BrainTrust Query: The Income Gap – The Growing Chasm Between Server and Served
Through a special arrangement, presented here for discussion is a summary of a current article from the Retail Prophet Consulting blog.
Review any retail sales training program written in the past 50 years and you’ll likely encounter multiple references to the word "rapport." Rapport, or the relationship and understanding between people that builds trust and confidence, has long been regarded as a vital aspect of effective selling. The idea is that in order to properly assess and address the needs of the consumer, the salesperson has to be able to fundamentally relate to those needs. Then and only then, the theory asserts, can salespeople recommend the best product, from personal experience, to satisfy the customer’s needs, with credibility. In other words, the more alike the lives of the customer and the sales associate are, the easier it is to build rapport.
Over the past 30 years however, the economic distance between the lowest paid Americans (many of whom are front line retail workers) and the highest paid, has been widening at an alarming rate. The likelihood that retail workers are serving someone outside their economic bracket is escalating. A mere 20 percent of all consumers now account for at least 40 percent of total retail consumption — a figure expected to increase to 50 percent of consumption by 2015.
At the same time, roughly half of the nation’s front line retail workers earn less than $10 per hour — which raises the question, how can a retail sales associate relate to the consumer who may be spending more on pair of pants than the sales associate themselves will gross that day? The simple truth is that the front line retail worker of today is less like their customer than they have been in more than 100 years.
Despite the escalating tension the income gap creates, approaches on the part of retail companies have remained relatively uncreative over the last 30 years. Programs aimed at better hiring, increased training and commissions in lieu of base pay have all been relatively standard responses. None of these truly address the issue of retail employees who are losing economic and social ground, leaving them vulnerable in an increasingly volatile economic landscape
This is not to imply that wages and benefits alone deliver employee satisfaction. There’s ample research to suggest that true employee satisfaction is driven by more intrinsic stimuli such as recognition, belonging, autonomy and sense of purpose. However, when wages are so low that even basic needs like housing, education and nutrition can’t be met, other more existential needs become moot. According to Daniel Pink, author of Drive: The Surprising Truth About What Motivates Us, companies need to pay their people at least enough to take "the problem of money off the table." This may be a different figure for every employer. But until they do, Mr. Pink suggests, it will remain a preoccupation and a deterrent to performance.
The question for all businesses, including retailers, may actually be quite simple. If people (those in their stores) truly represent their greatest competitive advantage and the critical medium through which consumers experience the brand, then business expenditure and investment should be guided accordingly. Furthermore, if the goal of the business is not only to compete but to dominate the human brand experience, then it must ignore minimum wage guidelines and target instead a rate of pay and package of compensation that begins (at least incrementally) to bridge the social and economic gap between staff and the customers they serve.
Discussion Questions
Discussion Questions: Do you see the income gap between customer and front line retail worker as a problem? Should retailers be paying more to workers in stores and, if so, how do they accomplish it while remaining competitive in the marketplace?
The politically correct answer is “no.” But in some instances, with certain types of products or services, the retail employee needs to relate to the customer in a way that the customer perceives likeness and credibility. This is especially true when “selling” is part of the function of the employee.
Pieces and parts of all the above are part of the issue (except maybe price and promotion – that one’s a non sequitur to me).
Do I see the income gap as a problem? I think that’s a question for a different forum. I see the product knowledge gap as a more immediate issue, and according to our data, so do retailers. On any significant purchase, consumers have done a LOT of research – and tend to be far more educated on features and benefits than the workers they talk to. That’s becoming a larger and larger problem.
We’ve answered the rest of this question a thousand different times and ways – retailers need retention plans, career pathing and talent identification programs to become more competitive in acquiring top talent. What they’re being paid at that moment in the store is less important than whether or not they believe they are part of the retail organization for the long haul.
I’ll give you there is a great disparity in wages in retail — always has been. I remember back in the 80’s when I was hiring grown men for $2.10 per hour plus commission — it’s never been great. But to adopt the Daniel Pink idea of “taking money off the table” is totally impractical in retail as I said in this blog.
Like it or not, retail is typically a transition job for most, either prior to their career, between them or as something to do after. I’d love it to be a noble career but, as a straight $ per hour pay, it won’t be. And disconnecting performance from pay moves closer to a unionization of the sales floor, which doesn’t deliver exceptional experiences.
One important point that didn’t make the summary is that the current median wage for frontline retail workers is a little over $9.00/hr. Experts on the other hand feel that even the minimum wage, if properly adjusted for inflation, should be well over $10.00/hr. In other words, retail staff are being left behind.
I can’t tell if this is a social statement about income and wealth distribution or a discussion question about how retail associates establish rapport with customers. But as is customary for this forum, I will answer only the latter.
