How should commissions work in the era of omnichannel retailing?
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.”
- Canadian retailers consider overhauling employee commissions after growth of online sales – Financial Post
- Store fulfillment is creating associate tension – RetailWire
- New Research Report Finds Retailers Struggling to Put the Customer at the Center of Business – O Alliance/Business Wire
- Why do retailers struggle to measure marketing campaign results? – RetailWire
- Entailment Is a Click Too Far for Investors – The Wall Street Journal (sub. required)
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?
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9 Comments on "How should commissions work in the era of omnichannel retailing?"
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Principal, Cathy Hotka & Associates
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.
Principal, Retail Technology Group
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.
President, Integrated Marketing Solutions
President/CEO, The Retail Doctor
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.
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
SVP, Client Services, MotionPoint
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:
True omnichannel retailing is all about teamwork and collaboration across the marketing and sales channels … this doesn’t happen by accident.
Global Retail & CPG Sales Strategist, IBM
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.
President, b2b Solutions, LLC
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.
Managing Partner Cambridge Retail Advisors