Has Rainbow Shops created a compensation model aligned with omnichannel realities?
Apparel chain Rainbow Shops suspected that not factoring online sales into its store compensation model was creating tension between the brick-and-mortar and online areas of the company. At the Internet Retailer Conference and Expo in Chicago, David Cost, e-commerce and digital marketing executive at Rainbow, discussed what was going wrong and how the retailer was attempting to remedy it.
Mr. Cost detailed a scenario the chain sometimes encounters in which a customer purchases an item from the online store and then returns it to a brick-and-mortar location. Not only does the brick-and-mortar location receive no benefit for the initial sale, but feels punished with a negative sale due to having to take the return.
While Mr. Cost noted that allowing online returns in stores led to an additional in-store sale 60 percent of the time, locations that saw the negative sales on reports were still not happy about it.
“Sales are a major factor in [stores’] compensation, so it doesn’t put them in a cooperative frame of mind,” Mr. Cost said. “We were really concerned with what the store, from the clerk at the register up through the regional manager, were experiencing in terms of how e-commerce was impacting their business.”
To ameliorate the situation, Rainbow decided to note the shipping zip code of each online purchase and apply it to the bonus of the brick-and-mortar Rainbow store that is within a 10-mile radius of that ZIP code.
“That return, even though it’s infrequent, doesn’t feel so bad,” Mr. Cost said.
If the online sale ships to a zip code outside of where Rainbow has a store, the sale remains associated with e-commerce only.
Making the in-store team feel as though they are part of a bigger omnichannel presence has value beyond returns. When visitors to a given store find that a particular item is out-of-stock, store staff has an incentive to point the customer to the website because they can anticipate it contributing to the store’s bonus.
Mr. Cost described the change as being “transformational” in terms of making everyone in the store feel like they’re playing on the same team.
DISCUSSION QUESTIONS: Is there any downside to a compensation model that associates online sales to a brick-and-mortar store within the same zip code? Are there other ways you think retailers should retool brick-and-mortar compensation to account for online sales?