How (and how much) should you pay your retail team?
With all the changes in retail, it's time to also reconsider retail worker compensation. As this role evolves to include more responsibility, we've broken down some new approaches to payment and rewards.
Learn from the best - subscribe to our clienteling newsletter now.
Latest posts in Best Practices
Last month, Modern Retail published an article called "In 2020, retail workers could no longer be just salespeople" - as the article puts it, "they also had to be safety officers, virtual stylists and shepherds of buy online, pickup in-store orders." That's a lot to take on in addition to also hitting your sales goals during a pandemic.
There's no doubt that the role of a retail worker has been evolving rapidly even before COVID - so said the NY Times back in December of 2019. So with all these changes, the next big question should be whether (and how) compensation should change as well. In most industries, with more responsibility usually comes more money. How can retail payment structures adapt to fit the new mold?
What Retail Workers Get Paid
Most retail workers are paid on an hourly basis. The city you live in and what vertical of retail you work in dramatically impacts what that hourly rate might be. Let's look at the data from 2019 (courtesy of Bureau of Labor Statistics). In 2019, the hourly rate in retail ranged from $20.57/hr down to $9.09/hr for the lowest ten percentile. Looking at it by vertical, automobile salespeople typically make the highest, at $21.28/hr, with general merchandise store workers making the least - $12.38/hr. Last perspective: the state with the highest hourly rage average is California at $15.79/hr, and the lowest is South Carolina, with an average wage of $13.07. (As a New York based company, we'd like to point out that our state ranks #4). You can also see what the biggest retail chains pay their hourly workers here - spoiler alert, 40% of them pay less than the lowest ten percentile rate referenced earlier.
Out of the 20 largest retailers in America, 8 of them pay their retail workers hourly rates that fall in the lowest ten percentile for 2019.
Additional Models for Retail Worker Compensation
While an hourly rate is the standard, there are many other ways to compensate retail workers that may incentivize them to work harder and also increase employee satisfaction.
Hourly + Store Team Bonuses
A popular way to motivate your store teams is to establish goals and prizes. Goals can certainly be revenue-based, but that's not the only number you can factor into performance metrics. Goals could also incorporate customer satisfaction, return rates, or a store's foot traffic. An improvement in any of those metrics would certainly be a win for the company.
Once you've established goals, you can then offer an increase in pay based on either a binary basis ("yes or no"), or by aligning an additional bonus payment with the percent to the goal the team reached. Setting up team-based incentives over sales goals per employee can be a great way to ensure that the culture of each store stays collaborative instead of competitive.
Hourly + Individual Commission
Another model is an hourly rate plus a commission on sales. A light search suggested that retail salespeople can earn between 2-10% in sales commissions, on top of a base hourly rate. However, this commission can also take various forms of its own:
- Fixed commission vs tiered commission: your commission percentage stays the same no matter what, versus the percentage increasing the more you sell
- Revenue based vs gross margin: the percentage is based on the final sale price, versus only the price of the actual items (not including tax or shipping).
If you are going to go down this route, its best to first set your sales goals up and then determine how to split the hourly rate compared to how much in sales you expect a worker to generate.
More from Endear
Read how Anine Bing transformed their retail team into omnichannel sales people during the pandemic.
In-Kind Incentives
In-kind incentives, i.e. non-monetary rewards such as days off, gifts, or free merchandise, are also great one-off ways to give employees an extra push. These kinds of benefits can be used as a way to temporarily generate some light competition as well, which can be helpful if you're trying to reach a short-term goal such as moving a specific type of product or if multiple stores are competing against one another. Below is a list of some great non-cash rewards to offer one person or a whole team:
- Day off or sleep in / leave early
- Team happy hour
- Extra discount over in-house merchandise
- Gift card to a local shop or restaurant
- First choice of shifts for the next week
Factoring E-Commerce into Retail Compensation
But in all these cases, the big puzzle piece that's missing is e-commerce. There's no doubt that having a store helps to drive traffic to your website, and at Endear we know that conversations with a salesperson can drive sales online. While retail workers may know that their efforts are only converting online, it can be disheartening when there is no way to prove it or receive credit for it.
Being an omnichannel operation doesn't mean having an online and offline business. It means enabling these two channels to work together, and that should include the way you think about your sales team. Your sales team should be able to receive credit for sales on matter where they happen in the same way they receive credit for in-store purchases. While tracking these conversions can seem challenging, CRMs like Endear were designed to give you better insight into the behaviors of your customers, especially so that you can have a fuller picture of who on your team is moving the needle. With our performance and analytics tracking, you can see not only every store associate's output in terms of customer messaging, but also the way in which these conversations drive sales.
If you are interested in taking a more holistic look at sales, contact us to chat about our modern approach to retail associate compensation and commission practices.