Part 1

CASE 3 Tractor Supply Company Targets the Part-Time Rancher

Tractor Supply Company (TSC), a large and fast-growing retailer with more than $6 billion in annual sales and more than 1,500 stores in 49 states, was the inventor of the "do-it-yourself" (DIY) trend. Its origins date to 1938, when Charles E. Schmidt Sr. established a mail-order tractor parts business. After the success of his first retail store in Minot, North Dakota, he opened additional stores to serve the needs of local farmers. But eventually, TSC's sales stagnated because small farms and ranches were being acquired by large farming and ranching corporations. These large agricultural firms buy supplies and equipment directly from manufacturers rather than through local farm supply stores like TSC.

TARGET MARKET

Since the early 1990s, TSC has targeted a growing group of people interested in recreational farming and ranching. Called "sundowners," "U-turners," "hobby farmers," "ruralpolitans," "metropolitans," "gentlemen farmers," and "ex-urbanites," these people have turned to the farm to escape the hubbub of urban and suburban life. They are drawn to what they believe is a more private, stress-free, simpler lifestyle. They typically live on 5 to 20 acres in a rural community outside a metropolitan area, where they work at a full-time profession, and use some of their earnings to keep their farms onPage 487operation. Many of them are the sons and daughters of traditional production farmers and inherited the family farm and decided to keep it running. Today less than 10 percent of TSC's customers classify themselves as full-time farmers or ranchers, and many of its customers do not farm at all.

RETAIL OFFERING

The typical TSC store has 15,000 square feet of inside selling space and a similar amount of outside space used to display agricultural fencing, livestock equipment, and horse stalls. The company tries to locate stores in the prime retail corridor of rural communities, two or three counties away from major metropolitan areas. Fifty percent of its stores are in previously occupied buildings.

The typical store stocks 16,000 to 20,000 SKUs, using a combination of national and private-label brands. TSC constantly tests new merchandise programs in its stores. For instance, based on a successful test of expanded clothing and footwear categories, TSC doubled the size of these areas of the store and added more lifestyle clothes and workwear for both men and women.

TSC stores are designed to make shopping an enjoyable experience and, at the same time, maximize sales and operating efficiencies. Their environment allows plenty of space for individual departments and visual displays. Informative signs assist customers with purchasing decisions by delineating "good, better, best" qualities, pointing out their "everyday low-pricing" policy, and providing useful information regarding product benefits and suggestions for appropriate accessories.

TSC emphasizes customer service. The company tries to hire store employees who have farming and ranching backgrounds. Its training programs include (1) a full management training program, which covers all aspects of its operations; (2) product knowledge modules produced in conjunction with key vendors; (3) frequent management skills training classes; (4) semiannual store managers' meetings, with vendor product presentations; (5) vendor-sponsored in-store training programs; and (6) ongoing product information updates at its management headquarters. This extensive training, coupled with a management philosophy that stresses empowerment, enables store employees to assist customers in making their purchase decisions and solve customer problems as they arise. Store employees wear highly visible red vests, aprons, or smocks and nametags. TSC uses a variety of incentive programs that provide the opportunity for store employees to receive additional compensation based on their team, store, and/or company performance.

While TSC creates a "hometown farmer" shopping experience for customers, there is nothing "small-town" or "laid back" about its operations and use of technology. Its management information and control systems include a point-of-sale system, a supply chain management, and replenishment system, a radio-frequency picking system in the distribution centers, a vendor purchase order control system, and a merchandise presentation system. These systems work together to track merchandise from the initial order through to the ultimate sale.

TSC has a centralized supply chain management team that focuses on replenishment and forecasting and a buying team that selects merchandise, develops assortments, and evaluates new products and programs. Almost all purchase orders and vendor invoices are transmitted through an electronic data interchange (EDI) system.

MISSION AND VALUES

Despite changes to TSC's retail strategy in the past 78 years, its mission and values have remained constant. The company's mission and value statements appear on its website, on cards handed out to all employees, and on the walls of every store. According to TSC management, the first discussion with new employees centers on the firm's values and mission because the firm steadfastly maintains that "being a great place to work enables the company to be a great place to shop and invest."

Sources: Tractor Supply Co., Annual Report 2015;www.tractorsupply.com.

This case was written by Barton Weitz, University of Florida, and Jenny Esdale.

