Face Value

With the cost of being an employer increasing on multiple fronts, it is imperative that pet specialty retailers understand the true value of store staff and tailor their compensation accordingly.


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The cash register is central to the day-to-day operations of every retail establishment—and working that cash register has oft been considered the core competency of anyone hired to work in a store. Pet specialty is no different, but as the market grows in sophistication, retailers have wised up to the fact that the heart of the business cannot beat without the right people. These days, storeowners require skilled employees who can do much more than keep a balanced cash register. Pet store associates need to be product and pet experts, and they must be able to use that expertise to assist customers and drive sales.

So, the question has now become: What is a great retail employee worth today?

According to Harry Friedman, founder of The Harry Friedman Group—an international retail consulting and training company—solving that riddle is imperative for retailers. “Every independent retailer should be an expert at staffing and pay. Why? Because the people-side of the business has a tremendous impact on the social well-being of your organization,” he says. “All the reasons that people love a store—for great customer service, follow-through, and things like that—is done by staff, not by a shelf. So, you are putting your entire future into the hands of an [hourly] employee.”

It is a concept that most retailers understand, at least in theory. In fact, the most successful storeowners often attribute much of their sales solvency to their employees. For John Stottele, owner of The Family Puppy, a five-store retail chain, the importance of having a great staff cannot be overstated. He spends relatively little time in the Michigan- and Ohio-based stores, and he depends on his employees to keep things running.

“With offsite management, the staff is crucial,” he says. “You have to have a good team.”

Jusak Yang Bernhard and Jeff Manley, owners of TailsSpin, a thriving and relatively young pet store chain in Georgia, agree. They say employees are key to not only the nitty-gritty operation of their business, but to maintaining the store’s warm relationship with its community, as well.

“They are the face of our store,” Bernhard says. “If we can’t be there, they have to represent us, and they have to understand our culture. We are known as a store with a heart.”

What many storeowners are realizing is that while retail jobs have often been considered unskilled, relatively low-paying positions—at least in stores with high transactions and low-cost goods—it can be costly to underestimate the value of store employees. It can also be just as costly not to compensate them what they are worth or to fail to offer a compensation package that attracts the right people needed for the job.

“The problem with staffing and labor is that it is viewed as a variable cost,” Friedman says. “[Retailers think,] ‘If my sales are down, I can let go of a salesperson and reduce my costs.’ That’s one theory. However, the joke is on them, because the very thing that can actually increase their sales is the salesperson. So, they actually cut blood flow to the heart.”

Many retailers, however, concur that it is essential to invest in the staff by supporting them with attractive salaries, bonuses and other benefits that employees seek. Where retailers differ is on how best to do this. Some are proponents of performance-based pay structures that reward individuals for sales. Others pay flat salaries, while offering other perks, benefits or bonuses to sweeten the deal. Meanwhile, some companies reward individuals for performance, and others focus on compensating the entire team for meeting or surpassing goals. There seems to be as many approaches to staff compensation as there are pet retailers.

Still, one thing is certain: many retailers are placing an increasingly higher premium on employees. They also tend to agree that, more often than not, you get what you pay for. Following this line of thought, many also believe that being the highest-paying retail employer in a particular market is a good strategy.

“I’ve owned several retail stores in my life, and my goal is always to be the highest paying guy in the category,” Friedman says. “I want to pay my people more than anybody.”

Tipping the salary scale toward the higher end also gives a retailer a larger pool of employees to choose from and may help attract more skilled people. “The more money you are willing to pay per hour, the more choice you have of whom to hire,” says Friedman. “It does not necessarily mean that the person is going to be better—there are some $20 losers and some $10 geniuses. What it does is give you more choice.”

Bernhard and Manley take a similar stance at TailsSpin, which has salary-based employees, as well as hourly staffers. “We pay more than the average retail store,” Manley says. “We need to offer more to get people with a better skill set and who can live up to that skill set.”

Chuck & Don’s, a 25-store pet specialty chain with locations in Minnesota and Colorado, is another company intent on showing its appreciation of its employees by how it compensates staff. The company recently bumped up its minimum hourly wage to $10.10—the exact amount proposed by President Obama, who is advocating a $2.85-an-hour increase of the current $7.25 federal minimum wage.

Bob Hartzell, CEO and president, says company management was already planning wage increases when talk of Obama’s $10.10 plan came to light. Chuck & Don’s then used the figure as a benchmark, deciding to preemptively go ahead with the salary hike before a mandate came down from Washington. It was the right thing to do, Hartzell says.
“We are in an extremely competitive industry, and we have to be aware of our labor cost. But it is always our intent to make sure employees are compensated fairly,” he says. “As we have been successful over the years—and recently, we’ve been doing extremely well—the idea of sharing our success with our employees was just a natural thing to do.”

Hartzell adds, however, that the increase in the hourly wage is not necessarily an endorsement of Obama’s federal minimum-wage increase decree. “I’m not a proponent of making it a mandatory increase,” he says. “We are successful and want to share that with our employees, but don’t feel government should force it upon us.”

Naturally, as concerns mount over the potential wage-increase mandate, the question of how much to pay hourly employees has been top of mind lately for small businesses. Many storeowners, quite a few of whom are still reeling from the effects of the slow economy, say they could not stay solvent if forced to adhere to such a significant wage bump.


