A highly motivated staff is the principal en-gine powering retail success. Motivation derives from numerous avenues, ranging from praise to flexible hours, but when you get right down to it, perhaps nothing in the mix works better than the opportunity to make money.
With the unemployment rate hovering at 4.2% nationwide and even lower in some markets, employers must offer an attractive compensation package to lure and retain top-quality staff. There are many approaches to staff compensation, each with its advantages and drawbacks. As we share with you the results of JCK’s exclusive annual salary survey, it’s useful to consider the insights of management consultants and other jewelers regarding the payment structures they find work best.
Base salary, performance incentives. Most jewelry store owners pay their sales associates a modest salary plus commissions or bonuses based on meeting monthly or annual sales goals. The median annual pay for a gemologist salesperson is $25,000, and for a general salesperson it’s even lower—$22,900 for men and $18,700 for women. When commissions are factored in, though, the compensation for all these people rises substantially, hitting as much as $75,000.
Some jewelers, however, see advantages in paying a straight salary instead of a base plus commission. J.K. Kalkhorst, vice president and co-owner of William Crow Jewelry in Denver, has found that a straight salary improves customer service. “We’ve always wanted every single person who walks in the door to be treated the same by everyone and not to be looked at as a commission percentage,” says Kalkhorst, whose 12 employees serve a high-end clientele in a downtown third-floor shop that grossed more than $3 million last year.
It pays off. Consider a case in point. One of Kalkhorst’s regular customers—a woman of modest income—received the same red-carpet treatment accorded to all clientele regardless of spending clout. When she got engaged to a wealthy client of her boss, the happy couple returned to Kalkhorst’s store to plunk down $27,000 on a ring. “You never know who they will know and who they will tell about how they were treated,” says Kalkhorst.
Maybe so, but Kalkhorst is blessed with what he considers a “self-motivated” staff. Others may not be so fortunate. Consultant Kate Peterson of Performance Concepts thinks customer service is more likely to suffer than improve in a straight-salary environment. “If I’m a consumer and there’s no incentive to you as a salesperson to do a better job with me or to help me find exactly what I’m looking for, that really isn’t an environment for good service,” she says.
Many jewelers have found that tilting the compensation package more heavily toward commission with less in the way of a guaranteed base motivates associates to hustle and make the sale. And it shows in the bottom line. Racine, Wis., jeweler Bill Sustachek saw his sales climb from $600,000 in 1994 to $1.6 million last year after switching from a salary-heavy payment structure to one with higher commissions. He pays his sales associates a base salary of $1,000 a month plus 20% of the profit of items sold (with 2% taken off that profit for overhead).
Here’s how it works. Say an item retails for $2,000 with a keystone mark-up. The profit is $1,000. Take off 2% and you have $980. The salesperson gets 20% of that $980, or $196. “It has made an enormous impact on the increase of volume in our business,” says Sustachek, who expects his sales to balloon to $2.25 million this year.
Expect some employee resistance should you decide to switch from a salary-heavy payment structure to one that leans more toward commission. When Atlanta jeweler David Geller went to a commission-based compensation system in 1991, his salespeople feared their incomes would drop, and many threatened to quit. He told them, fine, go ahead, he would find others.
As it happened, their income and that of the store increased dramatically. Just in that first year, sales were up 40%. Staff income has mushroomed as well. His salespeople in 1991 earned from $17,000 to $24,000. Now, sales associates get 10% of their sales with a guaranteed minimum of $7 an hour. Last year four of his five associates made from $43,000 to $53,000. (The weakest performer, who earned just $31,000, was dismissed.) Even adjusting for the modest inflation rates since 1991, that’s quite a jump.
Of course, paying sales staff by straight salary avoids the conflict that arises when more than one associate handles the sale. “We see too much friction that way,” says one North Dakota jeweler. “Most of the time people come in one to 10 times before they buy. Each time they get a different person. So how do you handle commission?”
Using the golden rule. That’s a common concern, but there are ways around it. In many stores that pay performance incentives, sales associates are encouraged to split the commission when two people handle a sale. “The golden rule here is to do unto others as you’d want them to do unto you,” says Sustachek.
Many jewelers circumvent the problem of splitting commissions by basing incentives on sales goals for the store overall and not solely on individual performance. That fosters teamwork. A typical approach is to increase the percentage of the commission if the store exceeds the monthly sales goal. “If I’m paid an incentive based on my personal performance and then that incentive gets larger based on the team performance, that facilitates the team-selling atmosphere,” says Peterson. “And customer service, by nature, improves.”
With that in mind, many of the larger chains insist that a sales associate turn a customer over to a colleague if the former cannot close a sale. “That’s a totally foreign concept to most independents,” says Peterson. “The understanding is that, if somebody doesn’t buy, chances are it’s because the associate either didn’t find what they were looking for or didn’t have the personality style [the customer] was most comfortable with.” Even with team-based incentives, your best performers earn proportionately more than their weaker counterparts. So it’s fair.
