Ask an Expert: Necessary to Pay Sales Commissions for Online Orders?

“Ask an Expert” is an occasional feature where we ask ecommerce experts questions from online merchants. For this installment, we address a question about paying commissions to a sales staff for online orders. It comes from George Sajonian, owner of Viva Performance, a seller of automotive accessories.

For the answer, we turn to Chad Weinman. He is founder and CEO of Cat5 Commerce, which operates 10 separate online stores — including RunningShoes.com — from its base in Missouri.

To submit a question, email Drew Coffin, staff writer, at drew@practicalecommerce.com and we’ll attempt to address it.

George Sajonian: “We are a growing ecommerce business and are looking to hire additional customer service and sales representatives. Could you provide some guidance on employee compensation best practices?

“Given the nature of ecommerce, we may receive multiple orders on any given day, with no additional effort from our sales representatives. How should we structure our employees’ compensation rates, given the realities of an online business? Do we pay our employees a flat salary, all commission based on their individual sales, or some mix of base plus commission? Should our employees get a sales commission for organic orders placed on our website?”

Chad Weinman: “First off, your location can be a significant variable in determining compensation for any employee. Cost of living can vary widely from one town to the next and it is important to be competitive with the market.

“Good people are hard to find and it is also important not to underestimate the time and money it takes to bring them up to speed. As such, we tend to gravitate to the higher end of the compensation range to minimize attrition.

“I am not a fan of a commission structure in a retail environment. I believe the ecommerce world makes it even less desirable. Having said that, I am aware of other online retailers that have found success with such a model. For us, there are just too many special cases to account for to make such a plan viable. Moreover, I believe that such a structure creates a less-than-friendly environment for the customer. Agents on the phone will be incentivized to turn calls quickly and increase order value. While this might sound appealing at first thought, we do not believe it is the best way to earn customers for life.

“Generally, I think an hourly rate of $10 to $12 is ideal. I like full-time employees working a straight 40 hours per week. Overtime can easily spin out of control and those extra dollars add up fast. It’s important to have regular, published business hours when your customers know they can reach someone on the phone. Most importantly, listen to your staff and make sure they are happy. Their overall job satisfaction will translate directly to their interactions with your customers.”