Why Apple Stores Don’t (And Shouldn’t) Pay Commissions

Why Apple Stores Don’t (And Shouldn’t) Pay Commissions

Apple made a conscious and important choice about sales commissions and customer experience

Over the weekend, The NY Times posted another investigative piece in its iEconomy series that about Apple. This installment focused on Apple’s retail stores. As with previous articles in the series, this one focuses on legitimate concerns about the American economy in an age of globalization. Like the other pieces, this one targets Apple specifically and ignores the range of Apple competitors that employ similar practices.

The primary issue that the Times brings up with regard to Apple retail stores is that employees can sell thousands upon thousands of dollars worth of Apple products and still earn a relatively modest wage. The underlying sentiment is that if a retail employee sells so much hardware, he should earn more because he is contributing to Apple’s vast revenues.

The only way for things to shake out that way and remain fair would be if Apple offered performance-based awards or commissions. Apple chose not to do that because doing so would have delivered a fundamentally different customer experience than the one envisioned by Steve Jobs – a fact that the NY Times chose not to explore in any real depth.

Apple consciously chose not to offer pay-for-performance incentives when Steve Jobs and Ron Johnson conceived of the store more than a decade ago. While the Times seems to imply that Apple may have chosen a flat hourly wage as a way to save money, anyone familiar with Apple or who has read Walter Isaacson’s biography of Jobs is likely to realize that money wasn’t the motivation for that decision.

Steve Jobs believed in creating experiences for Apple customers. All you need to do is look at the packaging of any Apple product (and the unboxing videos that show up on YouTube when a new product is launched) to see that. The Apple store needed to be the ultimate customer experience for Apple. The fulfill the vision that Jobs and Johnson had for the stores, the outlets needed to feel welcoming, friendly, and more like a place to learn about products than a place to buy them.

That model was crucial in 2001 when Apple launched its retail chain. At that point, there was no iPod, no iTunes Store, no Apple TV – Apple’s only product line was the Mac. Even after four years of Steve Jobs remaking Apple following his return to the company in 1997, the Mac was a niche product. At that point Apple’s retail stores needed to attract and entice customers to simply learn about Macs as much as to sell them.

Paying commissions and encouraging competition through compensation is antithetical to that creating that experience. The Times acknowledges this just once thanks to the comments of former Apple retail executive Denyelle Bruno.

At Apple, the decision not to offer commissions was made, Ms. Bruno said, before a store had opened. The idea was that such incentives would work against the company’s primary goals — finding customers the right products, rather than the most expensive ones, and establishing long-term rapport with the brand. Commissions, it was also thought, would foster employee competition, which would undermine camaraderie.

The idea of Apple stores as a tangible Apple experience has another unique twist that would have been stifled by sales staff paid on commission: Apple doesn’t need its customers to buy products from its retail stores to make money. Since Apple is both a manufacturer or goods and a retailer, the company will make money if someone spends an hour playing with an iMac in an Apple store but then buy’s one from Best Buy instead. That’s a unique perspective in retail and it completely flies in the face of retail traditions that would advocate in favor of commissions.

It’s important to note that other companies have experimented with similar flat-pay models. Most have done so to create a more engaging and customer-friendly experience. Best Buy, one of the biggest Apple retailers after Apple’s own stores also has a similar policy. So does Brookstone, which sells a number of iPhone and iPod accessories. Electronics retailers Radio Shack and Fry’s, on the other hand, do pay based on commission.

Related
  • McRCN

    Most people go to the Apple Store knowing what they want to buy. I cannot say I ever went there without a purpose. The Apple Store is mostly a retail buying experience and the sales folks are not an important part of the decision making process for most consumers.

  • Himself

    I disagree with McRCN. I see folks hanging out at the Apple store in droves, sometimes playing, sometimes exploring products before buying. They often don’t know which version of something to buy and ask for help. So do I. I trust that Apple employees will give me advice based on my needs rather than their rewards. To put this in context, some years ago I fired my travel agent when I discovered that he was recommending a cruise line to our family based on an incentive rather than the criteria I had shared with him. As far as I’m concerned, he was getting a kickback to send me on a particular vacation and I did not appreciate that. And I don’t appreciate salespeople on commission who are, in essence, getting a kickback for upselling me based on their potential reward rather than on my need. The other side of the coin, by the way, is that I do expect sales people working without commission to get a higher base pay to make up the difference. And I do expect there to be a reasonable performance reward system for promotions and bonuses. Just give me someone who will actually listen to me and advise me well–the Apple model–and I’ll come back over and over again.

  • Alberto Hernandez

    McRCN You are a nerd so of course you do not need help. MOST people have no idea what to do when buying a computer.

  • Jdsonice

    I think the model works for everyone. Apple has just instituted a 25% pay increase in the stores and with the benefits the employees they are receiving at least the same as others.

    Working at Apple is an experience that will be valuable to the employee in the long run.

  • aardman

    Just spending a few minutes in an Apple Store and observing the customers and their interaction with the sales staff reveals right away that a lot of the customers are not very knowledgeable about Apple products or computers in general. In fact Apple’s own statistics on the number of visitors that walk into an Apple Store gives strong clues that most of them need help in making their computer buying decisions: there are not that many tech geeks in the world.

    Putting sales staff on commission would be the worst thing Apple could do to customer experience. Try to imagine an Apple Store staffed with car salesmen.

