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Ever heard of the term “polycrisis”? French theorists Anne-Brigitte Kern and Edgar Morin coined this phrase in 1993 to characterise ‘the simultaneous occurrence and interaction of multiple crises that cannot be reduced to a single common denominator’. While the phrase was picked up by EU Commission president Jean-Claude Junker in 2016 to describe Europe’s governance during the Greek debt crisis, Russia’s first aggression against Ukraine, impending Brexit, and the Syrian refugee crisis spilling into Europe, it was popularised in 2022 by historian Adam Tooze, seeing the current world affairs in a situation where ‘disparate crises interact such that the overall impact far exceeds the sum of each part’.

Such a context requires businesses to look at their macro-environment in a new way, and ‘connect the dots’ between seemingly unrelated facts and data points. Before the summer, the IADS interacted with four different worlds: the FIRA retail federations meeting in Berlin, a column by the historian Adam Tooze, an article in The Economist, and a workshop convened by EM Normandie on the politicisation of business. While these are disconnected when taken in isolation, they suggest the emergence of a new macro-economic and political environment when read together. While this does not mean having a crystal ball, and the purpose of such an exercise is not to forecast, this allows for new angles that department store leaders interested in the transformation of their business should consider in their strategic reflection.

Department stores have long thought of themselves as national commercial institutions with a customer, a proposition, and a margin. While there are some exceptions for those who went international (such as Galeries Lafayette), they seldom see themselves as macro-exposed outside of their supply chain. The four reads below suggest that this posture is increasingly hard to defend: their flagship stores, their long-cycle inventory, their significant cash positions, their pricing latitude, and, above all, their trust are all connected to regional or global political and economic instruments that, until recently, were in the background of their strategic planning process. However, this background seems to be moving into the foreground, and retail leaders might need to consider new questions as they plan their upcoming strategy. Our hypotheses are based on four horizons derived from our analysis of four sources.

First horizon: where retail stands as of now

Last April, the IADS attended the mid-year meeting of the Federation of International Retail Associations (FIRA) in Berlin (report available here). 18 delegates from 14 national federations sat at the same table and described the same operating environment.

Concerns about the energy were universal. The consensus was that even an immediate reopening of the Strait of Hormuz (in hindsight, a vain wish) would not bring prices down for at least six months: petrol fluctuates quickly, and the cascade runs through transport, packaging, and petroleum-based inputs. India brought the most concrete second-order picture: shortages of liquefied petroleum gas cylinders had already pushed restaurants to alternative fuels, and the urea and fertiliser shock would surface only after the rainy season, with delayed pressure on food prices.

Inflation was another issue. Prices are still catching up to the 8% shock of three years ago, working their way through wages, rents, and contracts. A potential return to 3 or 3.5% inflation isn't relief: prices don't fall back; they just climb more slowly from an already-inflated base. This is why consumer confidence shifted from budgetary to behavioural: Belgium and Germany reported that households were parking money rather than lacking it; Germany's e-commerce channel grew by more than 3% in Q1 precisely because consumers were using online for price comparison and bargain-hunting. Australia recorded its worst consumer confidence since 1968 (including during COVID). Ireland’s consumer confidence lost 18% between February and April. Italy's stable volumes were considered to be masking speculative pricing by operators.

However, two other points caught our attention.

The first was Shein and Temu. Every European delegate and the Australian delegate cited them by name. Australia now records a 5% share of the entire national fashion category for what its retailers call "Sheemu", only two years after Shein and Temu entered the market. The diagnosis was unanimous: these players operate outside the safety, sustainability, and consumer-protection regime that binds incumbents. Customs and tariff reforms are in train, no association reported by then, a measure that had yet moved volumes.

The second was European regulatory paralysis. Many European associations complained that Europe has lost its capacity to think strategically because it had been firefighting since COVID. The competitiveness agenda, regulatory simplification, and the response to third-country platforms compete now with three further fronts: unfair trade practice rules between brands and retailers, an ongoing sustainability review that has been simplified but not lightened, and a geopolitical paradox (the need to open new trade partners, Mercosur, Australia, even China, while confronting Chinese platform competition at home). The textile sector's stop-and-go on circularity was the clearest illustration. Brussels, a delegate observed, now needs "to simplify the simplification procedure."

