Growth of online sales forcing retailers to review employee commissions
Rising online sales are prompting some Canadian retailers to consider overhauling the commission structures that motivate their store employees to deliver strong customer service.
Clothing retailer Le Chateau said it’s reviewing its options due to the growth of showrooming — a practice where shoppers browse instore but then order online — because it deprives employees of commissions.
“All of the retailers are trying to find out how to recalibrate,” said Franco Rocchi, Le Chateau’s senior vice-president of sales and operations.
One option under consideration is allocating commissions from online sales to stores near the shopper’s home.
The Retail Council of Canada said designing a good compensation strategy is challenging. It’s especially difficult figuring out how to divide store rewards among individual sales associates, said senior vice-president Michael LeBlanc.
“This concept of attribution is a really gnarly one for retailers,” he said, adding there is no “one-sizefits-all solution.” Options vary by type of retailer, store format, the role of sales associates and the company’s financial position. How ecommerce is integrated into its operations and fits within its priorities is another consideration.
“Retailers are looking at this because the customer is saying: ‘I’m going to be more agnostic than I used to be about where I shop,’” LeBlanc said.
Luxury menswear retailers such as Harry Rosen pay commissions to employees, even when the regular customers to whom they’re assigned make online purchases, said industry observers.
Commissions are typically paid as a percentage of sales by firms in automotive, electronics, furniture and high-end apparel, while other sectors pay varying degrees of individual compensation.
The trend in the U.S. is toward team rewards, with bonuses based on the store’s performance, in order to avoid the high-pressure tactics that customers loath, said Jim Okamura, a Canadian retail consultant based in Chicago who analyzes both markets.
Home renovation retailer Lowe’s said its stores, including those from its recent takeover of Rona, don’t pay individual commissions.
“Our people are motivated by the desire to provide a good customer experience,” said spokesperson Valerie Gonzalo.
Le Chateau says it is reviewing its options regarding commissions for store staff due to increasing online sales.