O'Reilly Auto Parts 2013 Annual Report Download - page 17

FORM 10-K
11
Products and Purchasing
Our stores offer DIY and professional service provider customers a wide selection of brand name, house brands and private label products
for domestic and imported automobiles, vans and trucks. Our merchandise generally consists of nationally recognized, well-advertised,
premium name brand products such as AC Delco, Armor All, Bosch, BWD, Cardone, Castrol, Gates Rubber, Monroe, Moog, Pennzoil,
Prestone, Quaker State, STP, Turtle Wax, Valvoline, Wagner, and Wix. In addition to name brand products, our stores carry a wide variety
of high-quality house brands and private label products under our BestTest®, BrakeBest®, Import Direct®, Master Pro®, Micro-Gard®,
Murray®, Omnispark®, O’Reilly Auto Parts®, Precision®, Power Torque®, Super Start®, and Ultima® brands. Our house brand and
private label products are produced by nationally recognized manufacturers and meet or exceed original equipment manufacturer
specifications and provide a great combination of quality and value – a characteristic important to our DIY customers.
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 competitive 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. Again in 2013, 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.
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 2013. Our largest vendor in 2013 accounted for approximately 7% of our total purchases and the next four
largest vendors each accounted for approximately 3% to 6% of our total purchases.
Marketing
Marketing to the DIY Customer:
We use an integrated marketing program, which includes television, radio, direct mail and newspaper distribution, in-store, online, and
social media promotions, and sports and event sponsorships to aggressively attract DIY customers. The marketing strategy we employ
is highly effective and has led to a measurable increase in awareness of the O’Reilly Brand across our geographic footprint. We utilize
a combination of brand and product/price messaging to drive retail traffic and purchases, which frequently coincide with key sales events.
To stimulate sales among racing enthusiasts, who we believe individually spend more on automotive products than the general public,
we sponsored multiple nationally-televised races and over 1,500 grassroots, local, and regional motorsports events throughout 42 states
during 2013. We were the title sponsor of two National Association for Stock Car Racing (“NASCAR”) National series events in Texas
and four National Hot Rod Association (“NHRA”) races across the country.
During the fall and winter months, we strategically sponsor National Collegiate Athletic Association (“NCAA”) basketball. Our
relationships with over 30 NCAA teams and tournaments have resulted in prominently-displayed O’Reilly logos on TV-visible signs
throughout the season.
Through an expanded use of Spanish language radio, print, and outdoor advertising, 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 Spanish speaking auto
parts consumer.
In 2013, 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.
In 2013, we launched our O’Reilly O’Rewards® DIY customer loyalty program. The program provides members with the opportunity
to earn points through purchases and other special events and allows members to redeem those points toward coupons, which provide
discounts on future merchandise purchases in our stores. The programs allow us to enhance engagement with our customers to earn more
of their business and target promotions tailored to their specific needs and purchasing patterns, while also rewarding our customers for
their continued business.
Marketing to the Professional Service Provider Customer:
We have over 600 full-time O’Reilly sales representatives strategically located across our market areas as part of our First Call® program.
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,