How should commissions work in the era of omnichannel retailing?

Discussion
Photo: RetailWire
Jul 28, 2016
Tom Ryan

With online revenues siphoning sales from physical stores, some Canadian retailers are considering allocating commissions from online sales to store personnel near the shopper’s residence.

That’s according to a report from for the Financial Post that explored how stores are considering “overhauling” commission structures amid the rise of showrooming and less loyal customers. It also reflects the faster growth in online shopping and the degree to which interactions with store associates may support online growth.

The only other example of a solution in the article came from Harry Rosen, the men’s clothier, which is able to pay its associates a commission whether their regular clients purchase in-store or online.

A report that came out earlier this year from O Alliance likewise found that using the store as a fulfillment center — both for buy online/ship from store and buy online/pick up in-store — was meeting with push-back from associates who felt they weren’t being incentivized enough for supporting online sales. In some cases, associates hold back “best sellers” rather than fulfill online orders to ensure the items are available for their clients.

If bonuses are tied to store goals, non-commissioned staff could also feel supporting an online purchase works against the in-store purchase.

The problem appears to be that commission or pay-attribution structures at the store level have long worked on the “last touch” model: basically the commission falls to whomever guides the customer to the register.

The issue seems similar to the “multi-touch attribution” challenge in campaign marketing, in which attribution is often fully-credited to “last click” when the decision to purchase may have happened at another key point in the shopper journey.

The Financial Post article noted that adjusting an in-store commission structure for online influences would depend on a variety of factors including the type of retailer and the responsibilities of each associate.

Randy Harris, president of consultancy Trendex told the business publication, “It’s complicated as hell, to be honest with you, and I think they are almost opening a Pandora’s box.”

DISCUSSION QUESTIONS: How should commissions and general pay structures for associates be revamped, if at all, to acknowledge the support stores provide for online sales? Do you see the challenge as being similar to or different from last-click multichannel attribution for online marketing?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Everyone is feeling their way on this, and we'll undoubtedly find, over time, that there are multiple ways to achieve goals."
"Finding the right weighted formula for who (individuals, stores, e-commerce personnel) gets what is the challenge."
"I see no reason why a modern retailer with commissioned sales people could not find a way to automate the accounting for this."

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9 Comments on "How should commissions work in the era of omnichannel retailing?"


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Cathy Hotka
BrainTrust

Commissions are one way to encourage store activity in unified commerce, but there are other models. One retail company compensates its STORES by allocating extra personnel time for each sale the store fulfills. Everyone is feeling their way on this, and we’ll undoubtedly find, over time, that there are multiple ways to achieve goals.

Bob Amster
BrainTrust

I very much agree with Cathy’s general assessment. I am of the opinion that in a unified commerce model, everyone should share in the benefit of the concept of commissions. Finding the right weighted formula for who (individuals, stores, e-commerce personnel) gets what is the challenge. Furthermore, there is the subject of performance bonuses for people in different functional areas of the company (store operations, merchandising, e-commerce, commerce). The formula will probably include some weight to both: individual departmental performance and overall company performance. I might add I would emphasize overall company performance so that team members realize the importance of inter-departmental collaboration.

Chris Petersen, PhD.
Guest
Tom Ryan has absolutely nailed one of the most difficult conundrums for omnichannel retailing today! For traditional brick-and-mortar retailers aggressively pursuing online, the issue of who gets the reward for the sale is “as complicated as hell” — especially with old POS systems focused on transactions. Omnichannel success is not about where a specific product sale was made today! It’s about the total customer relationship and lifetime value. Omnichannel powerhouses like John Lewis are using sophisticated CRM systems to help solve the dilemma by tracking who, when, where and how, which enables multiple people/entities to get credit for building pieces of total relationship. And the results are dramatic! John Lewis customer relationships that are omnichannel purchase 300 percent more than if customers just buy online or just buy in-store. In order to begin to solve the challenge of who gets credit, retailers need to be able to track at least four kinds of sales streams: Online purchase direct to customer; Online long tail shipment direct to store; BOPIS — click-and-collect, buy online collect in store;… Read more »
Bob Phibbs
BrainTrust

Many will no doubt posit to do away with commissions. I think that’s a mistake. The brightest and best have chosen to make their living selling a brand’s wares and deserve to have their talent to build rapport, compare and contrast and make the sale rewarded. Leveling the pay field usually leaves the weaker players on the floor longer and dis-incents the best. Cathy’s right, everyone is feeling their way. Just don’t throw the baby out with the bathwater.