Some jewelers use overall store sales goals as a basis for rewarding the entire staff, not just sales associates. Perhaps that kind of global reward is one reason Dunbar Jewelers in Yakima, Wash., had its biggest year ever in 1998, taking in $1.2 million and exceeding its previous peak volume by some $200,000. That was the year company president Pat Gilmore went to a system whereby all 14 employees earned a bonus if the store surpassed its monthly sales goal. “Everybody makes it work,” says Gilmore. “If the bookkeeper doesn’t do her job right, then the sales staff can’t do their job right. If the goldsmiths don’t get their job right, then the sales staff, again, can’t sell the merchandise. It’s all a team effort, so we reward everybody on the team.” His team’s spirit is likely to rise all the more. Sales this year are “way up” over last year’s record number and may reach $2 million.
Other ways to vary commissions. If you discount deeply enough, anyone can increase sales volume. Meanwhile, gross profit suffers. That’s why many store owners vary the percentage of commission based on the gross profit on sales.
Staggering commissions in this manner benefits both the storeowner and the salesperson. “The employees are looking to make the most money they can,” says consultant Harry Aureli of the Silverman Group in Mount Pleasant, S.C. “If they hold the line on price and make the sale, everybody comes out better. The storeowner makes more profit, the salesperson makes more commission.”
That approach has worked well for Robbins Bros., a $27 million Los Angeles-based company with 145 employees and five stores throughout Southern California. Sales associates are paid a base salary against a draw of a 7% commission, provided they discount no more than 2% of the list price of an item. Otherwise the percentage of the commission drops. “We don’t like to do too much negotiating on price,” says chairman and CEO Steve Robbins. Likewise, commissions for the sales associates at Modesto, Calif.-based Roger’s Jewelry Co. vary from 1% to 3% depending on the profit margin. “It keeps discounting in line,” says Roger Marks, president and chairman of the 11-store, 150-employee firm.
That’s important, because deep discounting hurts the store owner far more than the sales associate. Take an example. Suppose your mark-up is 2.5 times, so that a piece that cost you $400 retails for $1,000. Let’s say the salesperson’s commission is 2%. If he drops the price to $800, he’s lost 2% of $200, or four bucks. Hardly a big deal. Meanwhile the storeowner has lost $200. “Unfortunately, if you have weaker salespeople and allow them to give a certain amount of discount, they go directly to that discount,” says Aureli.
Another basis for staggering commissions is the length of time an item has been sitting in your case. A great way to increase turnover is to offer a higher commission on sales of jewelry that’s been gathering dust. “That piece that nobody would go and show becomes a featured piece,” says Aureli. Some jewelers set different rates of commission based on product category, whereby sales of higher-margin items such as gold jewelry warrant greater recompense than those of lower-profit pieces such as carat-plus diamonds.
Benefits. Benefit packages vary widely depending on the size of the firm and the market in which it operates, as our survey shows (see p. 74). “Obviously a package would be different in New York City than it would be in Amarillo, Texas,” says consultant Aureli. Likewise, it stands to reason that larger companies enjoy economies of scale that allow them to offer more generous perks than those provided by smaller outfits.
In our survey, we found that less than half of firms with sales volume under $700,000 offer their employees medical insurance. Ninety-eight percent of companies that gross $2.5 million or more provide health benefits. Buffalo, N.Y., jeweler John I. Starr, president of the $1.1 million S&E Wholesale Corp., hires part-time workers expressly to get around paying hefty benefits. “Health insurance is very costly, and that’s one of the reasons we dropped out of having full-time people,” says Starr, founder of the 51-year-old firm.
Maybe so, but in many cases an ample benefits package is a requisite means of luring and retaining employees. “In some markets you cannot get by and can’t hire anybody without having a superb benefits package,” says consultant Peterson. “And for most small retailers the only reasonable way to do that now is through employee leasing.” That’s the idea of paying an agency a lump sum to administer benefits for your employees.
For bigger companies, Peterson favors a “cafeteria” plan whereby employees are offered a fixed sum to spend on benefits and are free to choose precisely which benefits they would like. Cafeteria plans are especially effective in that employees gain a clear sense of the value of the benefits they’re receiving.
Beyond money. Looking beyond salaries, commissions, bonuses, and benefits, there are other ways to motivate and reward employees. What does it take to foster a work environment that spurs productivity and loyalty among your staff? Even as his staff’s income has escalated markedly in recent years, Sustachek believes the No. 1 motivator in his store is a four-day work week (although it’s an 11-hour day) that allows employees plenty of time for family and other pursuits. Now that Madison, Wis., jeweler Dan Danford has moved from a mall to a storefront setting, he’s no longer open 84 hours a week. His employees appreciate having evenings and Sundays off. “It gives our employees a better quality of life,” says Danford.
Sometimes it’s the little personal perks that make a difference. A manager at Freehold, N.J.-based Bellew Jewelers rewarded a stellar employee with a balloon ride with champagne for her and a boyfriend. Other times employees have been offered a night out to dinner, with limo transportation and a special bottle of wine. “There’s a lot of the personal side that goes into it,” says company president John Bellew. It pays off. More than half of his 22 employees have been with the firm more than 10 years. One who recently retired had been there since 1937.