Pay Per Play
Yet, when it comes to employee salaries, Friedman contends that most retailers are missing the point. He advises stores to stop calculating wages based on factors such as competition in the neighborhood, the state or federal minimum wage or overall store costs, and to ask themselves an important question: “If you don’t know how much [your employee] sells, then how in the hell would you know how much to pay him?”

All too often, Friedman says, store management will rate employees on operational standards only, and pay flat hourly rates or salaries to those who satisfactorily maintain those standards. Performance-based pay tied to sales, he contends, is a far more effective approach to compensation of store employees.

“You have to ask yourself a question,” he says. “Can the employees on the floor have an impact on what the customers buy? The answer is, of course.

“If you want that incremental sale—so, instead of selling $20 dollars of goods, it’s $30 dollars, or instead of $30, it’s $45—then you have to start understanding what individuals sell, and then you have to pay them a performance pay.”

Friedman admits that many stores are simply unaccustomed or unprepared to set up a performance-based pay structure. They typically have centralized cashiering, making it difficult to track employee assisted-sales. However, he warns that not holding store representatives accountable for driving and increasing sales undermines the business and squashes any potential for industrious employees to boost sales and earn more for their efforts.

Employees at Family Puppy get a base pay, but Stottele offers a commission on every puppy a staff member sells, if the store hits its goal. “You set a goal based on last year, and if they hit goal, they get commission on every puppy they sell. Again, in a recession, it is tough when the previous year’s sales were pitiful. You don’t want to give them a bonus for continuing to lose money; the store still has to make money.”

On the other hand, he aims to keep the goals reasonable, not wanting to make it prohibitively difficult for sales reps to earn commissions, but he has the health of the business to consider as well. “Your labor costs should be no more than 10 percent of your sales,” Stottele says, quickly adding that in tough economic times that objective is nearly out of reach. “Still, it’s a benchmark to shoot for.”

Similarly, at Denny’s Pet World, in Kirkland, Wash., employees are paid an hourly rate, but they can earn a commission on sales over $120. They also receive bonuses biannually, based on profit. Denny’s does not have dedicated computer software or technology to support the commission system—general manager Thomas Nelson describes it as the “old school” way of doing things. “[Employees] write up a commissions slip, date it, and note the amount and what they sold,” he says. “It’s kind of on the honor system.”

Nonetheless, Nelson says the commission structure proves a strong motivator for some—and not much at all for others. “Some people can add $4 or $5 an hour to their wage; other people may be adding 25 cents an hour,” he says.

Nelson says the staff of 25 experiences little turnover—and upper management hasn’t turned over in years. He and some of his colleagues have been with the company 20 years or more, others for 10 years or more. He credits a combination of fair compensation, benefits, and a stimulating and flexible work environment with keeping turnover to a minimum.

Meanwhile, the commission is meant to encourage staff to go the extra mile when it comes to selling high-ticket items for which many customers demand more time and hand-holding—for example, a $1,000 aquarium that a customer may mull over for hours. “You don’t want them to shy away from that or think that it’s too much work,” Nelson says.

The dollar amount is also set low enough that sales associates can potentially reach it daily, but high enough to prevent employees from merely cashing in on random customers who walk in and buy $100 worth of dog food without any sales assistance or encouragement at all.

Yet, not every retailer embraces a performance-pay model. Others, such as TailsSpin and Chuck & Don’s, choose to compensate and reward sales staff in different ways.

While great customer service and top-notch salesmanship are not mutually exclusive, Manley says he and Bernhard emphasize service over sales and prefer that their employees nurture relationships rather than deliver product pitches. Manley says the business has avoided going the commission-based pay route, because he fears “people will care more about selling and more themselves than the customer.

“A customer may come in and casually mention that it is hard to get the dog’s fur clean, and then [the employee] will say only, ‘Shampoo, shampoo, shampoo, shampoo!”

Still, TailsSpin’s owners are in the early stages of researching other incentive packages designed to help some team members become more comfortable on the sales floor. In the meantime, they point to other less-tangible benefits that make working at their shop rewarding. For example, Manley and Bernhard say they nurture employee’s talents and interests by allowing them to put those gifts to good use whenever possible—an aspiring writer might get to take a crack at writing the newsletter and a graphic designer will try his hand at designing a greeting card line supported by the business.


Team Approach
Chuck & Don’s, which has about 300 employees staffing its stores, also chooses not to reward individual sales efforts. Instead, it focuses on paying competitive salaries, and it gives quarterly bonuses to managers when the team meets its sales goals.

“The bonus is not calculated at all on individual performance,” Hartzell says. “If one person makes it, everybody makes it. If the team doesn’t win, nobody wins. The team effort needs to be the driving force.”

Meanwhile, the company has also just become a partial ESOP company—meaning all of its full-time employees are Chuck & Don’s shareholders. Hartzell says the program is one of the ways in which the company has chosen to ensure that its team members can share in the company’s success. The company foresees other long-term benefits, as well.

“When a customer comes in and buys a bag of dog food, they are buying it from a shareholder of the company—they are not just buying it from a customer with an hourly wage who is anxious to get home to the family,” he adds. “They are actually buying product and being taken care of by people who have a very vested interest in the company.”

However, no matter what the method, pet specialty retailers seem to be increasingly on board with the idea that there is an intrinsic link between how they compensate employees and the overall health of the business.

“Everyone can rent a space,” says Nelson. “And everyone can buy goods—we all pay about the same price. It’s the people that makes a difference.”

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