Cover Story: Reason to Smile

"We've been doing the same thing in the same manner for over five decades," notes May. "We compete on price, but we differentiate through service. We're a little bit of a hybrid model in the sense that most consumers believe they either have to choose a location where they can get great pricing or a location where they can get service. Our business model centers around giving the consumer a very competitive price on consumer electronics and appliances, but also giving them best-in-class service."

Leveraging existing distribution hubs is the single biggest factor hhgregg looks at when identifying new marketplaces for its brick-and-mortar stores. Since it primarily ships big-box items — May estimates that large-screen TVs and appliances account for 80 percent of the company's sales — this strategy helps hhgregg keep shipping costs down, ultimately helping it compete on price.

hhgregg currently operates four distribution centers: Indianapolis, which covers all stores within a five hour to seven hour drive of the city; Atlanta, which serves North Carolina, South Carolina, Alabama, Georgia and Mississippi; Miami, which serves the company's locations in South Florida; and Brandywine, Md., which serves hhgregg's Mid-Atlantic stores.

hhgregg has carved out a niche for itself in these markets, but that doesn't mean it's done looking for more. "We're really proud of the service that we offer, but we're not so proud of it that we believe the customer is willing to pay a premium," says May. "The success of the market really proves that out. In 1999, the company had 18 stores and it was an Indiana company; today we're going to finish our fiscal year at over 200 stores. We've been able to go into markets time and time again that were fully saturated with all the national big-box competitors and be successful because of these points of difference. Our strategy is to continue to scale that out. Our fundamental plan is to continue to expand that brick-and-mortar footprint across the United States."

Investing in E-Commerce
hhgregg isn't forgetting about its e-commerce site as it aggressively opens new retail stores throughout the country. In fact, the retailer has just launched a new e-commerce platform (or at least was on schedule to as of press time) to help it better serve its customers online. hhgregg's online strategy starts with branding and awareness — trying to educate the consumer about who the brand is, what it does and what product categories it offers, May says.

In an effort to integrate with its brick-and-mortar stores, each time hhgregg enters a new market it develops a microsite specific to that market. Consumers in that market can then go to the microsite to learn about the brand — where it comes from, its history, products, what makes it different and so on. hhgregg has gotten a tremendous amount of consumers to immediately register for an online relationship with it as a result of this strategy, May notes.

The new e-commerce platform will enable hhgregg to leverage some of the newer technologies that have made shopping online such a convenient and enjoyable experience for consumers. These include buy online, pick up in-store; buy online, ship from store; click-to-chat; click-to-talk; and improvements to its loyalty program.

May is particularly excited about click-to-talk, which hhgregg will launch before the holiday season. "Click-to-talk really leverages the best of hhgregg," he believes. "Think about the fact that the consumer has the ability to be on our website looking at and comparing products. Maybe they have two dishwashers up on their screen and they're trying to make a decision, they can click through to connect to one of our professional salespeople. That salesperson has the ability to see what the consumer sees to help them with that purchase decision.

"Instead of it just being a telemarketer on the other end of the phone, it's a person that goes through 200 hours of training every single year. They know the latest and greatest technology. They know about the product, they know about the consumer's engagement, and they can help that consumer either complete that online transaction or whatever else they need. Leveraging our sales force is a real point of difference."