Reverse Comission Question

[aliendavid]

The standard way of paying comission is you make a sale you get a part of the comission.

My business is a bit different in that it is an Ecommerce website. I am looking to give my staff(in china) a comission for bargaining for me. Here you have to negotiate with Wholesalers and Vendors on the price.

For example Widget A cost 50 and if my employee can talk the vendor down to a lower price how would I reward them. I can keep track because i already know roughly the market price.

Any ideas?

[aussietimbo]

Hi Aliendavid,

Why not provide your staff a commission based on the difference between the market price and the price they pay for the product?

So for example you work the market price out to be $50 and then your staff bargain down to say $40 per piece. You could provide a fixed commission per piece or per order (your choice).

Let’s say you communicate to your staff you will provide them a 40% commission on difference between the market price and the bargained price per product purchased. So in this example it would be a difference of $10, therefore 40% of $10 is $4 and they purchased 100 widgets in this order. Therefore you would pay them $400.

This may seem like a lot but you should also look at the other side of things. Your staff member just saved you $600 from the purchase.

Although to make it more efficient you may want to look at providing your staff with the daily or weekly market price to help avoid confusion and miscommunication when they talk to the vendors and begin bargaining.

Hope this helps.

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[RawMarketing]

That sounds like a great idea.

As far as employee reward structures go however, I'd always try and make sure that I don't offer the employee to greater reward for some tasks which should be apart of the job anyway (such as negotiating) and I'd always want to keep the remuneration relatively inline with what they should be getting paid.

For example, if your buying $5,000,000 of product a year and you give your employee a 40% commission if he saves you 10%, that'd be like $200,000 commission! and really all they're doing is bargaining off your hard-earned sales volume.... You'll also get heaps of angry sales or admin people because one employee is getting remunerated so much better.

I'd feel more comfortable setting my team non-monetary targets to achieve in order to get a higher base salary. Or calculating what sort of price I think they should be able to get for me and then making it something the employee will work hard to achieve. A lot of employees would become complacent if they all of a sudden found an easy way to double their pay.