O Reilly Automotive Inc (NASDAQ: ORLY)

O’Reilly Automotive, Inc. is one of the largest specialty retailers of automotive aftermarket parts tools supplies equipment and accessories in North America. The company serves both do it yourself customers and professional service provider customers through its dual market strategy. Founded in 1957 by Charles F. O’Reilly and his son Charles H. Chub O’Reilly Sr., the business began with a single store in Springfield, Missouri. Today O’Reilly operates a network of stores across 48 U. S. states, Puerto Rico, Mexico and Canada. The stores carry an extensive product line that includes new and remanufactured hard parts, maintenance items, accessories and various service offerings such as battery testing, wiper replacement and check engine light code reading. The firm’s common stock trades on the Nasdaq Global Select Market under the ticker ORLY. This description sets the stage for understanding the core operations of the enterprise. The firm’s stated goal is to be the dominant auto parts provider in every market it serves by offering better value and higher service levels than competitors.

Revenue is generated primarily through the sale of automotive parts and accessories to retail and professional customers. The company’s merchandise includes alternators, batteries, brakes, belts, engine components, fluids, filters, lighting, oil and many other items required for vehicle repair and maintenance. In addition to parts, O’Reilly provides services such as battery diagnostic testing, wiper and bulb replacement, check engine light code extraction via its VeriScan technology and referral to local repair shops. The dual market strategy means that roughly half of sales come from do it yourself customers and half from professional service provider stores. The company also earns revenue from its loyalty program O’Rewards and from specialized programs aimed at professional clients such as the custom hydraulic hose service and professional paint mixing. This mix of product sales and value added services constitutes the revenue base. Through its websites O’ReillyAuto.com and O’ReillyPro.com the company enables customers to browse inventory place orders and choose either in store pickup or home delivery.

Industry position: O’Reilly holds a leading place among specialty retailers of automotive aftermarket goods in North America. It competes with national chains such as AutoZone, Advance Auto Parts and NAPA as well as regional wholesalers, independent jobber stores, automobile dealers and mass merchandisers like Walmart and Amazon. The firm’s competitive advantages stem from its proven dual market approach, its focus on superior customer service, the technical proficiency of its store personnel, a well developed regional tiered distribution network and an experienced management team that has promoted from within for decades. These factors enable O’Reilly to maintain high in stock levels, offer same day or next day availability of many parts and provide a shopping experience that encourages repeat business. The combination of scale, service and logistics gives the company a durable edge in a fragmented market. The firm continuously invests in its distribution centers and hub stores to improve speed of replenishment and broaden the range of stock keeping units available to each location.

Customer base: The company serves a broad spectrum of individuals who maintain or repair their own vehicles as well as professional mechanics who work in independent garages, fleet service shops and specialty repair facilities. Professional customers include owners of small repair businesses, technicians at larger service chains and operators of vehicle fleets that require steady access to parts and technical support. While the filing does not list specific customer names, the description indicates that O’Reilly’s clientele ranges from private car owners seeking parts for routine maintenance to professional shops needing hard to find components for complex repairs. The firm’s strategy of catering to both groups allows it to capture a wide share of automotive aftermarket spending. By maintaining a presence in both densely populated urban areas and smaller rural communities O’Reilly reaches a diverse set of drivers who rely on its products for everyday vehicle upkeep.