TheChek News Flow

Putin is waiting for Washington to go silent

The Russian leader sees an opportunity to re-establish a sphere of influence in Europe

Vladimir Putin was in East Germany, working for the KGB, when the Berlin Wall fell. 

In his memoir First Person, published in 2000, Putin recalls asking a nearby Red Army unit to protect the KGB headquarters in Dresden. The answer he received shocked him: “We cannot do anything without orders from Moscow. And Moscow is silent.” Putin later said: “I got the feeling then that the country no longer existed. That it had disappeared.”

Searing experiences like that are formative. The lesson that Putin seems to have drawn from 1989 is that great empires can collapse because of internal political disarray. Having seen Moscow fall silent, Putin may now hope to see Washington fall silent and the “American empire” collapse in its turn.

Viewed from Moscow, the possibilities must look tantalising. The election of Donald Trump to a second term as US president would place the western alliance under unprecedented strain. Policy changes that could be initiated by Trump — such as a complete withdrawal of support for Ukraine or an American pullout from Nato — are just one potential route to the achievement of Russia’s goals.

A second, less discussed route does not depend on conscious changes in policy from the White House. In this scenario, the aftermath of a Trump election would see American government and society fall into disarray. Preoccupied by their own internal conflicts, the American elite would lose the will or the ability to project power around the world. 

That period of disarray might not have to last long to have world-shaking consequences. As Putin later recalled: “We lost confidence for only one moment. But it was enough to disrupt the balance of forces in the world.” 

A period of “lost confidence” caused by post-election turmoil in the US seems very plausible. If Trump wins, he has made it clear that he intends to seek vengeance against his political enemies. He has encouraged talk of putting prominent Democrats and even former officials in his own administration on trial for treason or corruption. The targets include Joe Biden, Hillary Clinton and Mark Milley, who was America’s most senior military officer under Trump.

Plans are being drawn up in pro-Trump think-tanks to purge the senior ranks of the US government. Officials in the Pentagon worry that Trump regards the top levels of the US military as disloyal because they resisted his demands to deploy troops on the streets of America. They fear that Trump will appoint real authoritarians to the top jobs in the intelligence services and the military — and might also seek to turn Maga-supporting lower ranks of the military against the top brass.

Even if Trump loses to Biden, there is a strong chance of political turmoil in the US. Who can believe that Trump or his supporters would accept defeat? A replay of the insurrection of January 6 2021 — only this time with added support from politicians and courts at the state level — seems quite likely.

All of this would be a recipe for turmoil in the US and for what Putin called, in the Soviet context, “the paralysis of power”. A paralysed Washington would then spell opportunity for Moscow and Beijing. 

What form this opportunity would take cannot be known in advance. The unravelling of the Soviet empire in 1989 was characterised largely by unforeseen events and improvisation. But for Putin the prospect of reversing the humiliation of 1989 and re-establishing some kind of Russian sphere of influence in Europe must feel tantalisingly close.

However, Putin’s view of what happened in 1989 — and therefore his ambitions for 2025 — suffer from a major blind spot. The causes of the collapse of the Soviet empire were not simply confusion and a failure of will in Moscow. The more profound reason was that Soviet rule was reviled in eastern Europe. The USSR had sent tanks into Hungary in 1956 and Czechoslovakia in 1968 to suppress dissent. Mikhail Gorbachev’s decision not to crush eastern European aspirations for a third time was a moral choice — not a moment of weakness as Putin sees it.

It was the old brutal Soviet model of domination that Putin was reaching for in 2022, when he launched his full-scale invasion of Ukraine. But the world had changed in ways that he did not understand. The Ukrainians fought back and the west supplied them with weapons — unlike in 1956 and 1968, when the US and its allies had stood aside and failed to oppose Moscow’s intervention. 

America’s alliance system in Europe — unlike the Soviet bloc in 1989 — rests on consent. It is an “empire by invitation”, in the phrase of the political scientist Geir Lundestad. While the Poles and Czechs longed for Soviet troops to withdraw in 1989, EU nations would be appalled if American troops pulled back today. 

A great deal has changed since 1989, in Moscow, Washington, Berlin and Warsaw. But one thing that remains constant is the determination of Europeans to resist Russian domination. The EU nations are painfully aware of how dependent they have become on US military power. But they are determined to do something about it. 

