How Tractor Supply managed to shrink theft rates when they're surging almost everywhere else

• Retailers like Target, Dick's, and more say theft is taking a bigger bite out of earnings this year.
• Tractor Supply Co.'s CEO says retail crime is a major problem, but his company is bucking the trend.
• He revealed four factors that have helped Tractor Supply see lower rates of inventory shrink this year.

For Target, it's an additional $500 million this year. 

For Dick's Sporting Goods, it's one third of the decline in the company's merchandise profit margin last quarter.

All told, inventory shrink cost retailers nearly $100 billion last year, per the National Retail Federation.

Shrink is an accounting term that encompasses merchandise that has gone missing due to damage, error, and the largest piece of the puzzle: theft.

The impact on earnings has loomed large in recent weeks, as retailers disclose concerning increases in shrink — but not at Tractor Supply Co., CEO Hal Lawton told Insider in an interview.

Lawton said inventory shrink was down in 2022 compared with the year before, and so far, the rate is trending lower still in 2023.

Four factors that help Tractor Supply Co. buck the trend of rising retail theft

Lawton joined the rural lifestyle supply company in 2020 following stints at Home Depot, Macy's, and eBay, as well as serving on the board of the NRF and membership in the Retail Industry Leaders Association.

"Organized retail crime is worse now than I've ever seen it," Lawton said, but he offered four reasons why his company has been able to buck the trend.

1. Store size and layout

The average Tractor Supply store is about 20,000 square feet — more on par with an Ace Hardware and roughly one-fifth the size of a Home Depot — and there is a single entrance and exit near the cash register.

"You basically get greeted and you're checked out right in the front of our store," Lawton said.

Both Costco and Best Buy use similar front-door strategies, and each have also managed to keep thefts relatively low.

2. Lots of staff

A second and closely related factor is having enough people.

"We typically have a good bit of staffing in our stores. At any one time there's up to eight team members in the store and only 20,000 square feet," Lawton said. "You're getting lots of engagement, which has a tendency to defray theft."

3. Hard-to-steal merchandise

Of course, the types of products that Tractor Supply sells — livestock feed, gun safes, truck boxes, etc. — play a big part too.

"Most people aren't able to walk in and throw a couple of those 50-pound bags over their shoulder and walk out," Lawton said. "Even if you do, you're stealing only $80 or $100."

Aside from being harder to steal, this merchandise tends to be exceptionally durable and not likely to be damaged beyond salability — another element of shrink. 

4. Location, location, location

Lastly, Tractor Supply's typical store is located in more rural markets, rather than urban or suburban areas where lots of people live.

In a way, the company's "Life Out Here" slogan reflects the real-world benefit of being too far away from most folks to be a convenient target for criminals.

And Lawton said those who do live in the communities near his stores are a bit more ready to step in if they see something suspicious.

"Not to get into politics or bring out the Jason Aldean song, but if you think about "Try That In A Small Town" — there is some degree of that," Lawton said.