O'Reilly Auto Parts 2010 Annual Report Download - page 23

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but to also allow for a smoother transition throughout the rebranding process. Store signage in substantially all acquired CSK stores is
expected to be changed to the O’Reilly Brand by the end of the first quarter of 2011, and we expect to end the co-branding of all forms
of advertising during 2011.
To stimulate sales among race enthusiasts, who we believe individually spend more on automotive products than the general public,
during 2010 we sponsored multiple nationally-televised races and over 1,500 grassroots, local, and regional motorsports events
throughout 38 states. We maintained our partnership with the National Association for Stock Car Racing (“NASCAR”) as the Official
Auto Parts Store of NASCAR and were the title sponsor of five National Hot Rod Association (“NHRA”) races from Pomona,
California to Charlotte, North Carolina.
During the fall and winter months, we strategically sponsor National Collegiate Athletic Association (“NCAA”) football and
basketball and the National Football League (“NFL”). Our relationships with over 70 NCAA teams and tournaments have resulted in
prominently-displayed O’Reilly logos on TV-visible scoring table signs throughout the season. In addition, O’Reilly Auto Parts radio
advertising can be heard during more than 350 NFL games due to our sponsorship of nearly 20 teams.
Through an expanded use of Spanish language radio, print, and outdoor, as well as sponsorships of over 45 local and regional festivals
and events, we demonstrated our commitment to increasing marketing efforts that are targeted toward the Hispanic auto parts
consumer.
In 2010, we continued our dedicated problem/solution communication strategy, which encourages vehicle owners to perform regular
maintenance as a way to save money and protect their automotive investment over the long term. This highly relevant message
resonates with consumers and establishes O’Reilly as their source for the parts they need and excellent customer service.
Marketing to the Professional Service Provider - We have over 450 full-time O’Reilly sales representatives strategically located across
our market areas. Each sales representative is dedicated solely to calling upon, selling to and servicing our professional service
provider customers. Targeted marketing materials such as flyers, quick reference guides and catalogs are produced and distributed on
a regular basis to professional service providers, paint and body shops and fleet customers. Our industry leading First Call program
enables our sales representatives, district managers, and store managers to provide excellent customer service to each of our
professional service provider accounts by providing the products and services bulleted below:
• broad selection of merchandise at competitive prices;
• dedicated Installer Service Specialists in our stores;
• multiple deliveries from our stores per day;
• same-day or overnight access to an average of 118,000 SKUs through five-night-a-week store inventory replenishments;
• a separate service counter and phone line in our stores dedicated exclusively to service professional service providers;
• trade credit for qualified accounts;
• First Call Online, a dedicated Internet based catalog and ordering system designed to connect professional service providers
directly to our inventory system;
• training and seminars covering topics of interest, such as technical updates, safety and general business management;
• access to a comprehensive inventory of products and equipment needed to operate and maintain their shop; and
• the Certified Auto Repair Center Program, a program that provides professional service providers with business tools they
can utilize to profitably grow and market their shops.
Marketing to the Independently Owned Parts Store - Along with the daily operation and management of the DCs and the distribution
of automotive products to our stores, Ozark Automotive Distributors, Inc., our wholly owned subsidiary (“Ozark”), also sells
automotive products directly to independently owned parts stores (“jobber stores”) throughout our trade areas. These jobber stores are
generally located in areas not directly serviced by an O'Reilly store. Ozark administers a dedicated and distinct marketing program
specifically targeted to jobber stores.
Approximately 185 jobber stores currently purchase automotive products from Ozark and participate in our Parts City Auto Parts
program, our proprietary jobber service program. As a participant in these programs, a jobber store, which meets certain financial and
operational standards, is permitted to indicate its Parts City Auto Parts membership through the display of the respective logo that is
owned by Ozark. In return for a commitment to purchase automotive products from Ozark, we provide computer software for
business management, competitive pricing, advertising, marketing and sales assistance to Parts City Auto Parts affiliate stores.
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Competition
We compete in both the DIY and professional service provider portions of the automotive aftermarket. We compete primarily with
the stores bulleted below:
•national retail and wholesale automotive parts chains (such as AutoZone, Inc., Advance Auto Parts, NAPA, CARQUEST and the
Pep Boys - Manny, Moe and Jack, Inc.);
•regional retail and wholesale automotive parts chains;
•independently owned parts stores;
•wholesalers or jobber stores (some of which are associated with national automotive parts distributors or associations such as
NAPA, CARQUEST, Bumper to Bumper and Auto Value);
•automobile dealers; and
•mass merchandisers that carry automotive replacement parts, maintenance items and accessories (such as Wal-Mart Stores, Inc.).
We compete on the basis of customer service, which includes merchandise selection and availability, price, helpfulness of store
personnel, store layout and convenient and accessible store locations.
Distribution System Support
We currently operate 23 DCs comprised of approximately 8.5 million operating square feet (see the “Properties” table in Item 2 of this
Form 10-K for a detailed listing of DC operating square footages). Our DCs are equipped with highly automated material handling
equipment, which efficiently expedite the movement of our products from the shelves to the loading areas for shipment to each of our
stores on a nightly basis. The DCs utilize technology to electronically receive orders from computers located in each of our stores. In
addition to the bar code system employed in our stores, each of our stores is connected through secured data transmission technology
to our DCs and corporate headquarters.
We believe that our distribution system provides industry-leading parts availability and store in-stock positions while lowering our
inventory carrying costs and controlling inventory. Moreover, we believe that our ongoing, significant capital investments made to
expand the network of DCs allows us to efficiently service new stores that are planned to open in contiguous market areas as well as
servicing our existing store network. Our DC expansion strategy complements our new store opening strategy by supporting newly
established clusters of stores located in the regions surrounding each DC. We currently have a total growth capacity of approximately
650 stores in our distribution network.
As part of our continuing efforts to enhance our distribution network in 2011 we plan to:
•continue to implement a voice picking technology in additional DCs;
•evaluate routing software to further enhance logistics efficiencies;
•begin to implement labor management software to improve DC productivity and overall operating efficiency;
•develop further automated paperless picking processes;
•improve proof of delivery systems to further increase the accuracy of product movement to our stores;
•continue to define and implement best practice procedures in all DCs; and
•make proven, ROI based capital enhancements to material handling equipment in DCs including conveyor systems, picking
modules and lift equipment.
Executive Officers of the Registrant
The following paragraphs discuss information about executive officers of the Company who are not also directors:
Gregory L. Henslee, age 50, Chief Executive Officer and Co-President, has been an O’Reilly team member for 26 years. Mr.
Henslee’s O’Reilly career started as a parts specialist, and during his first five years he served in several positions in retail store
operations, including district manager. From there he advanced to Computer Operations Manager, and over the next 15 years, he
served as Director of Computer Operations/Loss Prevention, Vice President of Store Operations and as Senior Vice President. In
1999, he became President of Merchandise, Distribution, Information Systems and Loss Prevention, and has been in his current
positions of Chief Executive Officer and Co-President since 2005.
Ted F. Wise, age 60, Chief Operating Officer and Co-President, has been an O’Reilly team member for 40 years. Mr. Wise’s primary
areas of responsibility are Sales, Operations and Real Estate. He began his O’Reilly career in sales in 1970, was promoted to store
manager in 1973 and became our first district manager in 1977. He continued his progression with O’Reilly as Operations Manager,
Vice President, Senior Vice President of Operations and Sales, and Executive Vice President. He has been President of Sales,
Operations and Real Estate since 1999, and in his current positions of Chief Operating Officer and Co-President since 2005.
FORM 10-K