The rise of O’Reilly Auto is dragging attention with its 2020 record revenue and earnings which result represents 28 consecutive years of comparable store sales growth, according to the company’s full year report.
O’Reilly Automotive is a specialty retailer of automotive aftermarket parts, tools, supplies in the United States. Whose a-hundred-years-rise from little family business is a worth-telling tale to remind the modern entrepreneurs of what it is like to bring up and nurture an empire through generations and generations – definitely the old American style!
The Found of O’Reilly Automotive to Recall the Notion of a Classic American Family Business
The O’Reilly Shamrock stands for a company that made its own luck by emphasizing the three values of honesty, integrity, and hard work. With that foundation, O’Reilly Automotive has grown into the third largest auto parts company in the United States with more than 5,300 stores in 47 states and over 80,000 team members as of 2020, according to Forbes.
It is a unique story about a family that spans three generations and 100 years in the business, starting with Grandfather Charles F. O’Reilly and followed by his son Chub and then Chub’s four children: Charlie, Rosalie, Larry, and David.
It was Charles the first one to work in the auto parts industry, who is a manager of Link Motor Supply and so does his son Chub to join the company. Years later, around 72 years old when Charles retired to have his son comes up as part of a corporation reorganization. Yet, it was far up at Kansas City, and on the interview phone call, Chub O’Reilly said he did not want to live in Kansas for it was “too big” with all the hustle and bustle and heavy traffic. But most of all, he does not want to uproot his family and be separated from those he loved. So, in 1957, at an age when most folks’ thought is turning to retirement, father and son Charles and Chub O’Reilly decided to start their own company and brought along 11 fellow employees from Link.
Since the first day, Charles and Chub adopted policies that the company still follows as of now. They considered workers as members of a team – a family, whose voice matters and action counts. Not by blood than by flesh, team members could own stock in the company and promotions would be almost entirely from within the company, rarely there were lateral transfers. “The O’Reilly company culture is that you treat everyone like family and earn it like a family,” says longtime family banker Rob Fulp.
Chub O’ Reilly once shared the notion of this hundred years business all thanks to their loyal ‘family members’
“We understood early the important of investing business trust in them. Our philosophy crystallized quite soon around the belief that it is the people who make a business what it is, and that to be successful we must share the fruit of the venture as well as the burden.”
What a successful business model it is that Link had to close its Springfield operation one year after. And just within the next four years, the company formed a distributor and began wholesaling to other auto parts stores.
However, Chub has one rule back then – there has to be an O’Reilly family member to present physically at their stores to take over. So, despite the slow growth of stores which they only have two of it after five years into the business – Chub still has no rush, kept in mind the core of a family business is that rules come first and business always second!
Finally, five years later, when Chub’s oldest son Charlie O’Reilly known he is ready to take part in and opened a third store in Joplin. In which early days, he would call on the truck stops in the area and tell them that ‘just call’ if they needed a part in the middle of the night, he would right away get out of bed and deliver it to them.
Next Generation to Reinforce the Family’s Legacy and The Rise of O’Reilly Shamrock
At his sixties, Chub decided to step back and pass on the absolute control and responsibility to his oldest Charlie O’Reilly and afterward Larry, Rosaline, and David as they join the company. Like a coach, Chub assigned particular positions to his children on the company team, remembers Larry “It took a lot of strong communication among the four of us, slotting out strengths in the right areas so we did not have four horses all trying to run in the same lane.”
First of all, let us start with Charlie the oldest brother who is then the face of the company to the public. A people person himself, Charlie concentrated on customer service particularly on the retail side, visiting each store every year – around 47 states for now, encouraging team members until that became physically impossible and he started sharing that responsibility with then Vice President Ted Wise who is now retired.
To Charlie, he knows great companies all have a compelling competitive advantage – something that you are better at than anyone else. While other companies have their own good-looking stores in good locations, good products, etc. Yet, Charlie believes their advantage lies in the customer service category delivered by the company hard-working O’Reilly team members.
