Struggling St. Louis AV Market Gets Boost with Hhgregg Arrival

ST. LOUIS -- In a market that has lost 12 AV retail stores in the last 12 months, counting at least one single-store operation that met its demise and larger retail chains that scaled back locations, competitors were digging in Thursday when hhgregg held its grand opening of four stores in the St. Louis metropolitan area. Big-box retailer Best Buy and AV specialty store The Sound Room applauded the entry of hhgregg for the marketing visibility the retail chain would bring to the area -- which most recently lost American TV, Ultimate Electronics, and independent Hi-Fi-Fo-Fum, after the demise of Circuit City -- though they had no intention of conceding market share to the newcomer from Indianapolis.

Competitive pricing “will not be an issue,” said Scott Roseberry, general manager of a Best Buy store down the street from the Chesterfield, Mo., hhgregg location, the only one of the four St. Louis-area hhgregg stores built from scratch. Best Buy will match prices even if it means going online and having product shipped, Roseberry told us. “There’s nothing we can’t get, meet or beat,” he said.

Best Buy sales staff is on salary, unlike hhgregg’s commissioned staff, and each store spins its approach as an advantage for consumers. “We're a commissioned sales staff,” said McGee, a President’s Club member for hhgregg who has netted the company at least $300,000 in profit to attain that status. “We're supposed to help customers make the right decision for them,” he said, “unlike Best Buy where you have to help yourself.” Down the street, Best Buy tells its customers that hhgregg’s commissioned approach leads to salespeople selling customers on products that may offer an advantage to the seller rather than the buyer, Roseberry said. “We put people at ease,” he said. “People don’t wonder if we're doing something for them or to them."

While hhgregg peppered the local newspaper and airwaves with doorbuster grand opening ads evoking Black Friday sales, area Best Buy stores fired back with double Reward Zone points on purchases through the end of the month, Roseberry said. They also added store promotions to sweeten the deal for customers, he said. “We have a lot of great deals in store depending on in-stock levels district-wide,” he said.

St. Louis-area Best Buy stores are touting the company’s financing program, which extends to 36 months on home theater purchases totaling $899 and up, compared with hhgregg’s 24-month financing, Roseberry said. Two hours after hhgregg opened its doors Thursday, “I've already had three customers come in asking about financing,” he said, with three of them applying for financing for a big-screen flat-panel TV. Best Buy’s 3-year no-interest financing is restricted to home theater purchases, according to the store website, and other categories qualify for 18-month financing on purchases of $429 and up and 6-month financing on products $149 and up. Throughout the hhgregg store, signs promoted no-interest financing up to 24 months on products $397 and up, although no-interest applied only if the bill was paid in full within a year. Small print on the hhgregg in-store flyer detailed specific financing requirements for different categories including TVs, audio, mattresses and appliances. It was clear shoppers would have to do their homework to find the best financing deal based on category, brand, minimum purchase requirements and terms.

The Sound Room, a specialty AV store several miles away, isn’t concerned about competition from hhgregg, according to President David Young. Noting that in the last year, American TV closed four stores, Ultimate Electronics closed four, Best Buy closed one and three independents shuttered, Young said the closings “created a big void in the market that hhgregg believes they can fill.” He added, “It appears that their business model is similar” to those of the other retailers that closed. “I'm not sure that they can prosper when the others couldn’t,” he said. Young expects to compete on product lines, touting a protected TV mix including higher end models from Sony, Elite and Sharp, in addition to other products. “Their product mix starts below ours (and Best Buy) and goes up to what Best Buy sells,” Young said of hhgregg. “We focus on higher value premium models and vendors so I don’t see a conflict."

That may be changing. Jeff Pearson, hhgregg senior vice president of marketing, told us at the grand opening event that the Sharp 90-inch LED TV is currently being sold in 70 out of hhgregg’s 218 stores. While sales of 90-inch TVs may not be flying out the door at $10,000 a pop, “it’s a way to get people into stores to see [more affordable] 70- and 80-inch TVs,” Pearson said. Sharp’s LC70LE640U was part of hhgregg’s opening event, marked down $500 to $2,299, and the 80-inch LC80LE632U was discounted $500 to $4,499, according to a flyer. The Best Buy website showed the same prices for those TVs on its website.

