Cover Story: Reason to Smile
For the last 25 years, Dennis May has been involved in the retail industry — and he's loved every second of it. From his modest beginning selling audio equipment to help support himself while in college (that was the cool job at the time, May recalls) to his tenure today as president and CEO of one of the fastest-growing cross-channel retail brands out there, the one constant has been retail. But that's just part of the reason we've chosen May as our 2011 cross-channel retailer of the year.
Loving your profession only gets you so far; eventually you have to produce results or you'll be looking for another career. This hasn't been a problem for the 43-year-old May. Since joining cross-channel electronics and appliances retailer hhgregg 12 years ago as chief operating officer, the company has enjoyed consistent growth, both in its national store footprint and bottom line. Upon his promotion to president and CEO in August 2009, May has presided over one of the most profitable eras of the brand's 53-year existence. Consider the following:
- hhgregg's net sales grew 11.1 percent, 9.9 percent and 35.4 percent year-over-year for its 2009, 2010 and 2011 fiscal years, respectively;
- the company's gross profit increased 11.9 percent, 7.3 percent and 34.9 percent in 2009, 2010 and 2011, respectively; and
- 19 new hhgregg stores were opened in 2009, 21 in 2010 and 59 in 2011.
Central to hhgregg's identity is its retail locations. The company opened its first store in Indianapolis (home to hhgregg's headquarters) in 1958 and has maintained a significant retail presence in the Midwest ever since. It's only recently that hhgregg has decided to expand its reach and take big-box national retailers including Best Buy, Sears, Home Depot and Lowe's head on. The company now operates 190 stores in 15 states, including newer markets such as Delaware, Florida, New Jersey and Pennsylvania. The metropolitan areas of Chicago, Miami and Philadelphia will have seen a combined 36 new store openings within the last year-and-a-half come this fall.
The evolving needs of today's consumers aren't being met, according to May, and this has presented an opportunity for hhgregg to grow its market share by doing what it does best — making the purchase experience enjoyable, but not charging a premium for it. This philosophy is ingrained in the company's culture.
"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."
Along with the new e-commerce platform that it's rolled out, hhgregg is launching a new mobile platform as well. Expected to be live before the start of the holiday shopping season, the site will have a fully integrated mobile strategy which will include the ability to comparison shop, access customer reviews, make purchases and more.
hhgregg is also active on Facebook, counting nearly 75,000 fans (as of press time) of the brand. The retailer uses the social media site to announce special promotions, marketing events and new technologies, as well as to support its product manufacturers (e.g., promote the fact that Samsung is launching a new tablet PC).
Trying Not to Mess it Up
Being both modest about his own achievements and deferential to those who preceded him, May believes the biggest contribution he can make to hhgregg is to be a steward for what's already been created. He credits former company chairman and CEO and current executive chairman and director Jerry Throgmartin for creating a culture of sound ethics where employees deeply care about the company and each other. This has made my job a whole lot easier, May says.
"We have a great team of people here that are very competitive for the consumer's interest," May notes. "They have a real passion for execution, competing for the consumer and competing for market share. I never have to get up and worry about, 'Boy, are these folks motivated? Do they care?' The real question is, 'What are the tools they need, what's the structure and support that they need to be successful?' They need direction, they need support, but they go get it done every day. They make me a lot better than I am."
In the rare times that May is away from his desk — he confessed to being a retail junkie and workaholic — he enjoys spending time with his family, which includes his wife (whom he met while they were both in high school) and 17-year-old son. His hobbies include playing golf with his son — who frequently beats him nowadays — and running. And if he can find the time to get away for a vacation, May and his family enjoy escaping the harsh Midwest winters in favor of a warm, sandy beach in the Caribbean.
Joe Keenan is the executive editor of Total Retail. Joe has more than 10 years experience covering the retail industry, and enjoys profiling innovative companies and people in the space.