Retailers debate the advantages and drawbacks of selling on commission

THE BALTIMORE SUN

TALLAHASSEE, Fla. -- Even if a Sears appliance customer rebuffs Carolyn Jensen on her first approach, Ms. Jensen sticks close by so she's available when the person is ready to ask questions.

"You say something [to the customer] that's a relaxer so they feel free to be tire kickers," said Ms. Jensen, a veteran saleswoman at Sears. "Then, you let them alone and watch for the signs."

For people like Ms. Jensen, who gets a commission on whatever she sells, giving shoppers the right amount of attention without being annoying is a particularly difficult tightrope to walk.

Hover too closely and risk driving an independent-minded shopper out the door. Ignore the person and risk losing a sale and a commission from a customer with a question and no one to ask. Or even worse, lose the shopper to another sales person and lose the commission.

Analysts say retailers need to be aware of the distinct advantages and just-as-distinct problems that a system of commission sales brings.

On the plus side: Employees may feel more of an incentive to work harder and learn more about the products they're selling.

"If a person says 'I'm just looking,' I feel they're making a mistake because I can help them," said Tom Henshaw, a Tallahassee Sears appliance salesman.

Not only that, a portion of a company's compensation costs are variable instead of being fixed at a higher rate.

On the minus side: Salespeople desperate to earn a commission may verbally push customers to get them to buy something.

"Commissions can be a very good motivator, but they can also be a disadvantage to the retailer and cause problems," said Cynthia Cohen Turk, president of Marketplace 2000, a Miami retail consulting firm. "It can focus the salespeople on too much sales and too little service."

Fear that sales associates on commission will badger customers into making purchases has kept some companies away from such a system and forced others to drop it recently.

"We're here to help, not to elbow another (sales) associate out of the way for an ulterior motive," said Monet LeMon, a spokeswoman for Talbots, a women's apparel retailer with a Tallahassee store.

HTC Highland Superstores Inc., a Midwestern electronics and appliance chain based in Plymouth, Mich., eliminated commissions at all 49 stores in June, saying, "Customers are turned off by the pressured atmosphere . . . created by a sales force working for commission."

Sears has had problems with auto-repair employees who received commissions.

After allegations this summer that workers in some Sears auto stores had sold customers repair services they didn't need because of the commissions involved, Sears switched its 3,500 auto-service advisers to straight salaries.

The company has acknowledged that "mistakes did occur" at its auto-service centers but has denied a pattern of wrongdoing.

That left about 50,000 commissioned sales employees at Sears nationwide out of a total work force of 175,000.

Sears compensation director Ken Cook said the company was considering a new incentive program for auto-service advisers that would link rewards to customer satisfaction, a strategy that is gaining popularity at other companies.

The commission-sales system may have its share of detractors but it has just as many supporters.

Experts say most salespeople are compensated through some kind of variable pay, commission or bonus plan.

Retailers tend to use commissions with those who sell furniture, appliances or other big-ticket items such as men's suits or women's dresses.

There are as many variations on how it is done as there are companies doing it.

Some give employees a base pay and allow them to draw on commissions if they reach certain sales levels while others allocate a percentage of the amount sold to the associate who sold it. Still others give salespeople a percentage of the profit on each item.

The reason for the continued reliance on commissions is that "they work," said Thomas Mott, a sales-compensation expert at Hewitt Associates, a suburban Chicago firm.

Supporters of commission sales say the most mentioned down side of the payment system (i.e. employees who badger customers to make purchases) shouldn't cause a company to throw out commission sales just because a few people couldn't behave responsibly with it.

The trick is to properly supervise the sales force, supporters say.

"Certain individuals will react differently if they're on commission rather than a salary if they know they're going to make something (on a sale)," said Tallahassee Sears Manager Dennis Andersen. "That's our job as managers to try to manage those things."

And if a retail manager finds an associate strong-arming customers, the response should be clear, said one retail observer.

"If you're in an organization that lets you know what is acceptable behavior and what is unacceptable behavior, you know that if you cross the line, you're going to get booted out of the organization -- and that's what keeps you in line," said Steven Grossman, a sales-force management expert with the Chicago office of Towers Perrin, a business consulting firm.

Regardless of whether commission sales are a blessing or a curse for retailers, it's a sensitive issue for many companies and employees, who are loath to discuss it publicly.

Ms. Turk, the Miami retail consultant, said many companies are sensitive about the issue after Sears' problems earlier this year.

Some retailers may be nervous about their pay policies, but not Mays-Munroe owner Ray Munroe. It helps that five of his sales associates are directly related to him.

"The ones here now realize that they've always made a good living and that they always will make a good living. I won't load up the sales floor so there will always be enough (customers) to go around," Mr. Munroe said.

"So, they aren't too anxious to sell somebody that they put too much pressure on them. They know I'm not going to let them starve."

Sales commissions: pro and con

FOR:

* Commissions give employees a direct incentive to work hard at gaining sales.

"Customers really want someone to respond quickly," said Thomas Mott, a sales-compensation expert at Hewitt Associates, suburban Chicago firm. "If [salespeople] have a personal financial interest, they are likely to be more responsive."

* Customers get better informed sales associates. Ron Khoury, Sears appliance manager in Tallahassee, Fla., said salespeople of big-ticket items such as refrigerators and washer-dryer sets often have to answer bushels of questions about the appliance.

* The company gains because compensation costs are variable -- they can dip if employees don't sell enough to earn higher commissions.

AGAINST:

* Some feel having sales associates work on commissions causes them to trample over each other to get to customers to make the sale.

"Any retailer putting in a system with some commission in it has got to look at the delicate balance between motivating [employees] to make additional sales [and] working as a team and providing service to a customer," said Cynthia Cohen Turk, president of Marketplace 2000, a Miami consultancy.

In fact, some companies have recently pulled back on their sales-commission systems in light of their problems with it.

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
36°