By Colin Craig, MBA, CSRIC®

It really is a gut-wrenching feeling when your car breaks down. For those of us who are not mechanically inclined, we depend on a knowledgeable, proficient, and professional mechanic to keep our cars safely on the road. But when your car breaks down and a part needs to be replaced, where does your mechanic get that part? What companies are part of your mechanic’s supply chain?

Today, I am pleased to introduce you to one such Shining Light Company that helps vehicle owners and mechanics alike: O’Reilly Automotive, Inc (trading as ORLY on NASDAQ). You see, O’Reilly Automotive (which does business as O’Reilly Auto Parts) is more than an auto parts supplier.  O’Reilly is in the business of customer service. And that customer service has been propelled forward by good leadership, an effective dual target-market business strategy, and the realization that there is more to business than merely increasing the bottom line in the short-term.

Good Leadership Fuels Good Business

O’Reilly’s CEO, Brad Beckham, once said “At O’Reilly Auto Parts, we are in the customer service business. Yes, we sell auto parts, but our motivation for coming to work every day is helping people.”¹ In other words, O’Reilly strives to be publicly recognized not only for its products, but for the customer service that accompanies those products.  Good customer service makes a world of difference! Wielded properly, good customer service can build brand reputation, and brand reputation can build brand loyalty, both of which are considered goodwill – an intangible asset that shows up on the balance sheet.

Stated differently, O’Reilly’s emphasis on customer service is an asset – it has value. But customer service doesn’t just happen automatically; rather, it starts at the top of the organization with a culture of servant-leadership. You see, O’Reilly’s commitment to servant leadership at the top of the organization has roots in its founders. In their excellent recent article, our friends at Sovereign’s Capital helpfully explained:

 “Beginning in 1957 with its founders C.F. O’Reilly and his son, Chub, the O’Reilly family adopted the Biblical standard of the Golden Rule as a cultural cornerstone. Thus, O’Reilly Automotive’s roots are deeply enmeshed in Biblical principles of unwavering commitment to customers and team members through service, mentorship, hard work, honesty, excellence, and respect…”² 

Sovereign’s Capital’s article went on to explain that Brad Beckham, O’Reilly’s current CEO, is also a Christian and strives to lead the company by example through humility, sacrifice, and courage. But Beckham is not a foreigner to the front line; he started his career at O’Reilly as a floor worker and worked his way up! Beckham exemplifies O’Reilly’s overall company philosophy to “promote from within.” In fact, many O’Reilly’s senior managers have been promoted from within, as evidenced by the average 19 years of service among senior managers (as of the last available annual report).³

A Dual Market Strategy

In addition to its emphasis on customer service and leadership development, O’Reilly seeks to add value for shareholders and create a competitive advantage by meeting the needs of two main categories of customers: DIY customers and professional service provider customers. Both the DIY and professional service provider sales revenue are quite evenly split at 53% and 47%, respectively, indicating that both segments are substantial target markets for O’Reilly.⁴

For the DIY customer (such as you and me), O’Reilly seeks to add value by offering many free in-store services such as battery testing, alternator and starter testing, check engine light testing, headlight bulb installations, and wiper blade installations.⁵

For professional service providers, O’Reilly has a staff of over 700 full-time employees dedicated to servicing service provider customers. And whether an employee is installing new wiper blades or providing consultation for a mechanic, O’Reilly relies on the knowledge and experience of its workforce.  In fact, its most recently available annual report, O’Reilly noted:

“We require our Professional Parts People to undergo extensive and ongoing training and to be knowledgeable, particularly with respect to hard part repairs, in order to better serve the technically-oriented professional service. Such technical proficiency also enhances the customer service we provide to our DIY customers who value the expert assistance provided by our Professional Parts People…

New store Team Members go through a comprehensive orientation focused on the culture of our Company, as well as the requirements for their specific position.  Additionally, during their first year of employment, our parts specialists go through extensive automotive systems and product knowledge training to ensure they are able to provide high levels of service to our customers.  Once all of the required training has been satisfied, our parts specialists become eligible to take the O’Reilly Certified Parts Professional test. ⁶

O’Reilly could choose to cut corners on training, but since their entire business model rests on excellent customer service, that would clearly be counterintuitive. Rather, O’Reilly wisely invests in their employees, which in turn brings value to the company. It really is a self-reinforcing, cyclical process!

More than Business

Lastly, however, I would be remiss if I did not mention that O’Reilly’s business strategy extends beyond the immediate bottom line. As Christian investors, we seek to invest in companies that are going beyond the immediate bottom line to create long-term value – not only for shareholders, but also for employees, for customers, for supply chains, for the community, and for the environment in which we live.

A quick look at O’Reilly’s website and annual report reveals a variety of initiatives designed to help employees and local communities flourish. For example, as part of each store’s annual budget, a portion is set aside to be donated to local causes – anything from t-ball teams to community events.⁷ And similarly, O’Reilly set up a Team Member Emergency Fund which has provided financial support to thousands of employees affected by circumstances such as natural disasters or unexpected hardships.⁸

All indications are that O’Reilly has been able to achieve sustainable, long-term success so far by implementing good, common-sense business practices. We could summarize what we have learned from O’Reilly by saying that good leadership prioritizes a qualified and motivated workforce, which leads to a competitive advantage via excellent customer service.

If you are interested in learning more about how your investment dollars can make a positive impact in the world today by investing in Shining Light Companies, like O’Reilly, please don’t hesitate to reach out to us today!

Colin Craig, MBA, CSRIC® is a Portfolio Analyst at Beacon Wealth Consultants where he serves as a member of the investment management team.

References

1. https://www.oreillyauto.com/cmsstatic/ORO-1600-OReillyESG-240808.pdf
2. https://www.scetfs.com/insightsfile/Company-Spotlight-O-Reilly-Auto-An-American-Success-Story-Underpinned-By-Biblical-Values
3. https://corporate.oreillyauto.com/cmsstatic/O’Reilly%20Automotive,%20Inc.%202023%20Annual%20Report_2023%2010-K_2.pdf
4. Ibid.
5. https://www.oreillyauto.com/store-services
6. https://corporate.oreillyauto.com/cmsstatic/O’Reilly%20Automotive,%20Inc.%202023%20Annual%20Report_2023%2010-K_2.pdf
7. https://www.oreillyauto.com/cmsstatic/ORO-1600-OReillyESG-240808.pdf
8. Ibid.