O'Reilly Auto Parts 2009 Annual Report Download - page 24

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We purchase automotive products in substantial quantities from over 500 vendors, the five largest of which accounted for
approximately 24% of our total purchases in 2009. Our largest vendor in 2009 accounted for approximately nine percent of our total
purchases and the next four largest vendors each accounted for approximately three to four percent of such purchases. We have no
long-term contractual purchase commitments with any of our vendors, nor have we experienced difficulty in obtaining satisfactory
alternative supply sources for automotive parts. We believe that alternative supply sources exist at substantially similar costs, for
substantially all of the automotive products that we sell. It is our policy to take advantage of payment and seasonal purchasing
discounts offered by our vendors and to utilize extended dating terms available from vendors. During 2009, we entered into various
programs and arrangements with certain vendors that provided for extended dating and payment terms for inventory purchases. As a
whole, we consider our relationships with our vendors to be very good.
Pricing
We believe that a competitive pricing policy is essential to successfully operate in the automotive aftermarket business. Product
pricing is generally established to compete with the pricing policies of competitors in the market area served by each store. Most
automotive products that we sell are priced based upon a combination of competitor price comparisons and internal gross margin
targets and are generally sold at a discount to the manufacturer’s suggested retail price with additional savings offered through volume
discounts and special promotional pricing. Consistent with our low price guarantee, each of our stores will match any verifiable price
on any in-stock product of the same or comparable quality offered by our competitors in the same market area.
We have repositioned the product offering and pricing in all CSK stores to an every-day low price strategy to ensure we are
competitive in every market. We feel competitive pricing is needed to grow our market share and maintain a customer’s repeat
business, and we feel strongly that this strategy is more sustainable, requires less promotional spending and will produce better results
than CSK’s historical promotional-based, high-low pricing strategy.
Professional Parts People
We believe our highly trained team of Professional Parts People is essential in providing superior customer service to both DIY and
professional installer customers. Because a significant portion of our business is from installers, our Professional Parts People are
required to be technically proficient in automotive products. In addition, we have found that the typical DIY customer often seeks
assistance from a Professional Parts Person, particularly when purchasing hard parts. The ability of our Professional Parts People to
provide such assistance to the DIY customer creates a favorable impression and is a significant factor in generating repeat DIY
business.
We screen prospective team members to identify highly motivated individuals who either have experience with automotive parts or
repairs, or automotive aptitude. New store team members go through a comprehensive orientation about the culture of our company as
well as the requirements for their specific job position. Additionally, during their first year of employment, our parts specialists go
through extensive automotive systems training to prepare them to become certified by the National Institute for Automotive Service
Excellence (ASE). Parts specialists also receive ongoing product knowledge training to ensure they are able to provide the highest
level of service to our customers.
All of our stores have the ability to service professional installer customers. For this reason, select team members in each store
complete extensive sales call training with their regional field sales manager. Afterward, these team members spend one day per week
calling on existing and potential professional installer customers. Additionally, each team member engaged in such sales activities
participates in quarterly advanced training programs for sales and business development.
Customer Service
We seek to provide our customers with an efficient and pleasant in-store experience by maintaining attractive stores in convenient
locations with a wide selection of automotive products. We believe that the satisfaction of DIY and professional installer customers is
substantially dependent upon our ability to provide, in a timely fashion, the specific automotive products requested. Accordingly, each
O'Reilly store carries a broad selection of automotive products designed to cover a wide range of vehicle applications. We
continuously refine the inventory levels and assortments carried in our stores, based in large part on the sales movement tracked by our
inventory control system, market vehicle registration data, failure rates and management's assessment of the changes and trends in the
marketplace.
Marketing
Marketing to the DIY Customer. We aggressively promote sales to DIY customers through an integrated marketing program, which
includes television, radio, direct mail and newspaper advertising, in-store and online promotions, and sports and event sponsorships.