The footprint of the 25,000-square-foot Chesterfield store is what all hhgregg stores would look like if the company could build all of its stores from the ground up, Pearson told us. Most stores currently are 30,000-35,000 square feet, but the company wants to focus on the smaller 25,000-square-foot size that’s big enough to allow shoppers to navigate aisles easily but not too large “that you don’t know where anything is,” Pearson said.

The St. Louis hhgregg stores are the third market to display furniture, Reggie McGee, an hhgregg sales trainer and Presidents Club member, told us. One lifestyle display showed a $2,355 leather sectional from furniture company Ashley facing a flat-panel TV along with several groups of speakers from Klipsch, Polk and Bose that sales associates can demo using a speaker selector. Other sofas, recliners and AV cabinets were displayed in an adjacent section of the store, although the limited real estate of the store forced the furniture to be placed in a crowded fashion that didn’t show the furniture in the way an upscale furniture store might. McGee told us that furniture sales have been strong since the chain’s recent entry to the category with 100,000 pieces sold within a month.

At least one customer was disappointed by the furniture offerings, according to a post on Foursquare. “Good luck,” said Todd T. “I don’t think they'll be in business long. Just tried to purchase some furniture and they didn’t have any in stock so I said I would take the floor model at full price, and they said no.” Furniture is one of the new categories hhgregg is focusing on to drive up margins battered by flat-panel TV sales, along with mattresses and fitness equipment.

A small fitness section at the front of the store showed a collection of elliptical machines, treadmills and exercise bikes. A small LCD TV hung on the wall, but Pearson said the store plans to build more related entertainment products around the fitness display area to connect the dots for shoppers who can combine entertainment with exercise. He envisions more TVs and a collection of headphones to remind consumers they can listen to TV and music while they exercise.

Citing company policy, Pearson couldn’t comment on expectations for the holiday season, other than to observe that tablets and TVs are likely to remain popular holiday purchases. Regarding hhgregg’s plans for Black Friday, Pearson said the company hasn’t announced when stores would open but that last year’s midnight openings among retailers set a standard that’s expected to continue. “Some retailers didn’t open at midnight, and I think they felt the crunch for not being open then,” he said.

Doorbuster prices -- including a $7.99 GPX DVD player, $19.99 Vivitar camcorder and $99 19-inch Curtis LED-based LCD TV -- gave the hhgregg St. Louis debut a Black Friday feel price-wise but without the crowds. Some 30 people had gathered by the time we entered the store just before 10 a.m., including two customers hunting for the $8 DVD player, one wanting the $139 24-inch Curtis TV and a couple “desperately in need of a new washing machine.” Chris and Steve Smith found the Samsung washer they wanted last weekend when the store was open for the soft launch, but salespeople wouldn’t sell at the sale price until Thursday. That sent Steve to the computer, hoping to beat the deal at Best Buy, Lowe’s or Amazon, but the $699 hhgregg price beat the others by a full $300, he said, so he had to wait. “I tried everything to get them to sell it to me last Saturday, but they made me come back,” he said.

A local TV crew from KSDK showed up to capture the ribbon-cutting, but according to cameraman Joe Young, the local action instead was at a nearby Nordstrom Rack store, where 200-300 shoppers had gathered for that store’s grand opening. Nordstrom’s was handing out $20 gift cards, 20 hidden “golden hangers” that could be redeemed for $100 gift certificates and a chance at a $2,000 shopping spree, Young said. At hhgregg, associates took customer email addresses in exchange for a “spin” on a tablet that could net grand opening customers anything from a fitness water bottle to a four-piece appliance set including an oven, microwave oven, refrigerator and dishwasher. Full disclosure: This reporter won a water bottle. Second prize was a Samsung tablet and third prize was a football signed by former Indianapolis Colts head coach Tony Dungy, now an NBC football analyst. “That may not fly in St. Louis,” said customer and St. Louis Rams’ fan Steve Smith, citing Dungy’s one-time rivalry with Rams’ coach Jeff Fisher.