DISCUSSION QUESTIONS

1. What is Tractor Supply Company's growth strategy? What retail mix does TSC provide?
2. Why and how has TSC's target customer changed over time?
3. How does TSC's retail mix provide the benefits sought by its target market?
4. How vulnerable is TSC to the competition? Why is this the case?
5. Why does TSC place so much emphasis on training employees?

Part 2

CASE 16 Choosing a Store Location for a Boutique

Stephanie Wilson must decide where to open a ready-to-wear boutique she's been contemplating for several years. Now in her late thirties, she's been working in municipal government ever since leaving college, where she majored in fine arts. She's divorced with two children (ages five and eight) and wants her own business, at least partly to be able to spend more time with her children. She loves fashion, feels she has a flair for it and has taken evening courses in fashion design and retail management. Recently, she heard about a plan to rehabilitate an old arcade building in the downtown section of her midwestern city. This news crystallized her resolve to move now. She's considering three locations.

THE DOWNTOWN ARCADE

The city's central business district has been ailing for some time. The proposed arcade renovation is part of a master redevelopment plan, with a new department store and several office buildings already operating. Completion of the entire master plan is expected to take another six years.

Dating from 1912, the arcade building was once the center of downtown trade, but it's been vacant for the past 15 years. The proposed renovation includes a three-level shopping facility, low-rate garage with validated parking, and convention center complex. Forty shops are planned for the first (ground) floor, 28 more on the second, and a series of restaurants on the third.

The location Stephanie is considering is 900 square feet and situated near the main ground-floor entrance. Rent is $20 per square foot, for an annual total of $18,000. If sales exceed $225,000, rent will be calculated at 8 percent of sales. She'll have to sign a three-year lease.

TENDERLOIN VILLAGE

The gentrified urban area of the city where Stephanie lives is called Tenderloin Village because of its lurid past. Today, however, the neat, well-kept brownstones and comfortable neighborhood make it feel like a trendy enclave. Many residents have done the remodeling work themselves and take great pride in their neighborhood.

About 20 small retailers are now in an area of the village adjacent to the convention center complex, along with some vegetarian and nouveau cuisine restaurants. There are also 3small women's specialty clothing stores.

The site available to Stephanie is on the village's main street on the ground floor of an old house. Its space is also about 900 square feet. Rent is $15,000 annually, with no extra charge based on the level of sales. The landlord knows Stephanie and will require a two-year lease.

APPLETREE MALL

This suburban mall has been open for eight years. A successful regional center, it has 3 department stores and 100 smaller shops just off a major interstate highway about eight miles from downtown. Of its 9 women's clothing retailers, 3 are in a price category considerably higher than what Stephanie has in mind.

Appletree has captured the retail business in the city's southwest quadrant, although growth in that sector has slowed in the past year. Nevertheless, mall sales are still running 12 percent ahead of the previous year. Stephanie learned of plans to develop a second shopping center east of town, which would be about the same size and character as Appletree Mall. But groundbreaking is still 18 months away, and no renting agent has begun to enlist tenants.

The location available to Stephanie in Appletree is two doors from the local department store chain. At 1,200 square feet, it's slightly larger than the other two possibilities. But it's long and narrow24 feet in front by 50 feet deep. Rent is $24 per square foot ($28,800 annually). Also, on sales that exceed $411,500, rent is 8 percent of sales. There's an additional charge of 1 percent of sales to cover common-area maintenance and mall promotions. The mall's five-year lease includes an escape clause if sales don't reach $411,500 after two years.

This case was prepared by Professor David Ehrlich, Marymount University.

DISCUSSION QUESTIONS

1. List the pluses and minuses of each location.
2. What type of store would be most appropriate for each location?
3. If you were Stephanie, which location would you choose? Why?

Part 3

CASE 20 Attracting Generation Y to a Retail Career

THE DIVA BRAND

Diva is a specialty retail store focused on fast-fashion jewelry and accessories. The brand's origins are in Australia, but recent years have seen rapid international expansion, and the brand now has stores in America, Russia, and Europe. Diva is predominantly located in shopping centers, with some stores in high-street locations, and is always positioned in/around apparel fashion clusters. The stores are clean, simplistic, and brightly lit, reflecting their fast-moving, funky, and vibrant product range targeted at the youth market (predominantly 15- to 25-year-old females). Diva's positioning sees it as the only fashion jewelry/hair accessory specialist retailer in Australia.

