Businessmodel of LKQ

Customer Segments

LKQ provides a range of aftermarket, recycled, and original to customers operating within the automotive sector. These partners include small to large business, as well as individuals, in the following categories:

• Automotive Repair, comprising professional collision and mechanical automobile repair businesses, including small independent operators and dealer-operated repair facilities;
• Specialty Automotive, including specialist automotive repair shops, predominantly small, independent retailers and installers of specialty vehicle automotive equipment;
• Commercial and Distribution, including fleet management and vehicle rental businesses, as well as warehouse distribution companies; and
• Individual, including do-it-yourself mechanics and hobbyists, auto rebuilders, and resellers. LKQ principally serves customers across north America, with the US and Canada its largest markets. The Company also operates in Europe, serving customers in the UK, the Netherlands, Belgium, Luxembourg, Norway, and Sweden.

Value Propositions

LKQ provides value to its customers in the following ways:

• Its extensive international distribution network, with the Company operating a broad network of distribution centres, parts facilities, and retail outlets, serving customers primarily across the US, Canada, the UK, and the Netherlands;
• The strength of its industry relationships, with the Company having developed positive business relationships with key constituents of the automotive industry, including automobile insurance companies, suppliers, and other industry participants in North America, the UK, and the Netherlands.
• Its broad portfolio of products, with the Company offering a full suite of automotive products, including aftermarket, recycled, remanufactured, refurbished and original equipment manufacturer parts, as well as specialty and used parts, and accessories;
• Its technology-driven processes, with the Company utilising state-of-the-art technologies to analyse and manage its inventory, assist its salespeople with up-to-date pricing and availability of our products, and enhance its inventory procurement process; and
• Its specialist personnel, with the Company employing specialist personnel with experience and training in the automotive sector. ### Channels

LKQ operates a website at www.lkqcorp.com, through which it provides information on its parts, locations, and operations. The Company also operates an online store at www.lkqonline.com, which enables customers to browse the Company’s catalogue of products, pay for online purchases, and schedule deliveries. LKQ also has an eBay store for used and salvage parts, and operates an online channel for its self-service Pick Your Part operations.

LKQ makes its wholesale sales through its in-house sales staff, employing full time sales personnel across its wholesale facilities and regional call centres we operate. The Company also has call centres dedicated to the support of national accounts, and the support of insurance adjusters. LKQ operates its own distribution networks across North America and Europe, comprising wholesale plants, warehouses, and cross dock facilities, with deliveries made primarily by its own team of drivers. In some instances, the Company also employs third party delivery providers to transport parts to local customers.

Additionally, LKQ operates a number of self-service facilities, through which customers are able to find scrap and used parts.

Customer Relationships

LKQ offers a range of products to customers on a self-service basis. This includes its online sales channels, which allow customers to browse items, make payments, and organise deliveries without interacting with members of the LKQ sales force. It also includes the Company’s network of self-service facilities, where customers can purchase parts in person, only having to interact with sales staff to complete transactions.

LKQ’s sales teams provide a personalised service to its customers, consulting directly with wholesale customers in order to fully cover their individual needs.  The Company seeks to maintain a local distribution presence that allows it to provide daily deliveries as required by customers, using drivers who routinely deliver to the same customers who are able to establish personal relationships with the local repair shops.

LKQ provides a range of information to customers through its various websites, including support resources such as FAQS, warranty guidance, and shipping information. The Company is also able to interact directly with its customers through its social media accounts including with Facebook, Twitter, LinkedIn, and Instagram.

Key Activities

LKQ is a global distributor of aftermarket automotive products, including replacement parts, components, and systems used in the repair and maintenance of vehicles, as well as specialty vehicle products and accessories.

The Company organises its activities into four segments: Wholesale – North America, comprising wholesale distribution of parts across North America; Europe, comprising wholesale distribution of aftermarket products to customers in Europe, primarily the UK and the Netherlands; Specialty, comprising the distribution and sale of specialty automotive products, including off-road and performance handling products; and Self Service, comprising the sale of used and salvage products through self-service facilities.

LKQ serves a range of customers across the automotive sector, principally mechanical repair shops, but also fleet management companies, and distributors.

Key Partners

LKQ works alongside a range of companies and organisations to provide the best service possible to customers. These partners include:

• Supplier and Vendor Partners, comprising suppliers of parts, products and accessories that are resold via the Company’s various sales channels, and suppliers of services that are utilised across the Company’s four operating segments;
• Distribution and Channel Partners, comprising logistics, distribution, and delivery providers that assist in delivering parts from the Company to its customers, enhancing the Company’s own in-house distribution capabilities; and
• Technology Partners, comprising various software and integration partners that provide technology that supports the efficient operation of the Company’s sales and distribution activities. ### Key Resources

LKQ’s key resources are its products and supply chain, its online platforms and IT infrastructure, its network of distribution and sales facilities – including its self-service sites, its partnerships, and its personnel.

LKQ owns and leases a number of properties across North America and Europe that are key to its ongoing activities, comprising 790 different locations, of which the majority are leased. This includes office space, more than distribution facilities, and warehouses, as well as equipment such as delivery vehicles.

Cost Structure

LKQ incurs costs in relation to the procurement of parts and products and the management of its supply chain, the development of its online platforms, the maintenance of its IT infrastructure, the operation of its sales and distribution infrastructure – including its fleet of delivery vehicles, the management of its partnerships, and the retention of its personnel.

In 2015 LKQ recorded cost of goods sold in the amount of $4.36 billion, including costs related to the purchase of parts, freight, and distribution of inventory. The Company’s selling, general, and administrative expenses – including commission and other incentive compensation expenses for sales personnel, and advertising and marketing costs – totaled $828.33 million.

Revenue Streams

LKQ principally generates revenue from the sale of vehicle products and related services – including aftermarket, other new and refurbished products, and recycled, remanufactured and related products and services – and the sale of extended warranties, collection of fees for admission to self-service yards, and collection processing fees.

In 2015 LKQ generated annual revenue of $7.19 billion, up on the $6.74 billion recorded by the Company in 2014. The majority of this revenue was derived from the Company’s Wholesale – North America segment, which generated $4.15 billion in revenue for the year. LKQ’s Europe segment generated $2.00 billion, while the Specialty segment generated $1.05 billion.