Tackling Retail Challenges: The Clausewitz Way

By Andrew Gorecki | 21 Mar 2013

What can retailers learn from military strategist Carl von Clausewitz? Retail Directions’ Andrew Gorecki believes there’s much to be gained from applying Clausewitz’s war defence principals in the retail environment.

There’s evidence to show the retail sector has been redefined and retail businesses must alter their ways to the new reality. This has been spurred on by changes to customer spending patterns – consumers buy less on impulse. They think twice about purchasing ‘non-essential’ items.

In most Organisation for Economic Co-operation and Development (OECD) countries, consumer spending for the last two years has been flat (0.5 percent growth and a three percent decline in the UK). Forecasts for 2013 are similar. Retail sales are also expected to be flat over the next 18 months with mild growth predictions expected for 2014 (1.0 to 1.5 percent).

KPMG cited ‘sustainability’ as the major issue facing retailers. I don’t agree. Companies that rely on better times to come along for survival will most likely fail. Retailers should instead look to military strategist Carl von Clausewitz, who said “the best form of defence is attack” in his classic book On War. Clausewitz also warned about inaction – “it is even better to act quickly and err than to hesitate until the time of action is past”. Retailers can take this approach by thinking about growth instead of survival, eliminating waste and reducing expenses.

In retail, there’s a fundamental element that must apply – you can’t do well if your costs are too high. This carries on from the ‘good old days’ prior to 2008 when many retailers inherited bloated cost bases. Therefore, retailers should apply Clausewitz’s theory to “pursue one great decisive aim with force and determination” to eliminate waste and reduce operating costs.

But how do you remove unnecessary waste and expense?

Systems and data communications often have a hefty price tag in the retail world. But we need to be concerned about more than just the costs of information technology in the business. In order to have an efficient and effective organisation, retailers require a moderately priced, highly capable and reliable system.

One of Retail Directions’ customers reported an annual net profit increase of £120,000 per store once they deployed our software. A world-class, end-to-end software system, coupled with a successful retail foundation allowed the retailer to release the latent capabilities within the business.

Logistics must be in order

The systems act as the backbone to any retail business. Once these are in order, retailers can turn to logistics. Clausewitz addressed the supply chain in the 1830s, saying “there is nothing more common than to find considerations of supply affecting the strategic lines of a campaign and a war”. This idea still applies today. Most retailers have clunky supply chains. Another Retail Directions customer experienced a £0.48 per item saving within the supply chain after implementing our software into their warehouse. With around two million items of stock moving through the warehouse, this translated into nearly £1 million extra in their bottom line. For them, this was a 20 percent improvement.

Process-oriented business management

There’s a third area that must be addressed in order to create a seamless retail operation – process-orientated business management. Also known as Total Quality Management. This management methodology, while not widely practised in Australia, allowed Japan to increase their GDP ten-fold within less than 40 years.

There are many elements to TQM but one of the most important is the ability to distinguish between process issues and incidents. Process issues require process improvements and the latter needs case-by-case handling. TQM principals are worth analysis but it will take time and a different way of thinking. If you’re able to master this then you business should see the results.

Results speak for themselves

Finally, when all the handbrakes on your business are released, you will be able to see the results of being a good merchant and a great trader. Retailers can learn much from Clausewitz’s way of thinking – “everything in war is very simple; but the simplest thing is difficult”. This is true in retail also. When the going gets tough take inspiration from Clausewitz: “if the leader is filled with high ambition and if he pursues his aims with audacity and strength of will, he will reach them in spite of all obstacles.”

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