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Retail workers want their discounts

April 17, 2014

Many people pick up retail holiday work primarily to take advantage of the associate discount. But some retailers seem to use employee discounts as a year-round recruitment and retainment tool.

In the apparel space, many discount benefits are tweaked to also work as a clearance tool.

J. Crew reportedly offers its employees 30 percent to 75 percent off as well as special access to special sales. The discount depends on whether the items are full-price, on sale, or on a list of slow-selling or overstock items. Regardless, employees get half off any five items each month.

The "great" to "best ever" discount was prominent among the "pros" of working at the chain in nearly all of J. Crew's employee reviews on the employee review website, Glassdoor.

Other apparel retailers known for generous employee discounts are American Apparel (50 percent off across the store), Abercrombie & Fitch (40 percent off for full time, 30 percent for part time), and Gap (30 percent to 50 percent off). Many department stores offer associates a 20 to 30 percent discount, according to a review of such discounts on Buzzfeed.

In many cases, the discounts extend to spouse/domestic partners and sometimes to family & friends.

In the electronics space, Best Buy allows employees to purchase items at five percent above wholesale cost. RadioShack offers a 30 percent discount.

Apple offers employees a $500 discount off new Mac computers and $250 off iPads. The offer can only be used once every three years. They also get a 25 percent off discount a major purchase once a year, as well as ongoing discounts on software and accessories.

In the grocery channel, Whole Foods stands out with its 20 percent off discount card for employees. In its optional and controversial program, the employee discount can lift to as high as 30 percent based on their BMI, blood pressure, cholesterol, and whether or not they smoke.

Many other grocers offer a 10 percent discount, including Walmart and Target. Home Depot appears to be one of the few major chains offering no employee discount.

Discussion Questions:

What are the keys to making discount programs work for both employees and employers? Do you think discounts are the right kind of incentive for developing good retail employees?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Should employee discounts be emphasized more or less by retailers as a means to recruit and retain workers?

Comments:

Having three kids who worked in retail to get through college, I can speak from some experience that employee discounts are an incentive, but certainly not a primary reason people choose to work for a particular retailers.

Discounts seem to be more important in employee retention than for recruitment. Long-term staff (if there is such a thing in retail) seem to value discounts more than new hires. Some of the best discount programs offer deeper discounts based on years of service.

Beyond employee motivation, one of the greatest things about employee discounts is that it gets employees using and displaying the products sold in store. No better way to great retail brand advocates, especially for retailer house brands.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

Before we get too excited, let's remember that, at least on the apparel side, many companies require employees to -- quite literally -- wear their brand on their sleeve, and every other part of their bodies.

Forcing part-time or under-paid full-time workers to spend money on a second wardrobe is an economic hardship, no matter how large the discount is.

I personally think giving employees an allowance to be used to cover the cost of clothing is better than a discount.

But, here's another novel thought -- why not make retailing an attractive career and pay employees at a professional rate? That way they could afford to buy their own clothes at full price.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

This one really isn't that difficult -- is it? (Or is this a trick exam question, Tom?)

Matching employees who are enthusiasts for the category to the store is what makes employee discounts attractive. While Ryan is right that some clothing retailers force the issue inappropriately, I've known lots of teenagers who slaved at AF just to get the clothes. And electronics for the Geek Squad types? No-brainer!

Discounts on dentures for the 20 year old receptionist? Not so much.

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Ben Ball, Senior Vice President, Dechert-Hampe

One of the more challenging issues facing retailers today is recruiting better candidates for full time work. This will be an excellent perk. It will aid in fostering longer employment commitments.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

No discount will be large enough to attract an employee. An employee only has so much capacity to consume. Retailers know their sweet spot. Discounts of 20-30-40% and they are still making money. I have a friend at a home improvement store that gets 20%. So he buys gift cards and resells them to contractors as a way to earn extra cash. Everyone wins. The store knows about it and is happy he is bringing business to the store.

David Livingston, Principal, DJL Research

Retail discount programs are beneficial to both employees and employers if executed properly. For employees, it serves as a rewarding benefit that is relevant and specific to their job. For employers, offering this discount will increase the employee's attachment and connection to the brand, will increase product knowledge, and will ultimately not hurt the bottom line tremendously because items are often sold at cost or a bit more.

There are other levers in place that will ensure good employees -- collective sales bonuses, intangible benefits, and strong management leadership are some examples.

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Jesse Karp, Omnichannel Consulting Manager & Loyalty Practice Lead, Cognizant Business Consulting

If we are talking specifically about apparel, few people will work at a retailer for whose products the employee doesn't care. Employees like to be passionate about the products they sell, especially apparel. So I do believe that offering incentives to employees to buy discounted merchandise is very productive, since they hopefully will be wearing the clothing while they work. That way they are literally advertising for the brand.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Just as in selling to customers, selling products - even at discounts - to employees should be done in a way that is a positive shopping experience. I'd recommend a monthly deep discount night on what is usually a slow night, when employees could bring in friends and family who can also receive the deep discount. This makes the employee feel good about the discount on their products, and they feel good about getting the "inside deal" for their friends and family. These kinds of things aren't losing any sales for the business and will help to keep employees happy, loyal, and hopefully, around for a while.

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Larry Negrich, Vice President, Marketing, nGage Labs

Discounts are a nice perk - nicer at some retailers than others - but they are just a nice-to-have. At Target, team members used to get a year-end statement showing total pay and benefits, including a total of your 10% discount for the year. Although the total could reach hundreds or even thousands of dollars, many viewed it with a jaded eye.

This reinforces much recent research about the relatively low impact of financial incentives on employee engagement and motivation. Make no mistake, everyone wants to be paid well enough to eliminate constant worries about money, but discounts and cash are NOT primary human motivators.

These truly motivate and engage us:

1. Autonomy - we want to be self-directed in pursuit of well-defined goals

2. Mastery we desire to become skilled at things that matter to us

3. Purpose we seek to work in service of something we see as important

Employees expend time, their most precious resource since nobody knows how much we've got and we'll never get more. In exchange, they desire something of real value. I'll take autonomy, mastery and purpose over 10% off a bag of kitty litter every time.

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Lance Thornswood, VP/Managing Director, inRetail

The employee discount remains as one of many tools to attract, retail, incent, and reward employees. I agree with Ralph that most, if not all, employees of a specific apparel retailer work there because they personally like or identify with the image of those who wear that apparel and therefore would be motivated by the ability to receive those same goods at a discount. Speaking from personal experience, we were loyal customers of a specific apparel store for many years, because they had provided such valuable employee discounts when my wife worked there while I was in graduate school.

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Verlin Youd, Principal, VPY LLC

Discounts are no substitute for a living wage, which many retailers unfortunately still do not pay.

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Al McClain, CEO, Founder, RetailWire.com

In all deference to Al, I have worked in retail since the mid-70s; during that time retail has never paid a living wage. If you wanted that, you had to be on commission or some type of bonus plan.

Employee discounts have always been a perk if you wanted to truly work for one brand over another - not just "have a job."

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Bob Phibbs, President/CEO, The Retail Doctor

Many apparel retailers attract employees who already have some loyalty to the brand. Electronics retailers attract candidates who yearn for the latest toys and have in part, a geeky side. Successful programs for both can cement loyalties and brand advocacy, but if not properly monitored, can result in discounts for more than the retailer bargained for. Employees watch like hawks for markdowns on favorites or needs and are exuberant when making those purchases - all good for the brand.

On the other hand a "cheap" employee discount can foster negative connotations about the brand.

Alan Cooper, Contract Trainer/Training Consultant, Independent/Freelance

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