  • totaji

    Really, the answer is in the last paragraph. Apple doesn’t because nobody does. The retail model now is to have Mcjobs, not truly trained professionals. I live in Columbus OH and there are 2 thriving stores here. I’ve been in both several times and the floor workers know about has much as Best Buy employees. They stand around waiting for girls to “help.” I am shocked at the poor service. I use Apple products despite the stores. The layout and design is nice. The employees are gutterballs on average.

  • theobserving

    I use Apple products despite the stores. The layout and design is nice. The employees are gutterballs on average.

    it’s been going that way for years, but when they introduced the ipad displays in the stores, that was truly the death knell of having any knowledgable people working in the store: they don’t have to remember anything or learn anything, they can just read off the screen, like a trained monkey. and the little “call for help” button on the ipad display or apple store app simply means that now, instead of getting someone who can answer YOUR specific questions (pro apps, etc), you get whoever is next available, who could very well be a complete moron.

  • jde1345

    What Apple could do is to create a annual pool based on store performance (measured in total sales or profitability). The pool could be distributed based on each person’s yearly earnings as a percentage of store paid salary for the year. Anyone who leaves would loose his or her right to participate in the pool and those earnings would not count in calculating total store earnings. This would give individual employees an opportunity to participate in the store’s success, build teamwork and preserve the customer experience.

  • CGJack

    I remember when I went to the Apple Store to buy a MacBook for school. Even after looking at the computers online, I wanted proper advice on what I should buy. I was split between a MBP, MBA and iPad, I eventually went with the most-expensive MBA; but it was my decision. The Apple Store employee was very friendly and recommended that I looked more towards the iPad and perhaps the 11″ MBA instead. This would not have happened if it was commission-based.

  • lymenlee

    During my couple of Apple store visits, I can’t help but noticing on fact. The elderly staffs there outnumbers any other stores I’ve visited. For example, in Best Buy you’re greeted with really nerdy looking smart boys who can answer all your questions, but probably can’t really relate to your confusion on why buying a Bluetooth headset is so complicated. I saw a lot of elderly people staying in the Apple store, asking questions, trying out new things, and the Apple elderly staff serving them in the same kind of patience. That’s quite a scene I’ve never seen on other stores. That could be another little detail that Apple paid attention to, make sure people of all age get served properly.

  • ApplePr0n

    I’m glad Apple doesnt do this. I mean I work in the same kindof environment at my job where there is no commision and all of my coworkers and I love it

  • ApplePr0n

    The culture in the Apple store doesn’t fit a commission based pay system. You have someone greet you, someone else to help you and make a sale, and if you buy a computer/iPad, you have someone else help you set it up on the spot. Who should get the commission? I want someone helping me who knows the product, not driven by bagging a bigger commission.

    Exactly. I’m not buying a car and tossed a sales pitch on a bunch of stuff I don’t need. That’s why commission sucks – and Apple won’t do it

  • lwdesign1

    I completely agree with this article. Commission sales create a highly competitive and VERY bad customer service environment, where each sales employee is motivated by how much money he/she can make and how many sales he/she can convert in a day. Customers who come in for a phone cable or a case are then an irritation because they take up valuable time that could be used to sell someone a Mac, or at very least an iPhone or iPad where the employee could make a higher commission. As in so many other areas, the NY Times doesn’t GET this and doesn’t seem to realize that Apple’s success comes from several areas: 1) Creating and selling excellent quality products that work so well and are so intuitive that users fall in love with them, 2) The staff at the stores and on the phone are friendly and not pushy car salesmen, 3) Excellent technical support that is friendly and actually helpful by people who speak English, and 4) Superlative repairs that are frequently above and beyond the warranty.

  • technochick

    There is also an issue of fairness. Geniuses and Creatives might make a little more money than the sales staff but it is far from the $30/hour they were being paid in the beginning when they were required to have done their own certifications and such just to get an interview. Now pay is more like half that (compared to the sales folks getting $11-12 an hour).

    if the sales staff gets commissions that gives them a chance that the other side of the staff doesn’t have. hardly fair since the tech support and training are a major thing that encourages the average computer user to switch/buy

  • technochick

    The culture in the Apple store doesn’t fit a commission based pay system. You have someone greet you, someone else to help you and make a sale, and if you buy a computer/iPad, you have someone else help you set it up on the spot. Who should get the commission? I want someone helping me who knows the product, not driven by bagging a bigger commission.

    if they were commission based you can bet that would stop. It would be more like when I was in high school and worked for Godiva. You are with the customer from door to door for everything. Except that Godiva also didn’t pay commissions despite having everyone assigned an amount of sales they had to earn or risk getting fired. It was supposed to be based on time on the floor but our manager would pull tricks like only give herself ‘one hour’ of sales time even though she was actually on the floor all the time. And when I was in the back sorting new stock for 4 hours I was still considered ‘on the floor’.

  • shumicpi

    McRCN You are a nerd so of course you do not need help. MOST people have no idea what to do when buying a computer.

    You are very correct.

  • JeremyL

    If you leave them your details they can get pretty pushy.

About the author

Ryan FaasRyan Faas is a technology journalist and consultant living in upstate New York who has written extensively about Apple, business and enterprise IT, and the mobile industry. In addition to writing for Cult of Mac, he is a contributor to Computerworld, InformIT, and Peachpit Press. In a previous existence he was a healthcare IT director as well as a systems and network administrator. Follow Ryan on Twitter and Google +

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