The Big-Box Electronics Retailer That’s Actually (No Joke) Growing

Contrary to the industry norm, electronics retailer hhgregg is quickly expanding at a time when its rivals are shutting stores

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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.

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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.

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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.

(MORE: Are We Witnessing the Death of the Big-Box Store?)

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.

(MORE: Big-Box Shrinkage: Retailers Embrace Sales on a Smaller Scale)

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.”

Brad Tuttle is a reporter at TIME. Find him on Twitter at @bradrtuttle. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.

17 comments
pdxuser
pdxuser

You note that hhgregg is adding stores and that its sales are up, but that's what happens when any business, even a failing business, opens a new store: there are more sales because there's a new store selling stuff. The problem is, hhgregg's *same-store* sales, the real measure of a company's fortunes, are falling. And its profits are shrinking. That's why its stock is down.

nowhere1111
nowhere1111

Adding to my comment below, I'd suggest the most successful stores before the on line assault was SMALL INDEPENDENT stores who were good because the need for sales training was minimal. Expertise came from the fact everyone was there, including the owner, because they loved the products. Employees already knew the products having typically been previous customers. Then the SHORT SIGHTED MANUFACTURERS would sell out to the Circuit Cities and not pay attention to the 'smaller independents.

nowhere1111
nowhere1111

Having been in consumer electronics since 1970 and owning my own stores for 25 years, I can tell you a main problem is SHORT SIGHTED MANUFACTURERS who don't care where a sale comes from. On line outlets, who contribute nothing to product interest and often have little to NO customer service, get essentially the same attention from manufacturers, sometimes more, than brick and mortar stores. Clearly unsustainable. Doors anyone know how Europe buys/ sells electronics?

Arnoldiwo
Arnoldiwo

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picklestreetbay
picklestreetbay

I really used to enjoy shopping at JcPenney for years, especially when i could find coupons to use. The problem is that the company is trying to change JcPenney into a store like walmart or Target, which is never going to work for a department store that is attached to a mall. People will always be attracted to enter a department store that advertises big sales with big bright signs hanging from the ceilings. Any doorbuster sales events will catch the most sales with consumers using coupons to score even better deals. JcPenney will lack the excitement that shoppers get from the temporary high by scoring a good deal using a coupon. Its really all about that high you get when you see the price of the item and feel the sense of accomplishment in presenting a coupon and then seing the $$$ being deducted, and paying so much less than the sticker price. I never go into JcPenney because i feel (whether right or wrong) that i will get a better deal from the sales and coupons than by the everyday low price guarantee offered by JcPenney. I also don't like the feeling i get when i walk into JcPenney now. The lighting seems darker, it is much more like the cold feeling i get from walking into sears. The clothes seem laid out in a cheap way that is uninviting. I would like to see JcPenney take some cues from Target and get a big name top designer to showcase some luxury home and clothing every few months. Also brighten the stores up a bit with light and nice unique light fixtures. It needs a little pizzaz and nice music. I don't want to walk into another kmart or sears with the bleakness stretching out to the other side of the store. I would like to see JcPenney bring a younger hip vibe into the store as well. Think anthropology/macys/target/forever21. I have had a problem for years with unattentive unfriendly employees, which i have never had at Dillards, Macys, or Nordstroms. JcPenney needs to retrain the employees which also means taking away the central checkout stations which have long frustrating lines. If a few employees carried ipads and walked around assisting customers in finding the right product locations and sizes and provided a better consumer experience, things might start to turn around. People can go to Sam's club and Costco if they want a hands off warehouse approach to shopping, but i don't see JcPenney thriving with this type of quality or vision. I just wish JcPenney could talk to a few consumers and see what we see and why we arent shopping there anymore.

albert71292
albert71292

 I

prefer buying major electronics at a store nearby, that way, if there

is a problem with it, I can take it right back! Seems it'd be too time

consuming with an online retailer. I'll buy books, DVDs, Blu-rays, etc

from Amazon, but not a TV... most of my home theater gear came from Best Buy, only big box electronic retailer here. HDMI cables and speaker wire however came from Big Lots.

curls0821
curls0821

I bought  a plasma TV screen from hhgregg in December and I was very pleased with the customer service. An associate spent literally an hour answering my many questions, including explaining the difference between plasma, LCD and LED. He was so helpful! I would gladly shop there again.

RobertSF
RobertSF

This isn't going to last. Hhgregg is just taking business from other retailers. And training the customer service people won't help because, although customers don't like bad customer service, they're also not willing to pay for good service. Those 200 hours of training aren't free for hhgregg, but it can't pass them along to the customer, so it has to eat it, lowering its profits.

People need to understand that the retailing of consumer product through storefronts is a thing of the past. It only works for Apple because Apple is also the manufacturer.

Mark Glidden
Mark Glidden

Growing your number of stores in the face of  declining sales and stock which is plummeting can only be categorized as a bad spin. This story only makes mention at the end of declining profits  You seem to only show the 1/3 of the pie that's left, not the 2/3's that is gone.

TLG1
TLG1

You're kidding right. How do you define success, does making a profit matter? Growing with investment money is easy, maintaining margins and being profitable is a whole other story. HHGregg will be gone just like all the other pyramid schemers, Fretters, Silo, Highland etc.... Of course you can grow selling cheap stuff but you can't stay open!! See article on same store losses etc..

http://finance.yahoo.com/news/... 

RobertSF
RobertSF

Exactly. I worked at what was probably one of the last regional department stores in the 90s (Whole Earth Access in the SF Bay Area). The computer department manager and I were having a smoke outside once when he said, "You know,  we'd lose less money if we closed the store and simply handed every passer-by a $20 bill."

Deborah Murphy
Deborah Murphy

You have to stand around for what seem hours before you can get someone who can help you. ..FreeLancerGetWork.blogspot.com

Leanne E. Vega
Leanne E. Vega

People need to understand that the retailing of consumer product through storefronts is a thing of the past. It only works for Apple because Apple is also the manufacturer...KingofProfits.blogspot.com

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Mike259
Mike259

Absolutely true. As much as I like Best Buy, their customer service is awful. You have to stand around for what seem hours before you can get someone who can help you.

Brian Thorn
Brian Thorn

I have the opposite experience repeatedly at my local Best Buy. I can't get to the back of the store where the DVDs are without being asked at least twice by some roaming employee if I need help. But the last year of Circuit City had abominable service, with employees so few and far between it was a wonder they were open for business at all.