One commonly accepted assumption in modern retail is that the death of the big-box store is nearing. As shoppers become increasingly comfortable using tablets, smart phones and other gadgets to purchase, among other things, tablets, smart phones and other gadgets, the future of big-box electronics retailers like Best Buy seem especially troubled. So how is it that one electronics chain has been able to expand in recent years, opening dozens of stores around the country, often in spots formerly occupied by failed electronics brands like Ultimate Electronics and Circuit City?
The retailer in question is the all-lowercase, Indianapolis-based hhgregg. In early 2010, with the economy in a sustained slump, one retail trade magazine highlighted hhgregg as a rare, exceptional breed. It was “a retailer that actually grew its store base.”
The chain had opened 15 new stores in the preceding few months, which at that point brought its national total up to 128. By midsummer 2011, hhgregg was named among the top five hottest retailers in the country (just two spots down from Amazon) due to 36% sales growth. The hot streak continued through last fall, highlighted by the company’s opening of 14 new stores in the Chicago area on a single day in September.
Now, reports the St. Louis Post-Dispatch, hhgregg operates 212 stores nationally, and that doesn’t count the 20 or so new locations in the works, including four opening in the St. Louis area later this month. This expansion is occurring at a time, mind you, when Best Buy, which essentially sells the same stuff as hhgregg, has plans to close 50 stores and is focusing on smaller retail locations.
How is it that hhgregg is apparently succeeding in a market where Best Buy, as well as Circuit City and others, have found it difficult, if not impossible, to compete?
It seems as if some of the explanation comes down to good old-fashioned customer service. The retailer’s “We Help” advertising campaign (which featured the Beatles’ song “Help!”) attempted to set hhgregg’s employees apart from the notoriously less-than-helpful workers at some of the country’s supposedly “best” (hint, hint) electronics stores. In job postings, hhgregg points out that its training program “includes over 200 hours of product training,” so that “each associate is well prepared to answer all product-related questions in order to help customers make the best purchase decisions.” Indeed, the retailer scores well on customer-service surveys like those conducted by J.D. Power and Associates.
At first, consumers might assume that they’d be better off getting assistance from a store employee working on salary, rather than commission — because with commissions, there’s an obvious incentive for the worker to oversell to the customer. But executives at hhgregg say that because their employees work on commission, “they are more driven to assist customers, provide useful information and build relationships with customers over time,” per the Post-Dispatch. (They’re also very obviously driven to produce sales, of course.)
While some retailers have been slow to embrace Web sales — or more foolishly, pretend online shopping barely exists — hhgregg has had a relatively forward-thinking approach. In a New York Times story published in the spring of 2011, a time when the term showrooming had yet to catch on, hhgregg’s president Dennis May offered his take on online shopping:
“We’re not afraid of it,” May said. “We know that about 85% of consumers check online, and this site will allow them to compare prices and click to talk to a salesperson” on the company’s new site, which is being developed with the interactive-marketing agency Rosetta. It will be in operation this fall. Hhgregg is also upgrading its mobile-commerce site.
As for showrooming — the practice in which a shopper uses a brick-and-mortar store merely as a showroom, inspecting the merchandise in person before ultimately purchasing online, likely via Amazon — hhgregg says it embraces that too. Courtesy of the Post-Dispatch:
“We definitely know it occurs,” said hhgregg’s Jeff Pearson, senior vice president of marketing. “So we try to embrace it.”
If a customer is seen checking out prices on a smart phone, an employee will encourage the person to use one of the store’s computer terminals where they can easily check out competitors’ prices. Hhgregg will then match the lowest price, he said.
Despite hhgregg’s growth and forward-thinking approach, there are signs that it too is struggling mightily. As Reuters reported a few weeks ago, amid declining market share, hhgregg was being forced to scale back its profit outlook, cut ad spending and decrease employment at stores. Shares of the company’s stock, once above $12 per share, dropped below $7. In light of hhgregg’s woes, Morningstar analyst R.J. Hottovy said what many have been saying for years, that “it’s become a difficult environment for traditional consumer-electronics retailers.”