While none of this is breaking news, what was striking was the unanimity among peers from geographies with entirely different institutional and consumer conditions, suggesting that we are not in a cycle but facing a structural difficulty that won’t be resolved through tax cuts or elections, especially in Europe.

Second horizon: How policy could evolve in reaction, tomorrow

If the environment remains durable, the next question is what governments could do about it. What is noticeable about it is a radical change in vocabulary.

In May, Gita Gopinath, until recently the first deputy managing director of the IMF, now returned to Harvard, used an op-ed in the Financial Times to warn that governments constrained by fiscal space may rely on "broad-based price controls, financial repression, nationalisations, and pressure on central banks to absorb fiscal risk." While she did not endorse those instruments, she flagged them as a scenario that markets are currently not pricing.

Adam Tooze, the Columbia University historian, extended the argument on his Substack feed (link), observing that the ‘Washington Consensus’ (in his words, the framework defining which policy instruments were respectable and which were not) had already been quietly loosened. Emerging market central banks have been combining inflation targeting with foreign-exchange intervention, capital controls, and macroprudential measures for years. According to Tooze, even the IMF and the BIS moved to rationalise these practices. What Gopinath called the "Four Horsemen of Heterodoxy" (price controls, nationalisation, fiscal-monetary coordination, financial repression) are not the arrival of something new, but, in Tooze’s view, the acknowledgement of something already underway:

• Price controls, not in the crude 1970s sense of a state-set price for milk, but in a much more modern sense: category-specific caps, windfall taxes, mandatory margin disclosures, or coordinated pressure on food, energy, and household basics. In Berlin, Spain's retail federation and EuroCommerce flagged food as the next political battleground after fuel, which is where this instrument could land first.
• Financial repression, in practice, means real interest rates deliberately held negative for an extended period. Not as an accident of monetary policy, as during the pandemic, but as policy, with financial regulations designed to prevent avoidance. For a business whose cash reserves earn nominal returns and whose long-term debt was contracted at higher real rates, financial repression is a wealth transfer of significant scale. It is also, historically, the least politically visible of the four instruments, which is precisely why governments could choose it.
• Targeted nationalisation, or, as Tooze puts it more accurately, the threat of such measures. The instrument works even when not in use. In sectors with strategic exposure (energy, telecoms, critical infrastructure), the credible possibility of state intervention shapes corporate behaviour. Retail is not first in line. But flagship real estate in politically sensitive city-centre locations is closer to the frontier than many CEOs assume, particularly for members whose flagship building has cultural or heritage status independent of the retailer occupying it. The recent example of the Paris mayor considering buying the BHV building is an illustration of such a change (link to the news and our analysis of the BHV case here).
• Fiscal-monetary coordination: central bank independence is not being abolished but renegotiated, with a direction toward greater accommodation of fiscal deficits. The implication for members whose treasuries hold non-euro or non-dollar balances is that the "backstop" investors are pricing may become a policy commitment rather than a discretionary intervention, with consequences for currency stability, cross-border capital flows, and the cost of any debt not held on a hedged basis.

None of these instruments is for real now; however, they are on the policy table in ways they were not five years ago, and retailers should not be wondering if they might be used by governments, but prepared for the potential when.

Third horizon: there might be a bigger, more structural shift coming in the long run

The Economist recently observed that for most of the past century, rich countries shared prosperity through a simple settlement: raise revenue mainly by taxing labour and consumption and redistribute through cash transfers (link to our report). That model may not survive the advent of artificial intelligence.

The reasoning is that if AI shifts income from labour to capital at anything like the scale its promoters suggest, the tax base built on labour income collapses. Governments will still need revenue (probably more, if unemployment is high), but they will have to find it elsewhere. The average OECD member currently raises about half its tax revenue from labour and roughly a third from consumption; the United States, which has no national consumption tax, is especially dependent on labour. The obvious substitutes are heavier consumption taxes, capital taxes, and, more radically, spreading ownership of the technology itself through equity distribution, sovereign wealth vehicles, or expanded public pension shareholding.

