RSR Research: The Disruption of Buy Anywhere, Get Anywhere

Nov 01, 2010

By Nikki
, Managing Partner

Through a special arrangement, presented here for discussion
is a summary of an article from Retail Paradox, Retail Systems Research’s weekly
analysis on emerging issues facing retailers.

In a refrain I have heard from
many other retailers, the participants at Manhattan Associate’s recent customer
event expressed frustration over how to compensate store employees for cross-channel

Is it fair to ask a store employee to send a sale to a different channel
when they receive no compensation for it? Is it fair to ask an employee to
spend customer time fulfilling an order from another store when that other
store gets the credit? The general response to this question is no — but without
a good answer for how to compensate store employees in an increasingly cross-channel
world. The challenge becomes even more interesting when you view it in the
light of order capture vs. order fulfillment. What are you incenting store
employees to focus on more, order capture or order fulfillment?

Incentives today
are largely based on the assumption that both happen simultaneously, so retailers
have never really spent a lot of time thinking about which one is more important
to stores. I would posit that both capture and fulfillment are equally important,
but perhaps they need different measures and incentives.

A store that doesn’t
necessarily grow revenue, but has perfectly balanced sell-through and a healthy
store-based fulfillment business shouldn’t necessarily be held to the same
performance standards as a high-traffic store that is blowing out the doors
but has little time to fulfill other channels’ orders. Should employees be
penalized for working in one kind of store over another?

I think incentives
based solely on sales, whether explicit commission or some kind of performance
bonus, have made retailers lazy. Sales are easy to measure, easy to track,
and thus easy to pay on. But when "sale" spans multiple touch points
— from consumer desire through fulfillment — perhaps it’s time to get a little
more creative.

Discussion Questions:  How should store employees be compensated for cross-channel
selling? How should incentives be aligned around order capture and order fulfillment?

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13 Comments on "RSR Research: The Disruption of Buy Anywhere, Get Anywhere"

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Bob Phibbs
10 years 6 months ago

Good discussion. At a recent visit to Pierre Deux store when I suggested I could just get the item online the clerk said, “We are in competition with them. I can have it transferred to you which they can’t.” Clearly she is not paid on that sale. On the other hand, how would you compensate the Internet store where the lead came from the bricks and mortar store? There is never a “fair” compensation program based on who touched the customer first – we typically only reward who gets the money. Not sure how that could be changed to improve sales by splitting hairs.

Susan Rider
Susan Rider
10 years 6 months ago

Absolutely, you want to incent the associate to get the sale. If it’s not in the store, then on the net, another store, etc. Cross selling is the name of the game. When internet companies like ebates can do it why can’t retailers? Why not have a couple of terminals when the item can’t be found in the store the associate walks the customer over to the terminal places the order using their code and has the item shipped to the customer or the store. Voila! Any software can get creative and track both!

Ryan Mathews
10 years 6 months ago

One option is to take the Best Buy approach and not pay salespeople commissions. With nothing to lose it’s easier to recommend an alternative channel. Perhaps it’s time to understand that in a world of clicks and bricks the only numbers that are important is how well a firm performs. That said, you still need to track channel activity even if you don’t use it as a way of establishing bonuses.

Anne Howe
10 years 6 months ago
Last week I was in Chico’s trying on jeans. When the size I needed wasn’t available in the color I wanted, the sales associate worked very diligently to prevent me from an online order. The promise that worked: no delivery charge when she sent the order from another store vs. I pay shipping to order online. It made me think about how the structure worked. Could she be retaining commission even though another store fulfilled the order? If so, I think that’s a creative solution and hope to see more of that. Why the push to keep the order store-based? My guess is that it’s just too complicated from a systems standpoint to track and reward Sally at Somerset Mall for helping ShopperAnnie on a random Sunday at noon. Of course, I asked. Didn’t get a business answer, and the store manager wasn’t in yet! Instead, I let the sales associate walk me around the store, which I rarely do. And the sale went from $79 to $260. Ahh, how we love retail therapy, especially… Read more »
Mel Kleiman
10 years 6 months ago

First of all most retailer don’t even incentivize their sales people by paying any kind of commission so most don’t even care if they lose the sale or provide great customer service. The person who is most likely hurt by the sale that went to a different channel is the store manager.

The model is changing and retailers are going to need to look at a new model if they want to grow their business and retain their great employees and customers.

