Buying new stores is only the beginning, says O'Reilly exec

Though O'Reilly has risen from humble beginnings, the company now is the country's third largest retailer based on store count, with sales of more than $2 billion a year and nearly 1,800 stores. O'Reilly also is celebrating 50 years in business, and with 14 distribution centers scattered throughout the country, the distributor has plans to erect a 15th DC in Lubbock, Texas, by the end of the year, according to Wise, who's also an Aftermarket Business Editorial Advisory Board member.

Each of these DCs offers a 200-mile radius of growth, adds Wise, who has been with the company for 37 years. His O'Reilly tenure has taken him from delivery driver and store manager to area supervisor and executive vice president.

Growth has been key to O'Reilly's success, and Wise jokingly says that at one time, if a jobber didn't pay its bill, that store became an O'Reilly location.

And although expansion is something every company strives for, another challenge for O'Reilly has been retaining its culture in the face of development.

This culture is on the minds of executives when it comes to store managers.

"We put a lot of effort into growing our managers," says Wise. Every store manager has been through the Springfield, Mo., headquarters, not to learn how to be store managers, but to learn the O'Reilly culture.

Training has been an emphasis of O'Reilly's business strategy, says Wise, who, at the breakfast event, also discussed the company's Learning Management Systems (LMS) for employees.

He admits: "It's tough getting people in the parts business." There aren't as many self-professed "gearheads" in today's society with the passion seen in previous generations of industry leaders, he suggests.

In other business facets, O'Reilly is focusing on reducing warranty returns. "I'm not sure why our industry ever came up with the phrase (lifetime warranty)."

Wise says, "In less than four years, we've reduced our warranties by 30 percent."

He also discussed the company's First Call program, which involved removing the O'Reilly logo from company trucks and shirts and replacing it with First Call logos in an attempt to garner new business. This allowed the field reps to remove some of the friction caused by competitors who would often describe O'Reilly as just a retailer.

"Having First Call allowed us to step away and re-approach those calls with a higher level of commitment," says Wise, who adds the company has 325 full-time dedicated field reps in the marketplace at any given time.

Wise says O'Reilly's success starts with quality lines on down to proper training and shop management systems.

Another key to success is the lack of focus on price alone. "We don't want to be the cheapest in the marketplace," Wise adds.

Wholesale roots

As much as it's known for slow, steady growth amid a dubious economic climate, O'Reilly also is famous for its successful 50/50 mix of retail and wholesale business.

But it hasn't always been this way, says Wise. He admits it's a challenge maintaining the company's even retail/wholesale mix. "It's not easy, but it's doable to ramp up and grow the way we've been doing."

He adds: "Part of that culture is our business strategy — being able to address both wholesale and retail business out of the same box."

At one time, the company was focused mainly on wholesale. It was a slow migration to adopt more retail business, and to convince team members to emphasize the importance of the retail side of the company's business.

To integrate these two different cultures ultimately takes "time and patience," stresses Wise, who adds it's much easier to make the transition from a wholesale culture to a retail one than the other way around.

An important component of staying successful on the wholesale side is O'Reilly's inventory deployment, which Wise says is "second to none."

The company's stores generally have up to 25,000 SKUs, with the traditional distribution centers carrying upwards of 110,000 SKUs.

But regardless of which side of the automotive aftermarket O'Reilly is focused on, one thing rings clear, Wise reiterates. "Whether it's retail or wholesale, we realize customer service is the most important thing we have."

Forming its own 'Parts City'

Wise also discussed during the Executive Breakfast some of the rationale behind O'Reilly's departure from the Aftermarket Auto Parts Alliance to its own Parts City Auto Parts programmed distribution group.

The company announced the end of its 30-year relationship with the Alliance in June, which will take effect at the end of the year. The split was attributed to product line compliance problems between O'Reilly Auto Parts and the Alliance.

Parts City was used on products sold by Midstate Auto Parts Distributors, Inc., a 70-plus store chain that O'Reilly purchased in 2005.

Wise says after this acquisition, they were known as Auto Value in the South and Bumper to Bumper in the North, which created confusion. The company didn't even know what to put on the letterhead, he recalls.

He adds that his company still has and will maintain positive ties with the Alliance. "It was a good separation. We have lots of friends in Auto Value and Bumper to Bumper."

Also at the Executive Breakfast, Anthony Cardez Jr., executive director of the Overseas Automotive Council (OAC), encouraged attendees to consider overseas trade if they haven't already done so.

"If you're not exporting to companies outside the U.S., you should ask yourself, 'why not,'" Cardez says.

OAC, a division of the Motor and Equipment Manufacturers Association (MEMA), considers itself a "match-making" organization that connects buyers to sellers in at least 50 countries around the world.

The AASA Executive Breakfast was sponsored by Ernst & Young.