And then comes Larry who is born a salesman. While calling on garages, he learned which business might be up for sale and become the instrumental in negotiating many acquisitions that set the foundation for later mega-mergers. In 1993, with 122 stores and about $110 million in sales the O’Reilly Auto went public.
“When you make the decision to go public and grow much faster, the only thing that remains constant was change” Larry recalls. It seems just overnight they had become a big company and are all ready for it!
However, the message from management has not changed from the first early days!
Former co-president Ted Wise, who started with O’Reilly as a delivery driver shares “The family had already recognized that if the company was going to grow, they needed to have dedicated, loyal team members.” Whether hiring staff for a new store or acquiring an existing store, orienting, and guiding new members about the O’Reilly culture is the first and foremost of all. Newly join folks or newbies, learn that many of the company executives started as a driver, then a parts specialist, then a store manager, and eventually a district manager. This path of training and promoting from within has created a loyal workforce. Today this company traditions continues with the current Co-president and CEO Greg Johnson.
You will see culture mostly talked about as stories or anecdotes. It is a vague concept that people sort of know is important, but they do not quite know how to apply and to successfully maintain such idea is halfway apart from the solid….
O’Reilly on sharing their strategy for the outperformance of 2020
O’Reilly Automotive announced by the end of 2020 – which is not so of a good year for anyone, its sales surged by more than 19% in the quarter ended June 30 compared with the like period a year earlier, far better than the 2.6% uptick analysts had expected. Even more notable was its bottom line: Net income grew by more than 50%, compared with an estimated increase of 7.8%. So, is this just an opportunistic result or O’Reilly is really hitting it, what is behind this dramatic swing? Let’s heard from the execs.
Firstly, ‘Price controls’ in the aftermarket these days. Especially, when minimum advertised price – also known as MAP – has certainly been the talk at recent vendor summit, many customers are asking suppliers to consider MAP policies, as the industry adjust to the new omni-channel reality. And David Wilbanks as senior vice president of merchandise for O’Reilly Auto Parts from a customer perspective claims pricing policies would offer great benefits, as it is helpful to retain the value of aftermarket brands. “They ensure that the value-added service that we bring to the market can be preserved,” he said.
As of 2019, Wilbanks claims the aftermarket still relies on brick-and-mortar stores where people can touch and feel the parts and find selection and installation advice. And that all comes at a cost and it also comes with a lot of value for the suppliers.
At O’Reilly’s there are investments they make. And a pricing policy does not allow those who do not or will not make those investments to sell strictly on price, and thereby devalues the brand in the market, which not only make it tough for everyone but also create channel conflicts.
Even though channel conflict might arise briefly when a policy is introduced, yet with education, patience, and a commitment to fair dealing, it will get resolved.
Secondly, how such sales strength could occur with miles driven – which has been the main driver of this industry, still being a little bit pressured? And instead, with COVID, accessories were a large factor in the outperformance, so will this be a one-time thing, or could it be a sustainable growth?
On this matter, Greg Johnson CEO of O’Reilly Auto considers appearance and accessory are not real strong sellers for the company. So, with these items consumers are tuning up their hot rides, street rises, cars that may have been covered up in the backyard for number of years. And part of the reason for that is just consumers are having more time. However, there are up numbers across all categories, it just unusual for what happens with the accessory category. Yet Johnson claims it was from the underperformed maintenance service and parts that is the biggest driver for this spectacular sales growth. But to speculate on next year, nobody could ever tell.
Johnson also mentioned the great supply chain team of his for being able to maintain an in-stock position both for brick-and-mortar and online customers, there was a big shift. It’s no secret that the company’s e-commerce business has improved along the pandemic as it has for most retailers, however, the majority of that waves continues to end up shopped in O’Reilly stores, wither the pickup in-store or curbside pickup that it has implemented.
The Bottom Lines
Found the business in their late life, Charles O’Reilly and his father have raised an empire to stay – for generations. O’Reilly Automotive with its main role in the aftermarket has never stop sizing down, till last year where it seems to be a hard time for revenue generating, once again its outperformance stressed the thrive of O’Reilly. All thanks to the firm vision – the culture of investment in trust its founder Charles O’Reilly had set foot.