JCPenney Dumps Associate Sales Commissions

Written by Evan Schuman
May 10th, 2012

As JCPenney continues to recover from its self-inflicted nice-price-all-the-time effort, the chain’s latest cost-cutting move came this week when it quietly killed associate commissions and cut back many of their hours. Cost-cutting is fine, but killing commissions right now—as it desperately tries to fight off E-tail incursions in its stores—seems stunningly ill-advised.

As retailers complain about showrooming—and its posterchild, Amazon—the only meaningful way to fight back is to make the store experience so pleasant, efficient and fun that consumers would much prefer to shop than click away on a phone, tablet or laptop. The key is enthusiastic, well-informed and truly helpful associates. As JCPenney cuts their hours and their salaries—and, as of next year, some benefits—how joyful are its associates likely to be? And with no commission incentive, how motivated are they likely to be? This seems like an idea that an Amazon plant within JCPenney’s executive team must have concocted.

Historically, there have been those who argued that a generous salary can motivate associates just as much, with the added benefit of the associate not pressuring a customer to upsell if it wouldn’t help that customer. Note: You don’t think salaried retail sales reps will get pressured to upsell unnecessarily? You don’t think bonuses—and perhaps continued employment—won’t be leveraged?

Even if you buy into those legitimate arguments, they apply to generous salaries. It doesn’t speak to the removal of commissions at the same time as hours and salaries are being cut back, along with future reduced benefits.

JCPenney is arguing that this move will indeed make associates perform better. The chain doesn’t say why it expects that to happen. “Our new business model requires that we move away from a commission-based environment, so that every team member is motivated by meeting the needs of our customers,” said JCPenney spokesperson Kate Coultas.

“Therefore, our commission pay plans will move from a commission-based structure to a competitive hourly rate structure,” she said. “By bringing their compensation levels back to what they earned last year with commissions, team members can have a better sense of their incomes. This new, collaborative approach to taking care of our customers will not only enable our teams to be even more effective in winning the hearts and minds of our customers but, over time, will provide greater opportunities for personal growth and development.”

But by cutting back many full-timers to part-time and by reducing hours overall, it’s certainly likely that many associate incomes will fall and some will fall sharply. Coultas wouldn’t offer figures on how many associates will have their hours slashed. “In regards to how many associates will go from full-time to part-time, we don’t have a number or percentage. Our staffing levels vary store to store,” she said.

But if you want to combat showrooming, this is not the way to do it.

If you were willing to pay your associates more—as an investment in improving the store atmosphere—then a transition to a salary-only model could work.

Here’s why this is such a showrooming issue. The very nature of almost all E-Commerce sites is self-service. The sites are WYSIWYG. If you search for an XYZ27, that’s exactly what it will show you. If you want help deciding—or an expert associate to say that the product you want won’t do what you need it to do—few sites will help.


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