A commission merchant is any individual or entity that is engaged in the business of receiving products for sale on a commission basis on behalf of another. A commission merchant acts as the agent of the seller, the seller retains title and the commission merchant sells the commodities on a consignment basis. A commission merchant is usually a receiver that obtains possession of the commodities.
Working as a commission merchant can be an enticing way to earn a living if you have communication skills, sales skills, and the ability to close a deal. Selling products or services is challenging and professionals who are into sales and marketing deal with tough competition.
Organizations offer a commission to motivate these sales persons to make them more productive and generate more sales and attract customers. Sales and marketing gigs in many industries, such as automobiles and real estate, generally offer commission-based compensation.
Note that it can be part of the salary of an employee or a separate form of income that is paid on a different schedule. It is calculated based on a percentage of total sales. That means the more products or services a merchant can sell, the higher the amount they receive.
Have it in mind that companies vary in the way they set and pay commissions. One way is the flat commission wherein the commission merchant gets a rate or percentage on any sale that he or she makes. The other way is ramped commission wherein the percentage increases when the merchant generates more sales or reaches higher targets.
When accepting a deal with commission-based pay, it is imperative you understand the process involved in calculating the amount. Always remember that several factors may affect your income, so take time to fully understand the agreement or contract.
Business researchers believe that companies have to continually adjust their sales commission/incentives packages in the coming years in order to remain competitive, since the overall business environment is changing with such rapidity.
For instance, merchants are now seen as more likely to move not only from business to business but also from industry to industry. Commission merchants, despite their market specialization, have one thing in common: They want to make lots of money. And these high-performing people will seek out companies with competitive pay plans—regardless of the industry.
In addition, increased emphasis on customer satisfaction and increasing market share with current customers will broaden the responsibilities of commission merchants, who will in turn expect to be compensated appropriately. Have it in mind that today’s selling environment is frustrating and fascinating, and Technology is propelling us into a new way of thinking about business strategy and the way we define success.
As always, though, commission merchants will do what they are rewarded for doing. That’s why compensation plans have to keep up with the changing selling methods. Sales managers are expected to motivate their reps to build real relationships between customers and company, in order to increase the share of each customer’s business and to increase the value of each customer to the company.
3 Advantages of Using Commission Merchants
Becoming a commission merchant is not for the faint of heart, nor are they always the top-paying sales jobs available. But here are the reasons why commission merchants are very important in business.
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Benefits and Freedom
Have it in mind that some commission only positions offer benefits (health, dental, vacation time, sick time, etc.) to their sales merchants, and some view their sales merchants as independent or contract workers. If you cannot stand the idea of going without an employer-sponsored benefits package, only consider positions in which you are a direct employee of the company and that offer a benefits package.
However, if you have more of a sales entrepreneur temperament or don’t need to work for a company that offers benefits, make 100 percent certain that the hiring company does not enforce restrictions on how you manage your time. The essence of commission based gigs is the freedom to sell other non-competing products or services so long as you deliver whatever revenue expectations to which you and the hiring company agree.
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Unlimited Income Potential
In this career line, you should expect the possibility to earn an unlimited income. However, there is a difference when it comes to commission only positions, as some do “top out” at a certain earnings level. While employers may try to disguise an earnings potential limit with additional compensation opportunities, these truly do not offer unlimited income potential.
For instance, consider a position that allows sales merchants who work solely on commission potential earnings of up to $150,000 in annual commission. Once that earnings level is met, the merchant can earn awards, prizes, trips, or can “roll over” a percentage of sales into the next year.
Howbeit, irrespective of how it is framed, any position that limits the amount of commission you can earn should be considered carefully. And while you are doing due diligence, don’t be deceived by a company that promises unlimited earnings potential but that markets a product or service that is either too general, and therefore viewed as a commodity, or too specific, resulting in fewer sales opportunities.
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Advancement Potential
Unlike other traditional multi level marketing companies, many sales businesses employ sales merchants to sell and earn commissions, and also provide training or support to others selling for the same company. Companies like these more or less offer advancement opportunities to their sales professionals who demonstrate both a strong skill set and the ability to help others improve their skills.
Conclusion
The sales commission is a method of compensating sales merchants or salespeople for the services they provide to their employer. Under so-called “straight” commission arrangements, the salesperson gets a previously agreed-upon percentage of the revenue brought in by a sale that he or she makes.
Commission arrangements can be used for both service and product sectors. Some employers, nonetheless, prefer to compensate their salespeople via straight salaries, thus compensating them in the same way as other employees, or via a combination of salary and commission.