Tell me about commission selling

In My Humble Opinion
1

I have a possible opportunity to work for a corporate-managed retail chain store selling medium- to high-priced items ($400-$8000). They’re items of which I own a few and use regularly, I like them and feel like it would be (relatively) easy to sell them (although in this economy I’m not so sure). Don’t know why I’m being so vague, other than to keep the topic to “commission selling” and not opinions about this particular chain.

There’s a base “salary” and a commission on items sold over-and-above the base pay. I will know more when I meet with the regional manager for a formal interview.

Anything of which I should be wary about commission selling? Any suggestions on specific questions I can ask this regional manager when we meet?

I really need a job, so this is something I’ll consider. Two years ago I wouldn’t have.

2

I’ve sold on commission for several different department store chains, in merchandise including shoes, TVs, computers, sewiing machines, and furniture. Cars as well.

One thing you should ask about is draw versus comission. In such a setup, your base pay is considered an advance on your commission. Let’s say you make $600 a week draw–$15 bucks an hour, full time. If you sell only enough merchandise in your first week to earn $300 commision, you are thus $300 in the hole. If, in the next week, you earn $1200 commission, you will be paid only $900. If you stay too long in the hole, you’re likely to be fired, or perhaps to have your draw lowered significantly–say to whatever minimum wage is now.

What is the store’s return policy? Retail stores that pay commission often take the commision away if the customer returns an item in a given period. It can hurt to make $1000 from selling Bose stereos one week and then to give much of that back because the customer’s spouse objected and forced him or her to return it.

How much time will you be allowed for training? That is, will they give you a week or two to gain product knowledge, or will they throw you into the deep end of the pool on day 1?

How are customers allotted? Is there an “up” system? In such a setup, walk-in-customers are assigned to a given salesperson based on a set order (unless the customer says, “Oh, I’m here to see Skald”). Are salespeople expected to honor one another’s leads, or is it catch-as-catch can?

That’s just what occurs to me off the top of my head; I may come back to offer some more.

3

Great insight, Skald, please do come back. I know so far that yes, there is an “up” system, but I believe that if I make a relationship with someone, I get to deal with that person if/when they come back. The store director who did an informal interview with me yesterday stressed that relationship selling is really the goal there.

Which are you describing here, draw or commission?

I will definitely ask about returns- that’s a good point.

A girl that works there mentioned to me that probably only 20% of the entire sales force ever consistently go above their base, and that I shouldn’t be hugely worried about it. She has also been there for 7 months or so and she didn’t have a lot of knowledge about or interest in the products going in, and she’s still employed there, so there doesn’t seem to be a huge amount of turnaround.

4

I’m describing draw versus commision.

There’s three basic setups for retails sales people:
[ol]
[li]Hourly wage with no commision;[/li][li]Hourly base pay plus commission;[/li][li]Draw versus commision[/li][li]Straight commission[/li][/ol]

5

I want to say the girl mentioned that you get a “salary” and you sell basically to reach that salary amount (but you get the salary no matter what), and once you go over the salary amount, you start making commission on what you sell over and above that (I think). Does that sound like one of the above scenarios?

6

It sounds like she’s describing base + commission or draw versus commission. I advise you to ask what the specific pay setup is (when you get to a point in the interview process when that’s appropriate). But I’ll give you some examples.

At one store I worked at, commission sales people were paid a draw that varied according to their experience and how much the hiring manager wanted them; I knew people while I was there who got paid as little as $6 an hour and as much as $18. Draw was paid weekly; commission was once a month in a separate check. Each commission check included a statement explaining whether you were in the red or the black. If you were in the red too long–say three months–they’d adjust your hourly pay downward so that your hourly wage reflected what you were actively earning. In other words, if in the first quarter your commision came out to be $6000, they’d calculate that you were earning $11.53 an hour. If your hourly rate was more than that, they’d change it (and you’d still have to earn back what you had been advanced; if your hourly rate were less than that, they’d ask you if you wanted it changed to match, but it would be your deicision. There was a single, across-the-board commission rate for all items.

At another store, everyone was paid a low draw–say $6 an hour. But commission was paid each pay period. You could be as much as four weeks in the hole; in the fifth week they’d forgive the first week, so that the maximum amount you could ever owe the store was $960. We also got a breakdown of every item we’d sold (or had returned) in a given pay period with each check; this was important because each item had a specific rate. I recall one week in which I worked a single day, had negative $200 in sales, but was paid several hundred collars commision; I had had a number of 1% or 0.5% commission items returned, but had sold a couple of Bose stereos–$2000 each and 10% commmission.

As I wrote above, when you reach the point in the process where it’s appropriate to talk about money, find out exactly what the commission setup is–whether it’s each pay period or paid as a bonus, whether you have to pay it back if it’s returned, whether you have to pay it back if it’s exchanged by another rep rings up the sale, and so on. Ask if it’s a set rate for all items or a specific rate for a given item. I’ll try to think of more questions.