No. Income disparity is not an impediment to establishing rapport. In fact, the ability to establish just such rapport with customers earning many multiples of our annual wage is exactly how $1.65 an hour bag boys got to be senior food executives.
With this nation moving over the last 30 years from a great manufacturing nation to a consumption, serviced oriented nation…this is a problem.
The strength of the American economy was built on the size and disposable income of the middle class, a large group of people who could afford the manufactured goods and services produced. By widening the income gap, you shrink the disposable income in one of the largest segment of the population: retail workers. Paying retail workers more is not about “doing the right thing” and has NOTHING to do with political correctness. It’s about generating enough self-sustaining demand. If we don’t reverse this trend, North America will become a glorified banana republic.
Several comments have already been made that Retail, as a profession, is not. It is either a starting point, interim job or something to do later in life to fill empty time, as previously voiced. That is a problem that has nothing to do with rapport. So I am not sure what the true meaning of this discussion is leaning toward.
While here, let’s add the disparity of life, safety and education to this. Fire fighters, the police and teachers certainly have a voice in the disparity between their wages and the people they protect and educate.
Enjoying seeing everyone’s comments….
For those that feel that retail workers have always been grievously underpaid, you’re partly right but not completely. Here’s another important factoid to keep in mind…
Writer Timothy Noah points out that in 1979 an individual in the top 20% of all income earners had an income 8 times that of someone in the bottom 20%. By 2007 the ratio had risen sharply to 14 times. Similarly, the ratio between the middle 20% and the bottom 20% also increased, from 3 times greater in 1979 to 4 times greater in 2007.
Not only has the situation gotten worse, it’s gotten a lot worse.
The question is, what’s the breaking point? When is retail simply going to be employing the otherwise unemployable?
The income gap does present problems, especially in light of the recent rush toward dollar stores and hard discounters, but in my experience, the problems are of a different nature. My clients who sell high ticket items/brands are continually frustrated by sales associates who build “rapport” by actively recommending lower cost alternatives, often those available at another retailer. Their thrifty sensibilities compel them to serve as a down-selling adviser to shoppers, in some cases. Paying more isn’t a panacea because the values remain intact regardless and they haven’t been counteracted with training.
This is where mass-to-mid-tier retailers could take a training page from luxury retailers in Las Vegas, New York, San Francisco or Honolulu. Do you think that their associates buy a lot of what they sell? It’s all relative.
The income gap between affluent consumers and the front line retail workers and service employees that serve them has always been a problem. Unfortunately, it is not practical to try to address this by raising the compensation of the workers to a level that substantially closes the gap.
The answer lies in extensive initial and recurrent training, proper selection of the employees, and very strong supervisors. I have seen some businesses that successfully accomplished this, but it is easier said than done.
Income disparity is a tough topic to simplify into a few paragraphs. There are a wide array of drivers that go far beyond what front-line retail associates are paid.
Here are some realities. First, retail front-line jobs have always hovered around minimum wage. Secondly, store level payroll is the largest single variable expense for a 4-wall retailer. Moving pay scales up to “bridge the gap” would make many/most 4-wall operations non-viable and cause wide spread store closings. Is this a good thing? Is an individual with no paycheck better or worse off than one making $9/Hour? I think if the question were posed to most front-line associates today in the current environment, most would say they are happy to have a job at all. Would they like to paid better? Of course, who wouldn’t?
Perhaps the situation in my area is unique but I am seeing a marked improvement in the quality of sales personnel recently. Many retail hires are older more mature workers who were once in professional and/or service jobs for other companies. They were raised in an era that expected courteous service from retailers and in their previous industries most were trained how to give courteous, professional service. They also seem to take pride in knowing the product, in being reliably at work and on time when scheduled, and take pride in their appearance.
Yeah, all that’s where “rapport” with customers comes from. I don’t know what the retail scene is going to look like in 20 years but it appears there will be enough quality retired and scaling back boomers–willing to work at retail’s going rates–to keep this trend going for quite a while.
Most definitely. This is particularly demonstrated in the many encounters I’ve had with clerks at a particular office supply mega-chain who will remain unnamed. A few real examples have been: employees unable to explain the store’s reward program; employees sending me to Walmart to find a toner cartridge; and, probably the most egregious, an employee who dared wear a headscarf made for sleeping to work! She’s waited on me at least twice wearing it! (I made a note to alert the manager on strike 3). Better pay is one solution, but REAL customer service training, and looking for basic etiquette and decorum among candidates is another.
I don’t see the income disparity between retail associates and the shoppers they serve as being a key customer service issue. Granted, associates could/should be better compensated by retailers across the industry. But I’m pressed to think of any retail chain where all customer-facing associates make equal or better income than the shoppers they serve. Has that ever been the case in retail?
