own property, they kind of have a bent on certain kinds of hardware that you're not going to find in your kind of traditional Ace or True Value hardware store. Things like barbed wire or electrical motors or loose wheels and that kind of stuff, things that you might use for projects and stuff while you're out working outside.

I bought an animal feeder in there the other day, one of the big plastic tubs that you use to contain water. Unique stuff that you don't find anywhere else. So when I walk into that store, clothing's not so much my thing, and I don't have pets and stuff to buy the animal feed. One thing I do really appreciate that store for is those kinds of things as kind of a fun toy store for those Legos that you use for the different projects that you're working on. And that's one reason I am a Tractor Supply customer.

So if you haven't picked up by this point, I don't feel that Tractor Supply is much of a threat to a dealership-type organization. You can see our strengths are very different from one another. While we really are in the business of supplying tractors and their related parts, the attachments, and everything that goes along with them, that's not really what their core business is. They're really much more focused on that hardware and clothing and feed type customer. And it does very well for them. They've had a very successful business. Looking across the street here, I see a full parking lot and I'm happy to see them succeed in that way.

I think we can be a great complement to each other actually because we don't overlap in those huge ways. And if anything, their traffic brings customers to us and ours to them. And it's kind of handy to have them across the street here, much like we've chosen in this building to have an ag-based insurance company in our showroom and Farm Credit's right down the road here from us.

Kind of being centered with different companies that serve the same kind of customers can be a real asset. It makes shopping for things more convenient for you and kind of creates this hub here of businesses that all serve the same kind of people. So as odd as it is to see Tractor Supply across the street from a business whose job is supplying tractors, I think we're a complement to each other.

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