With long delivery lead times, some spa retailers are modifying their compensation structures
Covid-19 has had a devastating impact on many industries but has been a boon for the hot tub industry. With the sudden spike in hot tub sales has come longer lead times for deliveries, as manufacturers scramble to keep up with demand.
Orders that once took just a few months to fill can now stretch eight to 10 months — a long time to wait for a hot tub.
If you are working in sales and your employer pays upon the delivery, that’s a long time to wait for your commission.
How are spa retailers dealing with long lead times, commission payments and keeping sales staff happy?
Some dealers, like Jamil Toubassi, owner of Flint Hills Spas in Wichita, Kansas, have not had to make significant adjustments to their compensation structures, either in the way commissions are paid or in benefits.
“We do pay commissions upon delivery and final payment from the customer, and this has not changed,” he says. “We have always paid early if the customer pays 100% at the time of order. Believe it or not, even with lead times in months rather than weeks, we are still getting a few customers preferring to put 100% down.”
In addition to commissions, salespeople are also paid a base salary.
“Fortunately, sales have been high enough and deliveries have been somewhat steady,” Toubassi says, noting that some pay periods can be a bit lean as sales staff wait for deliveries before receiving their commission. “To help out our staff, be it sales or service staff, we offer advances against either time worked or a percentage of commissions accrued, but advances have been extremely rare in the last six months.”
Other spa retailers have not needed to change their compensation structures. Jim Power, owner of Big Star Backyards, a family business in Austin, Texas, is one of them. He pays his sales staff their commissions not on delivery, but when the customer puts down 50% or more on a hot tub as a nonrefundable deposit.
George Dalhamer, president of Hot Spring Spas of Dayton, in Ohio, has also not made any changes. Delivery lead times have been long, sales have been robust and salespeople have enjoyed continual commissions. In addition, he pays his sales staff a draw on commission, something like an advance, which affords a salesperson some financial stability.
“We’ve done this forever,” Dalhamer says. “It’s not something new that we’ve instituted because of this historic change in our business model.”
Before the pandemic, Susan O’Con, co-owner of Cedar Works Spa & Sauna in Eugene, Oregon, had lead times of just three to four weeks. With a surge in sales this year has come “mind-boggling” lead times of five to six months, she says. Like most retailers, she paid sales staff a commission after delivery of the hot tub.
O’Con wonders about product that will be delivered in the future and whether employees would be able to maintain enthusiasm if their commissions are suspended. “With all the uncertainties (COVID, riots, the economy, wildfires),” she says, “will these customers back out, requiring a deposit return?”
O’Con likened the predicament to a palm tree in a hurricane, which survives by having both a strong core and an ability to bend.
“To weather this storm, we invest in our staff and stay loyal to the manufacturers we represent,” she says. This approach allowed her company to emerge stronger after the crash of 2008, and with the current crisis, the company shifted the payment of commissions from time of delivery to the month the product was sold. For several months, Cedar Works increased the hourly wage of employees who decided to keep working, while honoring the wishes of employees who went on unemployment and tended to family needs or to let the smoke clear — literally — from fires that plagued the Pacific Northwest last year.
Since reopening was allowed in its area, Cedar Works added sales staff from the ranks of workers displaced by the shutdown. Some have never worked in sales and have done very well, earning sizable commissions. The company’s latest challenge is helping new employees understand this is not the normal sales climate — and that they can’t expect sales to always be so easy.
“It’s still of the utmost importance to gain product knowledge and learn sales techniques,” O’Con says. “As we move into 2021, our game plan is to continue to adjust schedules, commissions or anything else we never thought of before, so as to stay strong and stable in our community.”
Long lead times on deliveries, though not alleviated entirely, have not been as much of a problem for Don Riling, president of Olympic Hot Tub in Seattle. But the pandemic has necessitated some temporary adjustments in Olympic’s payment structure: Ordinarily, Riling pays salespeople a base salary plus commission. Salespeople can also add to their earnings through a monthly productivity bonus program.
In March, Riling was forced to close his six stores in the greater Puget Sound area of Washington state and furlough his sales staff of 14. When he reopened in May, three salespeople did not return; a fourth left in August. Needing to attract new sales staff and dealing with long lead times, Riling initiated a plan whereby new sales staff, with no commissions in the pipeline, would be paid 1% of the sale as a closing commission; their remaining commission is paid out when the product is delivered to the customer. The dual commission program proved successful, and Riling is considering making it permanent for new sales hires for their first 90 days of employment.
Adjusting compensation during unprecedented times like these is all about retaining key employees. Despite lengthy lead times, some spa retailers have hung onto key sales staff, with or without changes to commission structures, while retailers who have lost staff during COVID have replaced them with relatively little trouble. Toubassi’s experience seems typical of many hot tub dealers.
“Employee retention has not been a problem this year,” he says. “We’re all working like crazy and it’s often stressful, but it’s a fun kind of stressful. At least most days — not the days when you’re fielding calls all day that begin with ‘When do I get my hot tub?’ ”