Retail customer service ills will never be cured by higher wages. Yes, better compensation may incent associates to provide better service, as would better training and non-monetary benefits. But at the end of the day – and like most any occupation – if the worker doesn’t actually like what they’re doing, they’ll never be able to translate their distaste into quality customer service. Poor customer service is less about compensation and more about viewing retail as a career, not as a temporary job.
It’s about 6 AM tomorrow here in Auckland, so I have the benefit of seeing the future at least one day ahead. In looking back, however, I remember one of my undergrad students submitting a paper with the word “repore” in it. As Doug Stephens wrote, we have messed with the word “rapport” for the past 50 years in retail sales training programs. In fact, I can come close to putting a date on it: In ’61 Robert Heinlein popularized “rapport” in his novel, Stranger In A Strange Land. (You might also remember another word popularized by the novel: “grok.”) And, we can identify the word “rap” as a derivative of “rapport.”
I don’t grok the thesis of this discussion topic: That successful retail workers should be able to understand and empathize with customers who enjoy significantly higher incomes, and to make this more possible retail employers should pay their workers more. Balderdash. History shows that an income disparity between seller and customer has not been an impediment to sales. In fact, looking into my one day crystal ball, I can predict with confidence that this situation won’t change tomorrow, either.
Retail workers are paid what they’re worth, and retail prices are formulated partly based on this overhead cost. The best retail workers, who work in stores that sell higher-end, more expensive products (like cars), are compensated beyond their hourly wage by something called “commissions.” The better they are at identifying with and influencing shopper decisions, the more they’re paid. It’s pay for performance.
As long as customers are willing to save a few pennies in exchange for no customer service from poorly paid retail workers who receive no benefits and job security, this trend will continue.
I wasn’t going to comment today because I could not write early. But this topic is worth commenting on.
I shop in two supermarkets — in “mean, unfriendly” New York City — and I use FreshDirect. The staff in both supermarkets and the delivery people from FreshDirect are always friendly, helpful and accommodating. And I assure you that in the neighborhood I live in, there is a considerable income gap between these folks and the customers. So let’s put that aspect aside.
As Warren Buffett puts it so well, “We do have class warfare and my class is winning.” His recent opinion piece is quite enlightening.
Chances are that the income inequality is not as bad as outlined for 99% of the supermarket customers. Unfortunately, income inequality has everything to do with the top 1%. In 1979, the top 1% of earners earned 9% of the total income in the U.S. Today, the top 1% earn 24%. Alarming? Well, especially when you look at the reverse. In 1979, the bottom 99% earned 91%. Not too bad, huh? Now the bottom 99% earn 76%. Something is terribly wrong. The great economy and standard of living of the U.S. was built on the growth of the middle class from 1946 to 1979. The current trend is unsustainable and unacceptable.
While the income gap between customers and front line retail workers is a concern, how the workers feel about their job, how important they view their role is in the company’s reputation building efforts, and the value they get out of serving customers, is just as important. I’m not suggesting front line workers should be paid less, but first must come the acknowledgement of the unique position they are in. If they feel management preys on them, and the customer is ever demanding without justification, and they are never paid enough, and this is just a job, they should get out of retail.
The bigger question is, are there enough special people out there to do this job, to fill all the stores, in all the malls, in all the world?
It’s silly to suggest that increasing minimum wage to $10/hr would somehow “bridge the gap.” You could increase it to $15/hr and it wouldn’t come close to what a doctor or business owner earns? However, it would probably put the retailer out of business.
Bottom line is if I get good service, I shop there. If I don’t, I go elsewhere.
The social issue has little to do with the retail issue. That is, assuming you consider the first an issue. Frankly, I’m grateful for the wealthy. The market determines how a salesperson is paid.
The dictionary defines “rapport” as “connection, especially harmonious or sympathetic relation.” Selling the affluent is not about sympathy; it’s about empathy. Attempting familiarity (or what some call rapport) is the wrong strategy. The key for retailers is to train your sales staff to serve your clients; be a servant.
Effective selling to the affluent requires salespeople to move beyond product and/or good service to “serving & delighting.” Research tells us that most of the affluent aren’t looking for friends; they’re looking for someone to help them make a good decision. Luxury is about emotion. Regurgitating a spiel of product specs isn’t what makes a sale (for most products).
One other point I’d like to make. Retail is an honorable career. I get the feeling from some of my fellow panelists that it’s a short term job between other real jobs; it may be at the Surf Shop, but it is not at the floor covering or decorative furnishings showrooms, etc. My experience with professional salespeople (most of my experience is home furnishings and luxury) is that they may not be rich, but they are loyal, remarkably caring, and happy with their careers.