7

I would call what you described base + commission. It almost sounds like base+ bonus, if most people don’t get beyond the base. The key is that they don’t come back and take away the base no matter how poorly you do. With draw, they are essentially advancing you against future commissions, and if you don’t “cover” the advance, at some point they take it back. You can ask if they have a written description of the pay plan you can see, or at least see after hire. The part that you won’t know yet, of course, is how hard or easy it is to reach certain levels of sales.

I have worked in base+commission advertising sales. If you don’t have sales experience, allow yourself some time to get up to speed in your commission earnings. You can do a lot more with a base of regulars who know you than right when you get started. Can you cover your bills with the base salary? Product knowledge and enthusiasm for the product lay a sound foundation, and the people who go far in sales tend to have that, but it is largely a game of persistence, relationships, and not getting discouraged on a day-to-day basis.

The theory behind commission pay is to keep you consistently focused on making sales, and to get you to leave if you’re no good at it. If you’re willing to consistently focus on making sales, you’ll usually make more on commission than you would otherwise.

8

Ok, I think I’m starting to get it. Questions I can ask so far:

  1. Does everyone make the same base pay? If not, is it based on longevity/experience or does it fluctuate based on how well (or poorly) you’re selling?

  2. Are there any instances where I would have to pay back my commission, like on returned items?

  3. Is the commission rate the same on all items in the store, or do the smaller, accessory-type items have a different rate?

  4. Is commission paid as a bonus check or as part of the paycheck?

  5. How long is the training/probationary period?

  6. Is there a quota below which I would be let go if I were not making sales?

Harriet, I think the only thing I would struggle with is that I don’t like to hound people (read: irritate). So I would not be a huge in-your-face seller type. Hopefully I’d be able to figure out what is that fine line between being helpful and encouraging people to get excited about making a purchase, and being pushy. I hate, hate, hate pushy salespeople.

Skald/Harriet (or others), is there a commission scenario that I should really consider staying away from? Some kind of “red flag” language I might hear during a discussion of pay?

9

Oh, so would I, except for the fact that the girl xanthous quoted used the word “salary.” As, technically, salary refers to being paid a set amount for one’s work rather than an hourly rate (as opposed to wages, which is the hourly rate option, and of course the various sorts of commission), I suspect that she was speaking imprecisely because she’s not sure of the correct terms.

I am on salary + bonus. I get paid xx,xxx dollars a month and do not punch a time clock. If I can get everything I need done accomplished in a 40 hour week (the minimum necessary if I am to supervise my people during their 40 hour weeks), fine. If not, I don’t get anything extra for coming on on Saturday or staying till 9. But if I need to take half a day off to get my car fixed, like this morning, it doesn’t hurt me. And twice a year, if my people are doing well, I get a bonus.

My reps are on wages + bonus. Every two weeks they’re paid according to how many hours they have worked; going over 40 hours in a week mandates overtime pay which is therefore discouraged. Once every six months, if they have brought in new customers and new business, they get a bonus, but it’s not calcuated according to units sold, at least not directly.

When I sold electronics, I was on weekly draw versus weekly commission. That was the $6/hour deal, with each check being a commission check if I had earned enough, and a draw check if not. The idea was to make it easy for good salespeople to stay but to force poor salespeople to quit. No overtime pay. As it was an ethical company, we were not ALLOWED to work over 40 hours a week either; there was no Wal-Martish “clock out at nine but clean the store and count the cash drawer for another hour.”

When I was sold shoes, I was on weekly draw versus monthly commission. The draw was higher–$15 an hour, in my caswe–but would get adjuted downward if you were not performing. No overtime, and they did the unethical clock-out-at-closing-but-keep-working bit.

10

I think the word base can refer to either a salary or an hourly rate. I’m a little fuzzy on this part of the payroll regulations, but I think inside sales is usually an hourly rate (overtime pay would apply) and outside sales or sales management could be a true base salary. An hourly rate could seem like a salary if someone regularly works 40 hours. The salary/ wage and the base/draw distinctions are two separate concepts. I can’t see the salary/wage distinction making a whole lot of difference here unless overtime is expected. That’s something to ask about.

In my case I was on a base hourly wage, which was increased periodically based on longevity/ merit, plus commission, which was adjusted periodically to provide different incentives.

I would avoid taking a 100% commission job unless it was either a) my only option or b) something I knew from experience that I could sell. In terms of base plus commission, I would evaluate the expected commission very conservatively when I compared it to my alternatives. Sales managers have a tendency to oversell earnings potential. Obviously, don’t go in intending to game the system (like sell to people who will be returning) because that will backfire. Don’t count chickens before they’re hatched on big commission sales. Those are the main red flags I can think of.

Advertising was different from retail, but persistence wasn’t all about being pushy. A lot of it was really remembering that person from a while back who probably would be genuinely interested in the new special going on, and actually getting in touch with them. And even if that didn’t bring them in the first time, remembering to do it next time, too. Because customers at heart are people who choose to buy your product. But if you absolutely refuse to take a moment of someone’s time to tell them about what you’re selling, commission sales won’t work out for you. That’s why the commission - because otherwise they could pay someone minimum wage to run the register.