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In the era of multiple systemic challenges affecting the world, the term ‘polycrisis’ has been repopularised by former European Commission president Jean-Claude Juncker and historian Adam Tooze. The utility of the term lies in mapping disparate shocks, that cannot be reduced to a single common denominator, interacting to create a shock more overwhelming than the sum of all individual shocks. In the wake of the COVID-19 pandemic and its long-lasting impacts, economic shocks around the world, Russia’s full-scale invasion of Ukraine, and the spiralling consequences of climate change, the diversity of problems is compounded by insufficient economic and social development for policy, business and individual decision-makers.

Given this context, the IADS undertook internal research to understand how department stores most severely affected by economic and geopolitical crises manage their operations. This exclusive combines the learnings of our exchanges with strategic teams responsible for guiding company activities. Despite the varying natures of crises, the IADS found that the priorities and critical goals for these department stores remain similar in contextually relevant manners. In one line, cash is king and the priority order is people, assets and operations.

Crisis management models: iterative vs. protocol-driven

Crises are rarely identical. While uncertainty permeates all kinds of crises, the source and evolution dictate how stakeholders respond. Department stores have faced a range of crises including full-scale invasions and currency crises, some at the periphery with others at the epicentre, and developed unique crisis models. According to research conducted by the IADS, the types of strategies used can be broadly divided into iterative models, where recovery plans use continuous cycles of evaluation and improvement as situations evolve, and protocol-driven models, that use predefined procedures and clear roles to guide organisations in managing crisis situations.

While adaptability is key in any crisis, iterative models are used by department store companies in volatile situations with little preparation, however, without widespread imminent physical danger. Especially evident in situations where they operate in turbulent political environments, strategic guidelines prove more useful than protocols to respond to new developments flexibly. The level of crisis management experience of decision-makers plays a factor as well.

Protocol-driven models are more common in situations where physical danger to people and assets looms. In the face of airborne incursions and national defence efforts, comprehensive and efficient evacuation protocols for staff, tenants and visitors are foundational for physical safety. Protocols designed to secure the store, inventory and other assets are next. Facing constant uncertainty for extended periods of time gives rise to a new operational status quo that requires updated operating mechanisms. The key necessities in such situations are to identify warning signs that signal the onset of larger crises and focus on recording organisational responses that can be refined over time to develop thorough standard operating procedures.

Liquidity equals lifeblood

The unanimous principal lesson is that managing the company’s cash ensures that the business survives daily. Steep currency devaluation and subsequent inflation are almost always a consequence of considerable crises and need to be managed by every economic actor in the nation. Monetary erosion is normally managed at the government level and percolates down to businesses and individuals. During times of crisis, regulations around currency arbitrage and investment are stricter to meet political goals. Provided banks continue to exist, companies can manage currency devaluation by converting domestic currency to a more stable currency in line with other regulations.

Department stores have employed innovative measures to keep themselves afloat. Heavily indebting a company in the extremely devalued local currency to eventually convert into a more stable currency to repay banks and suppliers, thus transitioning into a financial business, was one of the techniques used. Additionally, collaborating with providers from other, more restricted industries (in one case, the insurance industry) to buy and sell financial bonds was another method to maintain liquidity. Fundamentally, cash is a bargaining chip to find other manners of funding through loans, bonds and financial securities within exceptionally stringent legal limits.

People during crisis: Staff, partners and leaders

There is a consensus about people being the most important resource to address at the onset of a crisis. However, depending on the nature of the crisis and stakeholders, priorities for human resources can range from talent retention, physical safety, and adapted management techniques to the business’ transition to a social unit, among others.

During a crisis, businesses often pivot from pure profit-seeking to a more socially cohesive role, uniting employees, customers, and communities around shared resilience because collaboration and mutual support become essential for survival. Some retailers undertook initiatives such as distributing cash bonuses and paying advance salaries for employees to manage their personal situations. Staff measures depended on urgent imperatives: when retaining employees was the need, companies offered financial, non-financial (such as cars and houses) and personal (such as admission to schools for their children) incentives in individual compensation packages. In other cases, retailers helped employees relocate to safer parts of the country at no expense, as well as provided power banks, headsets, and other operational tools necessary for remote operations. For employees involved in national security operations, companies continued to pay full salaries for three years in some cases.

Continued communication within teams during a crisis is crucial. Some  department stores purchased satellite phones for senior executives to combat power outages and maintain connectivity. Keeping employee motivation up in times of crisis is important for their mental health and performance. Advocacy initiatives and collaborations with civil society can rally employees around a unifying purpose, turning uncertainty into renewed motivation and collective resilience.

Another aspect of people management is the relationship with partners, tenants and suppliers. Extensive negotiations are a given to arrive at universally acceptable decisions. Complications arise when partners have different policies than the department store in crisis situations requiring relocation of inventory. Specific store teams coordinate with partners, suppliers, brands, and tenants to access their inventory during crises. Emphasising transparent communication and commitment to cooperation, some retailers have managed to preserve all their longstanding collaborations while adding new partners. However, despite the best efforts, others have lost partners and suppliers who quit the market due to the larger political and economic instability.