Involving employees in buying decisions and other management tasks fosters loyalty as well. New Castle, Pa.-based King’s Jewelry, a 43-store chain with a staff of 325, holds an “expo” of key vendors each year at which employees purchase merchandise for their store as well as for themselves. “One of the greatest incentives you can offer people is that they feel like they are part of the business,” says company president Dale Perelman.
A simple acknowledgment for a job well done goes a long way. Says Gilmore of Dunbar Jewelers, “I think if we can show people respect for the way they do their job and just show common courtesy, tell them thank you and reward them for what they do, that’s what makes this thing work. Compensation is just part of the package, I don’t think it’s all of it.” (This special section continues on page 86.)
About Our Survey
Last April, we mailed questionnaires to 550 jewelry store owners or managers throughout the United States. We received 270 back, for a response rate of 49%. This is an extraordinarily high rate of return, giving the results unusual statistical validity.
All figures given here are medians and are for the calendar year 1998. A median represents a midpoint in a range of figures—there are as many above it as below it. Say the people in a group earn 30, 40, 50, 80, and 100 dollars a day. The median is 50, whereas the average is 60. Medians are considered more useful than averages since they’re less subject to distortion by extremes.
JCK is the only publication or organization that conducts an annual survey of jewelry industry compensation. If you would like to participate in future surveys, please let us know.
1998 Median Annual Compensation (All Stores)
|Base Pay||Base Plus Commission||Range (Total Pay)|
|Owner, president, CEO (men)||$50,000||$60,000||$15,600-$618,825|
|Owner, president, CEO (women)||$50,000||$51,000||$15,900-$265,000|
|Vice president (men)1||$45,000||$65,000||$23,700-$263,380|
|Vice president (women)||$42,900||$45,000||$16,000-$166,390|
|Store manager (men)||$36,000||$45,000||$13,085-$262,305|
|Store manager (women)||$32,000||$37,000||$13,680-$110,000|
|Assistant manager (men)||$25,000||$32,495||$16,720-$54,195|
|Assistant manager (women)||$27,020||$28,500||$13,900-$75,000|
|General sales (men)||$22,880||$26,275||$11,960-$80,000|
|General sales (women)||$18,720||$22,600||$10,525-$70,000|
|Watch repair (men)||$30,000||$33,000||$10,800-$64,625|
|Watch repair (women)2||—||—||—|
|Office staff (men)||$22,000||$23,500||$15,000-$40,000|
|Office staff (women)||$18,700||$20,965||$9,500-$50,000|
|1. Smaller sample size compared with that of presidents yielded higher median total pay for vice presidents than for presidents.|
|2. Small sample size yielded insignificant figures.|
Paying Employees 1998 Median Annual Salaries
|Job Title||Base Pay||Base plus|
|Owner, president, CEO||$60,000||$75,000|
|Job Title||Base Pay||Base plus Commission|
|Owner, president, CEO||$47,500||$50,000|
|Job Title||Base Pay||Base plus Commission|
|Owner, president, CEO||$44,400||$46,000|
|Job Title||Base Pay||Base plus Commission|
|Owner, president, CEO||$70,000||$100,000|
The Benefits Package
(% of Stores Offering Each Benefit)
|Less Than||$300,000-||$700,000-||$1 Million-||$2.5 Million|
|Paid sick leave||65%||38%||57%||62%||69%||91%|
|Paid maternity leave||14%||5%||9%||11%||12%||31%|
|Unpaid maternity leave||30%||5%||16%||30%||40%||56%|
|Defined pension plan||18%||2%||12%||38%||21%||22%|
|401(k) savings plan||23%||7%||15%||5%||21%||59%|
Number of Vacation Days Offered*
(% of businesses offering these vacation days)
|Less Than||$300,000-||$700,000-||$1 Million-||$2.5 Million|
|More than 15 days||10%||4%||2%||11%||14%||15%|
|* Maximum number of days offered based on duration of employment.|
Merchandise Discounts Offered to Employees (% of businesses offering these discounts)
|Cost + 10%||22%|
|Cost + 20%||4%|
|20% off retail||6%|
|30% off retail||13%|
|40% off retail||14%|
|50% off retail||9%|
1998 Commissions and Bonuses
|President, owner, CEO (men)||$19,000||$1,060-$467,000|
|President, owner, CEO (women)||$15,000||$300-$185,000|
|Vice president (men)||$10,000||$900-$180,000|
|Vice president (women)||$5,000||$2,000-$90,000|
|Store manager (men)||$7,000||$200-$167,090|
|Store manager (women)||$6,090||$50-$60,000|
|Assistant manager (men)||$6,790||$1,500-$20,000|
|Assistant manager (women)||$9,000||$300-$37,935|
|General sales (men)||$5,000||$200-$50,000|
|General sales (women)||$2,500||$100-$25,715|
|Watch repair (men)||$2,000||$650-$4,925|
|Watch repair (women)*||—||—|
|Office staff (men)||$2,000||$50-$16,640|
|Office staff (women)||$1,000||$10-$10,000|
|* Sample size yielded insignificant figures.|