O'Reilly Auto Web pilot turns golden

Online orders so far have given Springfield-based O’Reilly more bang for its buck, generating almost five times more revenue per transaction than in-store sales, according to Brett Heintz, vice president of retail systems. For competitive reasons, Heintz declined to disclose the cost of an average online order.

Parts dealers have been placing online orders with O’Reilly for years, but the company recently added a shopping component for retail consumers, Heintz said, noting that the expanded service was identified as a strategic goal some time ago.

“It’s a Web world and it’s a multibillion-dollar industry, and we wanted to have our part of that as well – and offer another option to our customers or maybe tantalize some potential customers,” he said.

Tapping into online sales

O’Reilly’s online shopping portal was developed in-house by the company’s information technology staff – a large group with an array of skills, Heintz said. Company staff developed the beta version in nine months by researching best practices and listening to O’Reilly’s customer base, he added.

“People work nights and odd hours and are not able to shop,” Heintz said. “People are making purchases 24 hours a day.”

On the shipping end, O’Reilly already had the infrastructure in place with a main distribution center in Nashville, Tenn., and satellite centers in Springfield, Atlanta, Indianapolis and Dallas, Heintz said. Staff, however, developed a Web interface to coordinate distribution and optimize shipping costs, he added.

UPS handles shipping for O’Reilly, and online orders of more than $75 are shipped for free, Heintz said, adding that exceptions apply for oversize items and those that require special handling.

One of O’Reilly’s main competitors, Memphis, Tenn.-based AutoZone, also ships in-stock items for free on orders of at least $75, excluding tax. AutoZone added a consumer-shopping component to its Web site several years ago.

Jim Murrow, an associate marketing professor at Drury University, said O’Reilly’s late arrival to online shopping actually puts the company in a better position to compete.

“There’s advantages to coming in (late) because then they can see what really works and what their competitors have done … and look at other really good Web sites and see how they move people through their Web sites,” he said. “Some of the earlier ones were very boring, like an old catalog.”

Customer connections

O’Reilly and AutoZone customers who shop online can search for auto parts or accessories by entering a vehicle’s year, make and model or the actual part number. Both Web sites also allow customers to assemble a shopping list of items available at their local stores.

O’Reilly ships to all 50 states but only has stores in 26 states, primarily in the Midwest and Southeast, Heintz said. Online shopping is a way for the company to connect with customers in markets without O’Reilly stores and expose them to competitively priced parts, he added.

There’s no specific launch date for the final version of O’Reilly’s online store, but Heintz said it should be ready once staff works out a few minor bugs.

“We pretty well hit the mark with our desired result of the site, but we’re just trying to fine-tune in anticipation of brisk sales,” he said.

The next phase of online shopping for O’Reilly will include a feature that enables customers to have orders shipped to the nearest store for pick-up, Heintz said.

The ability to pick up orders at local stores affords customers an opportunity to ask employees any questions about the parts or accessories they purchased, noted Drury’s Murrow, who described himself as “automotively challenged.”

He added, “I think … one of the things that has differentiated O’Reilly over the years is they have very knowledgeable staff.”

O'Reilly officials sell shares

In other O’Reilly news, two company officials recently sold off several thousand shares of common stock under a prearranged 10b5-1 trading plan.

Both Charlie O’Reilly Jr., vice chairman of the company’s board of directors, and Jeff M. Shaw, senior vice president of store sales and operations, exercised the stock options in April, according to forms filed with the Securities and Exchange Commission.

Shaw, a 17-year O’Reilly employee, reported he exercised the options for $6.13 apiece and sold all 45,000 shares April 25 for $37.13 and $38 apiece under a trading plan approved Nov. 28, 2006.

O’Reilly reported he sold 21,173 shares April 18 and 19 for $34 apiece under a trading plan approved March 20.

O’Reilly Chief Financial Officer Tom McCall said 10b5-1 plans allow a company insider’s shares to be traded during restricted periods, documenting how many shares would be traded and at what stock price.

“(Shaw) had a large number of options that were going to expire within the year, so it just gave him some more ability to exercise those options during the last year that they were going to be outstanding,” he said. “We have a 10-year limit on our options, and it turned out pretty darn good for him.”

Company shares (Nasdaq: ORLY) closed May 22 at $36.66, compared to a 52-week range of $27.49 to $38.84.

Pre-arranged Stock Sale Details

Jeff Shaw, Senior Vice President of Store Sales and Operations

Age: 44

2006 salary: $158,000

Shares sold: 45,000 at $37.13 and $38 apiece

Cost per share to exercise option: $6.13

Sum: around $1.4 million

Date sold: April 25

Charles H. O’Reilly Jr., Vice Chairman of Board of Directors

Age: 67

2006 salary: N/A (retired)

Shares sold: 21,173 at $34 apiece

Cost per share to exercise option: N/A

Sum: around $700,000

Dates sold: April 18-19