Last week another great retail chain closed its doors for good. HHGregg was a brand which had built its fortune in the days when customer care and high profit margins walked together hand in hand. However, the brand found it hard to adapt to the new era of retail experience.
With the collapse of this appliance retailer, many have been quick to respond saying that the company was simply a victim to the “Death of Retail”.
This term is often thrown around as a way to assign blame to internet retailers like Amazon for the consolidation and closures of many retail giants. However, in the case of HHGregg, the road to their filing of bankruptcy in March and final liquidation which occurred last week was something that had very little to do with internet sales.
The actual cause requires that you look a bit deeper into the history of this national tenant and see how a strong brand can crumble without the correct driving force.
HHGregg was founded back in 1955 when HH and Fansy Gregg opened an 800 sq. ft. appliance showroom in Indianapolis, Indiana. The years that followed were a whirl wind romance of expansion, normally by taking over the locations of former competitors who thought that they would go into the Midwest market and bankrupt HHGregg.
The company eventually landed in the care of Fansy Gregg’s grandson Jerry Throgmartin. For a full timeline please visit the page devoted to HHGregg via the Indiana Business Journal.
By the time that Jerry Throgmartin had taken over as CEO, in 2003, the HHGregg brand was present in 9 states with over 60 retail locations. Through Mr. Throgmartin, the company flourished all while keeping the principals of his grandparents in place. The company was also renowned for paying out 5% commissions to its sales staff, a procedure which was at this time considered to be “Old Fashioned” as most other companies paid out 1% commission, if any.
When the company went public in 2007, the brand had 79 locations within 11 states. Jerry Throgmartin remained with the company as Executive Chairman. Dennis May (former President of Sun Television & Appliances) replaced Jerry as the elected CEO. By 2010 the company had reached its all-time high with shares valued at $30.00.
So what happened over the course of less than a decade? In 2012 Jerry Throgmartin died at the age of 57 from complications of meningitis. Two years later, in 2014, Jerry’s son Gregg left his position as HHGregg’s Executive Vice President.
Although it didn’t seem like much of a shift, the loss of these two men was what broke HHGregg’s forward momentum. The chain continued to expand with the absence of the Throgmartins, setting up in high dollar locations in Southern markets and along the East Coast, a decision they would later regret.
In 2013, Dennis May chose to change the brands identity. Due to losses in revenue from the holiday season, HHGregg decided to remove all lines of computers, tablets, gaming systems, and other small electronics systems while adding in a furniture department for all locations.
After three years in the hot seat, May left HHGregg due to increased losses. The new CEO Robert Riesbeck then changed the brand’s focus in 2016 choosing to concentrate on the HHGregg Fine Lines store prototype which had taken the lion’s share of company sales. In an interview Riesbeck commented on this decision saying, “There was just too much competition in electronics.”
Without a clear direction, HHGregg could not get back the rapport it had lost with customers and employees. This eventually prompted the board’s decision to file Chapter 11 in March of 2016.
Hoping to cut loses, HHGregg released plans to close 88 locations using Chapter 11 bankruptcy protection to consolidate over $190 Million in leases which would not come to term. The remaining stores were to remain open, being purchased by an anonymous third party.
However, two weeks later, it was reported that the sale of the remaining locations had fallen through resulting in the full liquidation which concluded last week.
Although very sad, the loss of a retail giant like HHGregg is something that many other companies can learn from.
Over expansion, improper rebranding, and loss of strong leadership were the factors that lead to the fall of HHGregg, not a “Death of Retail.”
There are other retail giants who are having the same issues. Companies like Macy’s, Sears, and JCPenny have all realized that company resources had been stretched too thin over the course of the last decade due to over expansion.
As these brands try to find new ways to connect with the next generation of shoppers, it is important that they take a note from one of Jerry Throgmartin’s famous mantras: “It is my own belief that competition does not put you out of business. You put yourself out of business because you stop delivering what the customer wants.”
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