When store channels compete, both the customer and the companies lose.

Cathy Hotka
10 years 6 months ago

Retailers need to figure this out asap. Customers do not care who gets credit, but they do want to obtain merchandise quickly and efficiently. This is even more complicated when the online retailer is actually a separate company than the brick and mortar retailer. Folks, come up with a structure and stick with it!

Doug Fleener
10 years 6 months ago

“When store channels compete, both the customer and the companies lose.” Great point Mel. The same thing happens on returns too.

I think the easiest way is to give managers and the staff a blended bonus based upon the performance of both the store and the company. So while losing a sale or having to take a return still stings, there’s a little less pain because they have some skin in the overall company performance.

Mark Price
Mark Price
10 years 6 months ago
What you are describing here is a fundamental gap in metrics and compensation that leads retailers to sub-optimize potential customer value. In addition, these sorts of inherent conflicts reduce customer loyalty and increase the commoditization of retail in general. While it is difficult to imagine, the ultimate metric that represents success for a retailer today is customer value across all channels. If stores are not measured on the total value to the company of all customers who either purchase or fulfill through their location, in addition to the online purchases of multichannel customers, then inevitably the store associates will seek to improve their own performance, at the cost of the performance of the total business. In my experience, retailers who compensate associates based on multichannel sales perform better than those who create artificial silos. While it is true that the retailer may be compensating associates for sales in which they have little influence, it is better to drive growth in the overall business and slightly overcompensate your associates, than to hinder the growth of the… Read more »
Ed Dennis
Ed Dennis
10 years 6 months ago

Why reinvent the wheel? This isn’t a new situation, just a new sales channel. For years profit sharing and stock award programs have been in place to reward employees for placing the welfare of all above their immediate compensation. It is very easy to implement programs of this kind, but can be expensive for the employer as often the bonus program base is very hard to exclude as are gains achieved due to improved efficiencies or capital investment.

It can be done and has proved effective for years. Don’t get blinded by thinking something is a “new” situation simply because someone said it is new! Compensation has always been based on individual contribution coupled with the health of the employer. If the employer isn’t healthy then compensation is in jeopardy – period!

Camille P. Schuster, PhD.
10 years 6 months ago

What is the philosophy of the sales function for that company? If the philosophy is to generate sales then the company has to find a way to track which sales belong to which sales rep no matter where in the channel it occurs. If the philosophy is to create relationships with customers then paying primarily on commission thwarts the goal–why should any sales rep spend time helping the customer find a product anywhere else if their pay is only based upon directly attributable to that person?

Commission is a great incentive to create sales not to create relationships. If the goal is sales then the company has to match every sale to the sales rep who generated the sale.

Ed Rosenbaum
10 years 6 months ago

This is an excellent discussion and one with many potential theories. Both order capture and order fulfillment are equally important to the corporate bottom line and success. Let’s take it down the food chain a few steps to the store level and see where it leads us. Yes, order capture and fulfillment is important to the store manager and probably the district manager because of the numbers they produce that shows success or not.

So maybe it is the human element that needs to be rewarded. In the case where the only human is involved, that person should be rewarded.

Lee Peterson
10 years 6 months ago

It is an interesting question, but perhaps the emulator in this case may be the business development/sales world. Generally there are incentives for initiation and then separate bonus plans for closing sales. You may create some complexity with something like that, but I’m sure the sales world could help with that as well in terms of the right software and training.

The last thing you want happening is what was outlined: competition vs. cooperation, especially if the customer feels it. The sales process should be seamless and collaborative on both ends.

James Tenser
10 years 6 months ago
To get multi-channel retailing right, we have to replace analog thinking with digital. If a shop here – pay there – deliver elsewhere – return anywhere business reality clashes with our 1950s sales commission model, then it’s time to ditch the model and modernize our approach. I’ve got nothing against properly designed sales commissions, but we have to face facts. Closing the sale is an “activation” of the selling process that begins remotely and ends at the POS. Multiple competencies are involved along this “path to the sale” and the sales person seldom makes the sale unaided by other influences and tools. Properly designed digital systems should have no trouble linking online and in-store shopper interactions together. That’s what relational databases are good for, after all. The key pre-requisite is a means of identifying the shopper each and every time he or she interacts with the physical or digital retail environment. So the new order seems to demand two types of incentives: (1) A more thoughtfully designed commission structure for the floor staff and store… Read more »

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