Due to Diva's recent expansion, staff numbers have grown significantly. However, Diva is confronted with the problem of attracting and retaining experienced and talented people, particularly from Generation Y. In an attempt to counteract this problem, Diva has implemented several internal talent policies to provide a point of difference and be an employer of choice, including:

• Training plans/workshops to fill skill gaps.
• The career development program for top store managers.
• A leadership development program for top regional managers.
• Increased salary package offers for certain roles to attract talent/skill.
• Global expansion, with new offers of career progression.

GENERATIONAL DIFFERENCES IN THE WORKFORCE

As a result of key demographic and lifestyle issues such as aging populations, declining fertility, delayed retirements, rising labor participation rates, and higher life expectancies, there is a demographic trough in the Asia Pacific workforce, in which there are soon to be smaller proportions of younger-aged members and larger cohorts of mature-aged workers. This is further compounded by a shrinking talent pool and the fact that retail is not perceived as a career of choice by the adult population, who has limited sight of career path opportunities "beyond the shop floor."

Although research acknowledges the pertinence of this issue in retailing today, it remains unclear how to effectively manage generational diversity in the workplace. This is not a new issue; however, wider age groups are culminating in less segregated work arrangements. In the past, older staff undertook senior managerial positions, while younger workers assumed front-desk or field positions. However, today it is common to see staff members from all age groups working together on projects, with senior employees managing across several generations or younger employees managing older generations. It is important to note that, if managed poorly, intergenerational impacts can cause conflict for employers and among employees, hampering workplace productivity and morale.

Retailers, as well as organizations from many other industries, therefore need to identify and adopt the best approaches in attracting and retaining staff across all retail functions, optimizing the experiences of mature-aged workers while capitalizing on the potential of young employees. This involves understanding each generation and its unique perspectives, communication styles, and working styles to provide tailored support. Each generation holds different perspectives of work, including the definition of an attractive working environment, leadership qualities, and preferred team playing approaches, and has an individual information processing style. For example, Generation Y believes in having fluid work patterns and influencing job terms and conditions. Conversely, the baby-boomer generation regards work as primary security in life, while Generation X values a balance between work and life.

GENERATION Y

Born between 1981 and 2000, members of Generation Y were one of the key segments of focus for Diva given their sheer numbers and prospective employment in retail as of recent or upcoming workforce entrants. While organizations have had time to understand baby boomers and Generation X-ers, determining the needs of Generation Y-ers has been challenging, especially given their vastly different values. This is particularly important given the significant career opportunities that exist for Generation Y in retailing. In better understanding the unique career motivations, perceptions, and aspirations of Generation Y, several focus groups were conducted with university students who were studying a business major and currently working in retail and high school students who were studying retail-related subjects and currently working in retail or interested in doing so.

In terms of perceptions of working in retail, our research found that retail is simply not viewed as a career of choice by Generation Y. This is primarily due to the feeling that retail involves "just being a checkout chick," has limited or no career paths "beyond the shop floor" and is, therefore, a short-term employment solution, and has difficult conditions at times (e.g., long hours, repetitive tasks, low salaries). A related concern was that the retail industry is not generally perceived as prestigious in the eyes of the general public.

Despite such issues, there were several motivators (other than financial) for working in retail for Generation Y, such as improving one's social life and extending friendship circles, gaining work experience while studying, and following a particular passion (i.e., fashion). Generation Y-ers also reported a variety of career aspirations that were generally consistent with the courses or subjects they were studying. Even though few listed retail as their number-one career option, a strong desire was found for a career that could be facilitated by the retail industry, such as marketing, human resources, or buying.

Focused on self-improvement, Generation Y-ers also expressed enjoyment in working for organizations that provide constant learning environments; they want to be involved in the organization's vision and mission, desire mobility and flexibility in the workplace, and seek instant gratification. Members of Generation Y also thrive on systematic feedback and value positive reinforcement at accelerated rates, as compared to previous generations. This is the primary reason that Generation Y questions starting at the bottom of the organizational ladder, having developed a strong desire for rapid career progression from years of high-level education.

This case was written by Sean Sands and Carla Ferraro, Monash University, Australia.

DISCUSSION QUESTIONS

1. How can Diva demystify what happens behind the scenes and make potential Generation Y employees aware of the opportunities available to them beyond the shop floor?
2. Diva has implemented a learning organizational culture in an attempt to attract and retain staff. Discuss the possible pros and cons of this strategy for Generation Y.
3. Give examples of how other organizations (perhaps even nonretailers) attract a Generation Y workforce. What could Diva learn from other organizations?