This is obviously not going to happen tomorrow, but it might be a reality within ten to fifteen years. A department store CEO signing a twenty-year lease on a store is implicitly betting on the demand structure of an economy whose tax and distribution logic may look very different by the time the store amortises.

Two implications matter for department stores:

• The first is that consumption taxation (VAT in Europe, sales tax in the United States, GST across most of Asia) is the shock absorber most likely to be adjusted upward. Every point of consumption tax is, at the margin, subtracted from the department store proposition. Members whose businesses are most exposed to price-sensitive segments should model this explicitly rather than treat it as background noise.
• The second is that the political legitimacy of large capital-owning organisations will be examined in ways it has not been for a generation. Department stores are not tech giants, but they are visible, publicly recognised holders of significant real assets, and in a number of markets, they are among the largest single occupiers of prime urban real estate. In the tax-and-redistribution conversation that AI will force, they will not be invisible.

The fourth reading: the end of neutral ground

At the end of June, IADS attended the opening session of a three-year research programme run by EM Normandie's AGORA institute, in partnership with Georgetown University and Florida Atlantic University, on the politicisation of business (report available here). Practitioners from L'Oréal, Google, Ubisoft and Airbus sat with academics from four American and two European institutions. The question was simple: can a company still credibly claim to be apolitical?

The workshop concluded that the answer was a clear no, or at least, not without effort. Once corporate activism has become the norm, neutrality is itself a position. It can be defended, but only if it is asserted and practised consistently. Silence is legible as a choice (and legible differently to different constituencies).

Two of the workshop's findings added up to the first three horizons mentioned earlier in ways that are directly relevant to the department store:

• The first is procedural: the credibility of a corporate position does not come from the position itself, but from the transparency of the process that produced it (who sat at the table, whose incentives dominated, whether an ethical voice was present at the strategic level rather than in an advisory function). In a politicised environment, decisions are read cynically by default, and only procedural discipline earns the benefit of the doubt.
• The second is structural: size changes the rules. Formal procedures, ethics functions, reputational exposure and lobbying capacity all scale with the organisation. Large firms hold a structural advantage in regulation (legal complexity and access to institutional channels favour the better-resourced), but that advantage shades into regulatory capture when they are the only actors able to shape the rules. For a format whose members are often among the largest single retail employers in their market, this ambiguity is not academic. It is the terrain on which every ESG commitment, every tax-optimisation choice, every sourcing decision will now be read.

For a format that trades on a century or more of accumulated trust, this matters. Trust takes years to build. It can be destroyed in a single decision. The calculation for any political position is not "Is it correct?" but "What does it cost in trust, and is that cost recoverable?" That calculation argues for procedural discipline over substantive boldness, which, paradoxically, is an issue for a format looking for reinvention.

What the newfound macro-exposure of department stores means

Department stores are macro-exposed in a way most operating conversations do not yet acknowledge. While conversations on customer traffic, category performance, and format innovation remain obviously crucial, they are now nested inside a set of political and macro variables that used to be in the background. This suggests that, when starting new commercial cycles, CEOs should ask their organisations an additional new set of questions, taking into account a macro-political focus:

• On cash and debt: if real interest rates are held negative for an extended period as a deliberate policy, how does that change the cash strategy, the debt posture, and the willingness to hedge?
• On pricing: if category-specific price controls or windfall measures land on food, energy, or household basics, does the assortment structure absorb the change gracefully, or does it distort the proposition?
• On consumption taxation: if the largest market raises VAT or its equivalent by two to three points over the next decade to substitute for eroded labour taxation, does the value proposition hold, or is there a need to reprice?
• On real estate: do the flagship locations sit in cities whose political posture toward large capital-owning organisations is stable, or is there a need to model exposure scenarios?
• On corporate posture: have retailers consciously chosen their position on the questions their society will force on them, or are they relying on a silence that is now legible as a choice? And if they have chosen, is the process that produced that choice defensible under scrutiny?

None of these questions has a universal answer; they depend on context, market, and governance. However, they are meant to be run.

Credits: IADS (Selvane Mohandas du Ménil)