O'Reilly Auto Parts 2011 Annual Report Download - page 15

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See "Risk Factors" beginning on page 15 for a description of certain risks relevant to our business. These risk factors include, among
others, deteriorating economic conditions, the performance of the acquired CSK stores, increased debt levels, our acquisition
strategies, competition in the automotive aftermarket business, our dependence upon key and other personnel, future growth
assurance, our sensitivity to regional economic and weather conditions, the effect of sales of shares of our common stock eligible for
future sale, unanticipated fluctuations in our quarterly results, the volatility of the market price of our common stock, our relationships
with key vendors and availability of key products, a downgrade in our credit ratings, complications in our distribution centers
(―DC‖s), and environmental legislation and regulations.
OUR BUSINESS
Our goal is to continue to achieve growth in sales and profitability by capitalizing on our competitive advantages and executing our
growth strategy. We remain confident in our ability to continue to gain market share in our existing markets and grow our business in
new markets by focusing on our dual market strategy and the core O’Reilly values of customer service and expense control. Our
intent is to be the dominant auto parts provider in all the markets we serve, by providing superior customer service and significant
value to both DIY and professional service provider customers.
Competitive Advantages
We believe our effective dual market strategy, superior customer service, strategic distribution systems and experienced management
team make up our key competitive advantages that cannot be easily duplicated.
Proven Ability to Execute a Dual Market Strategy:
Over the past 30 years, we have established a track record of effectively serving, at a high level, both DIY customers and professional
service providers. We believe our proven ability to effectively execute a dual market strategy is a unique competitive advantage. The
execution of this strategy enables us to better compete by targeting a larger base of consumers of automotive aftermarket parts,
capitalizing on our existing retail and distribution infrastructure, operating profitably in both large markets and less densely populated
geographic areas that typically attract fewer competitors, and enhancing service levels offered to DIY customers through the offering
of a broad inventory and the extensive product knowledge required by professional service providers.
In 2011, we derived approximately 59% of our sales from our DIY customers and approximately 41% of our sales from our
professional service provider customers. Prior to the acquisition of CSK, we derived approximately 50% of our sales from both our
DIY and professional service provider customers. As we continue to grow our commercial business in the acquired CSK markets, we
expect that over time our DIY and professional service provider sales mix to approximate historical averages. As a result of our
historical success of executing our dual market strategy and our over 460 full-time sales staff dedicated solely to calling upon and
servicing the professional service provider, we believe we will continue to increase our sales to professional service providers and will
continue to have a competitive advantage over our retail competitors who continue to derive a high concentration of their sales from
the DIY market.
Superior Customer Service:
We seek to attract new DIY and professional service provider customers and to retain existing customers by offering superior
customer service, the key elements of which are identified below:
superior in-store service through highly-motivated, technically-proficient store personnel (―Professional Parts People‖) using an
advanced point-of-sale system
an extensive selection and availability of products
attractive stores in convenient locations
competitive pricing, supported by a good, better, best product assortment designed to meet all of our customers’ quality and value
preferences
Technically Proficient Professional Parts People:
Our highly-motivated, technically-proficient Professional Parts People provide us with a significant competitive advantage,
particularly over less specialized retail operators. We require our Professional Parts People to undergo extensive and ongoing training
and to be technically knowledgeable, particularly with respect to hard parts, in order to better serve the technically-oriented
professional service providers with whom they interact on a daily basis. Such technical proficiency also enhances the customer
service we provide to our DIY customers who value the expert assistance provided by our Professional Parts People.
Strategic Distribution Systems:
We believe our commitment to a robust, regional DC network provides for superior replenishment and access to hard-to-find parts and
enables us to optimize product availability and inventory levels throughout our store network. Our inventory management and
distribution systems electronically link each of our stores to one or more DCs, which provides for efficient inventory control and
management. We currently operate 23 regional DCs, which provide our stores with same-day or overnight access to an average of
123,000 stock keeping units (―SKU‖s), many of which are hard-to-find items not typically stocked by other auto parts retailers. We
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FORM 10-K