Finally, all teams emphasised the importance of strong leaders’ over preparedness and decisiveness. All leaders require a combination of mental resilience, clarity, and strategic foresight. They should focus on issues they can impact while recognising factors beyond their control. Making tough choices is an inherent part of leadership and should be guided by the long-term well-being of the company and its stakeholders. Both the leader and the team must remain agile and ready to adapt swiftly when plans no longer align with changing circumstances. Trust within the team is paramount for strong collaboration, and transparent communication is essential to foster alignment, minimise misunderstandings, and strengthen overall cohesion.

Shielding stores and inventory during disruptions

Department stores’ management of their key assets, buildings and owned stock, is the second-most important priority after people’s safety. In times of acute crisis, physical protection of assets encompasses securing the façade, internal maintenance systems such as heating, water, and electricity, as well as entrances and windows. Compounded by widespread chaos, the risk of thievery, rioting and squatting increases. Some retailers have dedicated, protocol-driven teams that work to secure the building and even live onsite on a rotational basis to counter hostile activity.

In other situations, the threat to assets may not be physical but economic. In cases of currency crisis and hyperinflation, the devaluation of inventory can make stock almost worthless, with government-imposed price cuts having the same effect. A large divergence between the market exchange rate and a government-fixed one further complicates the situation. While the price cuts briefly increased sales, cash flow fell, resulting in unpaid suppliers and exhausted stock. While the product mix remained similar to the pre-crisis situation, this drove a shift in the brand mix. A basic strategy to ensure that products would be sold was mapping key product features to ensure that they were affordable and necessary for customers. For instance, for fashion products, the criteria necessary for their customer base were: under USD 30, exclusive brands, quality, and differentiated from the market. Meeting these requirements reflected a great sell-through rate for this category.

In countries experiencing political instability, there is a risk that government actions may lead to capital expropriation. Remaining politically neutral can keep a company out of the limelight and at a distance from the threat of state takeover.

Pertinent operational continuity: Handling energy and supply chain shocks

Operational continuity depends on the specific nature, scale, and timing of a crisis, requiring adaptable plans that may range from protecting supply chains during a pandemic to reinstating critical systems after an energy outage. A variety of strategies to continue operations can be used. In some cases, department stores reduced the number of stores operated, maintaining only profitable stores. Even during challenging times, department stores continued to make small investments that could have big payoffs when the situation improves, notably in enhancing online operations via marketplaces.

Energy crises are one of the primary challenges during pervasive emergencies. Some dealt with this by implementing a series of operational protocols to optimise electricity consumption during power disruptions. These included reducing energy usage in sales areas by managing lighting, turning off façade lighting during non-peak hours, installation of a diesel generator to maintain operations during emergency power outages, and introduction of start/stop systems on escalators to reduce energy consumption. Installing solar panels on the rooftop enabled clean energy generation, resulting in a 10% reduction in overall electricity consumption, driving long-term operational efficiency sustainably. Mapping the citywide electric network allowed the department store to switch between electricity lines when necessary.

Shocks such as the war in Ukraine impacted companies’ supply chains worldwide, requiring realigned sourcing and logistics strategies, not only around the conflict’s immediate theatre but across entire global networks. To overcome disrupted global sea and air logistics, some retailers shifted to freight transportation for their international supply chains. This has resulted in increased logistics costs and a rise in fuel prices, but a more diverse mix of goods to meet growing demand. The loss of suppliers is almost inevitable, especially when driven by volume reduction due to currency collapse. Department stores coped by simulating purchases from brand headquarters to balance smaller quantities, a larger mix and affordability for customers.

Advertising and customer communication shifted as well. In some cases, all marketing initiatives were stopped to avoid being very visible in the public eye due to the risk of political targeting. Slowly restarting with in-store and social media advertising, the messaging focuses on being quality-oriented to regain customers’ top-of-mind space. Credit initiatives and promotions were also stopped in countries facing extreme currency collapses and high exchange rates. Selling merchandise each day is indispensable since cash flow keeps the business going.

Forward watch and the impact of Trump  

Global geopolitical developments, especially the election of US President Donald Trump, are being watched apprehensively by entire populations as his policies have introduced a new wave of changes. Impending tariffs and potential sanctions can upend several business continuity operations during ongoing crises. 

Amid multiple systemic crises, intensified by global upheavals and an overarching polycrisis, these insights have been distilled from retailers operating at the epicentre of these events. The IADS aims to lead members into strategic thinking avenues that may not have been addressed before in the face of growing geopolitical and economic uncertainty. While members surely have their own crisis management strategies and teams, learnings from department stores already confronted with profound and overlapping political, economic and security shocks can provide incomparable insight to sharpen and solidify their own playbooks. The commendable resilience and ingenuity shown by those already navigating crises offers a valuable benchmark, prompting others to reflect on and strengthen their own crisis management practices. 

Credits: IADS (Anchita Ranka)