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Business Insights from Andrea Hill

Compensation Advice for Retailers

Originally Published: 02 April 2019
Last Updated: 12 January 2021

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What is a fair compensation rate for retail sales staff today? And how should commissions  be structured? Andrea Hill gives advice for the jewelry industry in this article in InStore Magazine.

From InStore Magazine online, April 2, 2019:

I have an employee who makes $16 an hour and 6 percent on retail (although for loose diamonds, commission is based on gross profit). She earns close to $60,000 a year but feels underpaid and that paying gross profit on diamonds is contrary to the industry standard. How can I convince her she has it pretty good?

She does indeed have it pretty good, says industry consultant Andrea Hill, owner of Hill Management Group, noting that her hourly rate is almost 50 percent higher than the average for retail salespeople of $11.50, and even more than the average of $15 paid by very high-end luxury retailers (think Gucci). The commission is also higher than the industry average of 3-4 percent on retail, although, significantly, Hill notes, “wise” businesses are increasingly moving away from such a formula to pay commission on gross margins. “In this way, sales professionals are challenged to balance the need to get the highest price possible with the need to close the sale. When commissions are paid out on total sales only, then it becomes very easy for the salesperson to sacrifice profits for the easy close,” she says. While exposure to such numbers should mollify your associate, what you really want to do is excite her about the potential of earning as much as $100,000 a year — which is what top luxury salespeople make — although that requires building a “strong book” of customers through active networking, clienteling and prospecting work. Keep in mind, however, that even the most generous commission rate won’t help if you’re not on top of your game, meaning advertising intelligently, keeping up with changing retail trends, providing the right technology for how consumers today want to shop, and maintaining an exciting inventory that reflects current tastes, says Hill. “If the retail business owner does not ensure that they are running a strong merchandising and marketing operation, then even the best salesperson in the world will not be able to turn the promise of commission into actual earnings.”