James Tenser
BrainTrust
The challenge of attributing the sale dates back nearly 20 years, to the first multi-channel retailer to accept an in-store return of an online purchase. Managers rightly balked at the notion that their store productivity could be negatively impacted when they issue a credit. Not to mention the staff time that would be soaked up by the service encounter and restocking. The perception at the time was that the online channel was effectively in competition with the stores. Pursuit of fairness led to some early policies to credit stores with a proportion of online sales. In the ensuing unified commerce world, new customer paths, notably BOPIS, add new wrinkles to the attribution question. Commission-based sales are certainly impacted by extension. There are several schemes worth considering to add fairness, without relying solely upon the “last-touch” model. One might be to pool commissions for net sales completed entirely online and allocate to personnel based on each store’s geographic footprint. This is like found money for the sales staff, so payout rates might be adjusted lower. Certainly… Read more »
Charles Whiteman
Guest

For retailers where the “shop online, buy in-store” and “shop in-store, buy online” behaviors are significant (which research shows they are for most multi-channel retailers), creating an omnichannel commission structure is smart.

It should be augmented several ways to be most successful:

  1. The CMO and vice president of e-commerce should collaborate closely on the website and the CMO should fund some of the cost of maintaining the website as a marketing channel (since companies will chronically under-invest in the website if it is viewed only as a sales channel to be funded by the vice president of e-commerce’s P&L).
  2. Store associates should be given the training and tools to leverage email, social media, etc. to drive their customers to transact in whichever way customers prefer.
  3. Reporting should be implemented to create visibility and accountability for driving cross-channel behavior.

True omnichannel retailing is all about teamwork and collaboration across the marketing and sales channels … this doesn’t happen by accident.

Ralph Jacobson
BrainTrust

There are some really insightful comments posted here so far, so it’s obvious that this is and has been a real challenge for years … even a couple decades at this point. I think a serious, intentional update of sales staff roles both online and offline is in order for the vast majority of retailers working with commission programs. I do feel commissions still have their place today as a key incentive for the staff. If retail management addresses this issue across channels and functional silos, there can be effective sales handoffs that capture sales contribution, and “sales assist” efforts from each potential salesperson.

Steve Montgomery
BrainTrust

As everyone has already commented, the short answer is yes. The questions are how and how much. To even begin to accurately answer we first have to be able to track all the ways consumers make purchases and which impact element in the transaction impacts the purchase decision.

Few retailers possess the information systems to capture that data to say nothing of the skills to analyze it. Those that figure that out will not only have happy customers, but happy employees — a winning combination.

Ken Morris
BrainTrust
Ken Morris
Retail industry thought leader
3 years 10 months ago
Attribution and compensation are a big issue for omnichannel sales. If retailers fail to motivate and compensate sales associates for cross-channel sales and fulfillment, they risk lackluster adoption of processes at the floor level, and subpar customer experiences. Retailers must fundamentally reinvent their compensation plans to reward cross-channel success. Unfortunately, many retailers (55%) do not offer store employees incentives for fulfilling omnichannel orders, according to the 2016 Customer Experience/Unified Commerce Survey from BRP. Other rewards vary: Offering partial sales credit or commission for orders fulfilled from a store (27%); Having dedicated employees handle fulfillment (16%); Adjusting store labor costs/ credits to compensate for orders fulfilled from a store (16%); Providing incentives or bonuses to pull inventory and fulfill orders promptly (7%); and Rewarding associates with complete credit for a sale (2%). Some of the best practices we have seen include compensation models that take into account the following scenarios that associate online transactions to in-store interactions: Store associates are paid a commission on qualifying online sales when customer information for an online sale matches the… Read more »
wpDiscuz
Braintrust
"Everyone is feeling their way on this, and we'll undoubtedly find, over time, that there are multiple ways to achieve goals."
"Finding the right weighted formula for who (individuals, stores, e-commerce personnel) gets what is the challenge."
"I see no reason why a modern retailer with commissioned sales people could not find a way to automate the accounting for this."

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