O'Reilly Auto Parts 2009 Annual Report Download - page 18

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automotive aftermarket business, our dependence upon key and other personnel, future growth assurance, our sensitivity to regional
economic and weather conditions, legal proceedings and related matters arising from CSK, 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, complications in our distribution centers, 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 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 significant value to both installer and DIY customers.
Competitive Advantages
Proven Ability to Execute a Dual Market Strategy. We have an established track record of effectively serving, at a high level, both
DIY customers and professional installers. We believe our ability to execute a dual market strategy is a competitive advantage. The
execution of this strategy enables us to better compete by targeting a larger base of consumers of automotive aftermarket parts, by
capitalizing on our existing retail and distribution infrastructure, by operating profitably in both large markets and less densely
populated geographic areas that typically attract fewer competitors, as well as by enhancing service levels offered to DIY customers
through the offering of a broad inventory and the extensive product knowledge required by professional installers.
We have been committed to our dual market strategy for over 30 years. In 2009, core O’Reilly stores derived approximately 53% of
our sales from our DIY customers and approximately 47% from our professional installer customers. As a result of our historical
success of executing our dual market strategy and our over 450 full-time sales staff dedicated solely to calling upon and servicing the
professional installer, we believe we will continue to increase our sales to professional installers and will continue to have a
competitive advantage over our retail competitors who derive a high concentration of their sales from the DIY market. In 2009,
acquired CSK stores derived approximately 84% of sales from our DIY customers and approximately 16% from our professional
installer customers. We have a tremendous opportunity to build on the strong retail base at the CSK stores by growing the commercial
business through the implementation of our dual market strategy and capitalizing on our other competitive advantages.
Superior Customer Service. We seek to attract new DIY and professional installer customers and to retain existing customers by
offering superior customer service, the key elements of which are bulleted 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; and
• 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 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 installers 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 distribution center 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 a distribution center, providing
for efficient inventory control and management. Our distribution system provides each of our stores, excluding the nonconverted CSK
stores, with same-day or overnight access to an average of 118,000 stock keeping units (“SKUs”), many of which are hard to find items
not typically stocked by other auto parts retailers. Distribution infrastructure enhancements are a key component to the CSK
integration plan and will enable us to support the acquired store network with the same inventory availability provided to our historic
O’Reilly markets. We believe this timely access to a broad range of products is a key competitive advantage in satisfying customer
demand and generating repeat business.
We currently operate 21 distribution centers, including two acquired in the CSK acquisition and our newly opened Greensboro, North
Carolina; Seattle, Washington; and Moreno Valley, California, distribution centers. In 2010, we will open additional distribution