Retail Pay Ripples: Executive Bonuses Sinking, According to Korn Ferry Research

LOS ANGELES–(BUSINESS WIRE)–New research from Korn Ferry (NYSE:KFY) shows that volatility in the
retail industry is now hitting senior retail executives in the
pocketbook.

Korn Ferry conducted an analysis of 40 North American retailers with
annual sales between $1 billion and $50 billion, representing nearly 2
million employees. The study found that 73 percent of retailers paid
little to no bonuses to senior executives in 2017 for 2016 performance,
with 35 percent paying no bonus and 38 percent paying only small bonuses
to their executives.

The percentage of retailers paying no bonuses to executives has steadily
increased during the last 5 years.

 
Retail Senior Executives
Year    

Percent who receive
no bonus

2017 35 percent
2016 25 percent
2015 25 percent
2014 11 percent
2013 10 percent
 

Only 15 percent of the retailers paid senior executives their target or
above bonus amount in 2017.

“Bonuses are typically tied to the performance of the retailer, and
historically about 50 percent of retailers achieve their business plan
for profits and pay executives their normal bonuses,” said Craig Rowley,
a Korn Ferry Senior Partner specializing in the retail industry. “The
fact that this year only 15 percent of companies met or beat their
expected profit plan and paid full bonuses to executives exemplifies the
challenges facing the industry.”

So far in 2017, 23 major retailers have filed for bankruptcy and 24
retailers have either closed are closing more than 5,000 stores in North
America. Currently, up to 25 retailers are on the watch list for poor
financial performance.*

Today retail e-commerce makes up $395 billion of the total $3.4 trillion
in retail sales – which is about 12 percent of all retail. That
percentage is expected to nearly double in coming years.

In addition to e-commerce, new increases in minimum wage in cities
across the United States are taking a huge chunk of retailer profits,
and according to Rowley, some retailers are innovating to curb costs.

“We’re seeing a trend toward retailers taking a hybrid approach to
sales, with showroom stores where consumers can see and touch
merchandise, but can then make their orders online,” said Rowley. “This
gives consumers a chance to interact with a retailer and a brand, and
also allows smaller stores with less need for inventory space and sales
personnel.”

*Source: Business Insider

About Korn Ferry

Korn Ferry is the preeminent global people and organizational advisory
firm. We help leaders, organizations, and societies succeed by releasing
the full power and potential of people. Our more than 7,000 colleagues
deliver services through our Executive Search, Hay Group and Futurestep
divisions. Visit kornferry.com
for more information.

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