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Electronics chain hhgregg bucks trend by opening more stores

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Don’t tell this lowercase-lettered upstart from Indianapolis that the era of big box electronics stores is over — or on the way out.

Well, hhgregg is actually more of a smaller big box with new stores averaging about 30,000 square feet. In any case, the Indianapolis-based chain of 212 stores has come charging full steam ahead into St. Louis.

The electronics and appliance company, which was founded in 1955 by Henry Harold Gregg, is opening four local stores later this month. Two of them — interestingly enough — are going into the former Ultimate Electronics stores in Fairview Heights and St. Peters.

A third is going into the shuttered Linens’ N Things store in Fenton. And the fourth, in Chesterfield, has been built anew.

These locations — the company’s first west of the Mississippi — are among 20 to 22 n

ew stores the retailer is planning to open this fiscal year that started in April. The previous year, it opened about 35 stores in new markets such as Chicago, Miami, and Pittsburgh. Many of those stores have gone into shuttered Circuit City and Linens ‘N Things stores.

“That available real estate allowed us to grow quite rapidly over the last couple of years,” said Jeff Pearson, hhgregg’s senior vice president of marketing. “Our ultimate goal is to become a national retailer.”

So why does the company think it can succeed where Circuit City and Ultimate Electronics have failed? And why is it adding more stores when Best Buy is shuttering 50 of its big box stores and opening smaller mobile stores instead?

Pearson said the secret to the retailer’s success is its business model, which includes having a knowledgeable sales force that undergoes many hours of training so they know the ins and outs of the products.

While many of its competitors pay their employees on an hourly basis, hhgregg’s staff is commission-based. So the company says they are more driven to assist customers, provide useful information, and build relationships with customers over time.

Ben Arnold, an industry analyst with the NPD Group, thinks the retailer may indeed have a leg up over Best Buy in this respect.

“People have a lot of questions about electronics,” he said. “So if (hhgregg) can differentiate themselves in that way, that is a feather in their cap.”

Despite the struggles of other electronics stores, Arnold said he thinks there’s still an opportunity for a big bricks-and-mortar competitor to Best Buy.

“Whether it’s home improvement or pet stores, there’s always room for a competitor,” he said. “It provides some choice to consumers.”

But hhgregg is not immune to the pressures facing the rest of the industry — namely falling prices and lower margins on TVs as well as stiff pricing competition from the likes of Amazon and other online retailers.

Still, experts note that electronics often need to be experienced in person — to see the clarity of a TV model or to hear for yourself the sound through a pair of headphones.

But now there is this new phenomenon called “showrooming” that has had retailers in a frenzy. Armed with smartphones, customers may go in to a store to check out products in person, but then will buy them online from a different outlet for a cheaper price.

“We definitely know it occurs,” said hhgregg’s Pearson. “So we try to embrace it.”

If a customer is seen checking out prices on a smartphone, an employee will encourage the person to use one of the store’s computer terminal where they can easily check out competitors’ prices. Hhgregg will then match the lowest price, he said.

But some of the news coming out of hhgregg has not been too rosy as of late. Its stock has tumbled about 45 percent to $6.35 in the last month as the company has taken a hit in its TV segment. Earlier this week, the company reported a net loss of $5.7 million in its first quarter.

The results have led some Wall Street analysts to question whether hhgregg is growing too rapidly and opening too many stores.

For its part, company executives have said they are trying to offset the weaknesses in TVs by increasing its market share in appliances. Hhgregg, which already has a somewhat eclectic product mix that includes mattresses, is also expanding into new lines such as fitness equipment, furniture, mobile phones, and a bigger selection of computers and tablets.

It’s also looking to Apple to help boost sales. Hhgregg already sells iPhones and Apple TVs and is now testing out other products in some of its stores such as iPads and iPods.


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