Business model of O’Reilly Auto Parts

Customer Segments

O’Reilly Auto Parts serves an extensive customer base, offering broad range of automotive parts and products, and related services.  O’Reilly Auto Parts’s customers can be organised into three principal categories:

• General Consumers, comprising general consumers across multiple demographics, with the Company principally targeting individuals interested in DIY automotive repair and maintenance;
• Professional Automotive Service Providers, comprising professional auto repair and maintenance to which the Company provides professional branded products as well as training and other programs; and
• Independent Dealers, comprising various independent retailers and distributors of automotive parts.

O’Reilly Auto Parts’s key market is its native US, where the Company serves consumers through its network of retail outlets across 44 states, and other customers through dedicated sales teams.  The Company does not appear to have any significant international operations.

Value Propositions

O’Reilly Auto Parts provides value to its customers in the following ways:

• Its size and industry standing, with the Company established as one of the largest and most recognised companies of its kind in the US, having a track record for providing high-quality products and services efficiently and reliably;
• Its extensive portfolio of products and services, with the Company offering its customers – including consumers and professional clients – a large catalogue of products – including parts, maintenance items, and accessories – as well as services such as battery recycling and diagnostic testing, and wiper replacement;
• Its efficient distribution network, with the Company operating a regional, tiered distribution network which provides customers with reliable and efficient access to hard-to-find parts and enables the Company to effectively optimise product availability and inventory levels across its store network; and
• Its industry expertise and experience, with the Company employing specialist, technically-proficient personnel who are able to provide technical assistance to customers, as well as an experienced team of industry executives.

Channels

O’Reilly Auto Parts operates a website at www.oreillyauto.com through which it provides consumers with information on its product catalogue, retail locations, and services. This website doubles as an online sales channel, through which customers are able to browse products, place orders, and arrange deliveries. The Company operates a separate online customer portal for its professional clients, which enables clients to place and manage larger orders online.

O’Reilly serves its consumer base primarily through its network of more than 4,570 stores spread across 44 US states.  The Company makes its consumer sales through a dedicated team in-store sales personnel. O’Reilly additionally employs approximately 700 full-time sales representatives strategically located across the Company’s domestic office network as part of its First Call program. These sales representatives are dedicated solely to calling upon, selling to and servicing the Company’s professional service provider customers. The Company also has a dedicated system in place through which it sells automotive products directly to independently owned parts stores in certain market areas, generally located in areas not directly serviced by an O’Reilly Auto Parts store.

O’Reilly Auto Parts operates its own distribution infrastructure across the US.  This comprises the Company’s network of distribution centres, as well as its hub stores, which, in addition to serving DIY and professional service provider customers, also provide delivery service to our other stores in the surrounding area.

Customer Relationships

O’Reilly offers a range of products to consumers and professional customers on a self-service basis via its online store and its dedicated professional service providers online portal.  These channels allow customers to browse products, make purchases, track orders, and arrange deliveries without interacting with members of the Company’s various sales teams.

O’Reilly provides personal care to its customers across multiple channel. It in-store personnel are available to assist customers directly with queries and enquiries, offering technical information on the Company’s various products. Similarly, the Company’s First Call program provides tailored services to professional clients, offering direct support.

Customers are able to contact O’Reilly Auto Parts’s various support personnel over the phone or via online contact forms in order to receive personalised responses to complaints and concerns. The Company also provides online resources such as FAQ, product information, and warranty that customers can access independently.

Additionally, O’Reilly Auto Parts operates social media accounts with Facebook, Twitter, YouTube, and Google+, through which it is able to interact directly with customers and provide updates on corporate developments.

Key Activities

O’Reilly Auto Parts operates as a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories. The Company offers its broad range of products to do-it-yourself automotive enthusiasts, as well as professional repair and maintenance service provider customers. It also serves a range of independent automotive parts retailers across the US.

O’Reilly’s product portfolio includes a range of new and remanufactured hard parts, such as alternators, starters, fuel pumps, water pumps, brake system components, batteries, belts, hoses, temperature control and engine parts; maintenance items, such as filters, lighting, engine additives, and appearance products; and accessories, such as floor mats, and seat covers. The Company also provides various automotive services, such as oil filter and battery recycling, professional paint shop mixing and related materials, and machine shop services.

Key Partners

O’Reilly Auto Parts works closely with a range of partner companies and organisations I order to provide the best possible service to its customers. These partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, principally comprising suppliers of parts, equipment, and accessories that are resold through the Company’s multiple channels, as well as suppliers of tools, services, and technologies that are utilised more broadly across the enterprise;
• Channel and Distribution Partners, principally comprising the Company’s network of independent retailers to which the Company provides a range of support and retail services, including marketing and website services; and
• Strategic and Alliance Partners, comprising various market leading companies and organisations with which the Company collaborates on joint marketing, branding, and other projects;

O’Reilly Auto Parts has a number of partnerships in place.  In particular, it has numerous partnerships with automotive business, including a distribution partnership with BendPak, a technology and retail partnership with Internet AutoParts, and a retail partnership with Auto Club Speedway.

Key Resources

O’Reilly Auto Parts’s key resources are its products and supply chain, its distribution and storage infrastructure, its online ales channel and client portal, its IT and communications infrastructure, its physical network of retail outlets and offices, its partnerships, and its personnel.

O’Reilly Auto Parts owns and or leases a portfolio of physical properties that are key to its operations.  This notably includes its network of 26 regional distribution centres across the US, of which 18 are owned, and its network of 4,571 retail stores, of which 1,774 are owned, as well as its network of administrative and corporate offices.

Cost Structure

O’Reilly Auto Parts incurs costs in relation to the procurement of supplies and equipment, the procurement of professional services, the operation and maintenance of its distribution infrastructure, the development of its online store and customer portal, the maintenance of its IT and communications infrastructure, the operation of its physical retail outlets, the implementation of marketing and advertising campaigns, the management of its partnerships – in particular those with independent retailers, and the retention of its personnel.

In 2015 O’Reilly Auto Parts recorded total cost of goods sold – including warehousing and distribution costs – in the amount of $3.80 billion. The Company recorded selling, general and administrative expenses – including personnel and occupancy costs – in the amount of $2.65 billion.

Revenue Streams

O’Reilly Auto Parts generates revenue primarily through the sale of various auto parts, maintenance products, and accessories through consumer retail and professional sales channels. It also derives a portion of its revenue through the sale of various related services, such as auto battery recycling and professional paint shop mixing.

In 2015 O’Reilly Auto Parts generated sales for the year in the amount of $7.97 billion, up slightly on the $7.22 billion recorded by the Company in 2014. The bulk of these sales relate to product sales across all sales channels. According to the Company’s annual report, it derived 58% of its sales from DIY consumers and approximately 42% of sales from professional service provider customers.