Transforming Sales Compensation in a Changing Retail Landscape

Published: March 2021

 

As the retail space moves towards a greater reliance on e-commerce and digital selling, companies must update their selling behaviors and sales compensation design.

Technology has forced many industries to pivot and transform, but few more so than retail. The continued rise of e-commerce has shifted the retail selling environment from one that was more transaction-oriented and focused on price to one that is more consultative and relationship-focused. This means sales employees must develop new selling strategies and compensation plans need to be revised to drive this behavior.

There are four key trends that are integral to supporting this transformation: the emphasis on an omni-channel approach, driving consultative selling behaviors, clienteling to establish long-term relationships and an expanding talent profile. In this article, we explore these four areas, providing insights on their impact on the traditional retail landscape, retail sales compensation elements and how companies should respond accordingly.

Key Trends that are Shaping the Future of Retail

The Impact on Total Rewards

These trends have a strong impact on retail sales compensation and incentive plan design. Everything in sales incentive design cascades down from role definition – if the role profile and accompanying sales strategy evolves, it likely requires a refresh of the sales incentive plan. Pay mix and performance measures are the areas where we see the most changes.

Many traditional retail brick and mortar environments have historically favored highly leveraged commission plans, keeping sales professionals eager to transact with customers and consequentially dictate their behavior. As retailers shift to an experiential store environment catered to casual shoppers, the pay mix must adapt to account for the desired change in selling style. We see pay mixes becoming more conservative, increasing the proportion of fixed pay as a percent of total cash compensation — reducing pay at risk. This change provides sales professionals with the ability to focus more on creating a positive shopping experience, clienteling and building long-term relationships, rather than having an urgent need to transact and move on.

The second big change in incentive plans is the way that a retail sales associate’s performance is measured. Instead of having a sole emphasis on individual sales goals, we find that more retailers are incorporating team or store sales objectives to encourage teaming and dissuade “sharky” behavior. Additionally, retailers are turning to measures centered around specific customer experience goals, such as Net Promoter Score and retention metrics.

Next Steps

The transformation of the retail space and emerging technology has accelerated due to the COVID-19 pandemic. E-commerce will continue to surge, and firms must update longstanding processes and practices to meet this change. As companies look to properly align the efforts of their sales organization to their transformation goals, a reevaluation of their sales incentive framework will be a crucial piece of that challenging transition.

For more information and detail on retail sales transformation and how it is impacting the world of sales compensation, please reach out to a member of our rewards consulting group or write to rewards-solutions@aon.com
 

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