It’s a whole new ball game in the retail arena of late, and so it’s not surprising that changes are being considered in the way we keep score.
Because an increasing chunk of Canadian retailers’ revenues are coming by way of online sales, the appropriateness of the compensation-by-commission model that has long been the cornerstone of many retail operations—including those involved in automotive, electronics, furniture and high-end apparel sales—is being called into question.
At the heart of the issue is the practice of showrooming, where shoppers tire-kick their considered purchases in store, only to vault home and close the deal with an online purchase, thus leaving the sales personnel who helped them browse high and dry. How to apportion compensation for this eventual sale is at the crux of the issue. And, say those with a worried eye on the scene, the concern is that customer service on the floor level will suffer, with the incentive for encouraging sales on the hook.
According to recent news reports, clothing retailer Le Chateau is responding to this revised reality with a thorough review of its employee payment plan in pursuit of a fair strategy for dividing store rewards among individual sales associates. One option its principals are considering is allocating commissions from online sales to stores near the shopper’s home.
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.
It’s an unprecedented development that’s for fresh attention to how an omnichannel retailer integrates e-commerce into its operations.
In the US, the practice of team rewards is gaining ground. Here, bonuses are based on a store’s overall performance, thus freeing up sales staff from the imperative to apply high-pressure tactics to encourage sales.
As retailers’ online sales pick up as a portion of overall sales, this compensation question will likely gain in priority. E-commerce accounted for just 5.7% of total retail sales in Canada last year, according to a Trendex NAFTA apparel report.