It is possible that Washington will fall silent in the coming year. But that does not mean that Moscow will be able to turn Europe’s clock back to 1988.

Mid-market American department stores like Macy’s, Kohl’s and Nordstrom need more than new owners and retail formats to win back customers; they must reinvent their entire value proposition with a selection that can compete with online fast fashion and off-price players. Time is running out.

KEY INSIGHTS

For Terry Lundgren, a former CEO of Macy’s, talk of the possible extinction of department stores is a tale as old as time.

Lundgren joined the company, then known as Federated Department Stores, nearly 50 years ago right out of college, his first choice out of a dozen job offers. His roommate could not believe him.

“He said, ‘Aren’t they going to be going out of business?’” Lundgren recalls. “Back then, it was because catalogues were emerging and he thought, ‘Well, isn’t everybody just going to read catalogues and shop that way?’”

Macy’s survived the catalogue scare, and countless other evolutions in how Americans shopped, from QVC to the rise of e-commerce. But there’s something different today about the cocktail of threats facing Macy’s and other department stores that cater to the middle class, including Kohl’s and Nordstrom. No matter how many unprofitable stores they close or innovative retail concepts they try, they keep losing customers, whether to historic online threats like Amazon, newer, more nimble competitors like Shein or off-price stalwarts including TJ Maxx that are better geared towards stretched household budgets.

Some longtime observers of these companies fear the endgame may be approaching. Last month, Macy’s announced it will close another 150 stores by 2026, effectively halving its footprint from 2018. Kohl’s and Macy’s have both been targeted by activist investors more interested in selling off their real estate assets than revitalising retail. The Nordstrom family is reportedly exploring taking its namesake chain private, as a series of turnaround plans have done little to boost revenue, which peaked in 2018, or slow a decade-long slide in the company’s stock. Belk, a chain primarily found in Southern states, filed for bankruptcy in 2021 and has also seen revenue decline under new owners.

“In and of itself, going private is not the solution to the problems,” said Neil Saunders, a managing director of retail at GlobalData. “For Nordstrom, private ownership may provide the chain with some breathing space. ... For Macy’s, the current bid to take the chain private is basically a death warrant.”

To survive, experts say, these companies need more than new owners and experiments with new retail formats, such as the dozens of “boutique-sized” smaller stores Macy’s plans to open in the next few years. They must rethink the entire value proposition that they present to their target customer, starting with what they stock on their shelves and their websites.

In short, they need to find something to sell that can’t be found on Amazon’s everything store or Shein’s addictive app or TikTok Shop.

“What’s going to get people to go into any store? The answer one, two, three is product,” said Lundgren. “You can have great service and bad product … You have to have a unique product that is fair in value and exclusive or limited in distribution to your channel. Macy’s used to be the king of that.”

As difficult as that sounds, some department stores are on their way.

The IRL Advantage

Right now, department stores cannot compete with Instagram and TikTok as engines of product discovery, said Andrea Wasserman, a retail veteran and former executive at Nordstrom. But they have something online platforms do not: a physical footprint.

“For inspiration and for convenience, you still have to go into stores,” she said. “You can follow any influencer on TikTok but you still need a place to go to see a new style or brand.”

That’s where department stores, with their hundreds of locations in malls nationwide, have an opening. At a time when Shein and Temu dominate online sales with ultra-cheap, trendy wares, Spanish retailers Inditex (owner of Zara) and Mango both posted double-digit sales growth last year. Renovations and expansion in brick-and-mortar retail were a big reason why.

Mall traffic, meanwhile, is close to fully recovering to pre-pandemic levels, according to analytics firm Placer.ai. In 2023, availability of leases in shopping centres fell to their lowest rate in 15 years, according to brokerage Cushman and Wakefield.

“Department stores offer something that no other stores do: cross-category shopping,” said Rebecca Duval, retail analyst at BlueFin Research. “You can go in to get something for yourself, for your house, and for your mom, but only if [they] can speak to the consumer today.”

The Power of Brands

The problem is, consumers are returning to malls but often walking right past the department store with the big sign at the entrance. In-store sales for both Macy’s and Kohl’s declined about 5 percent in 2023 compared to the year prior. Nordstrom’s sales rose in late 2023 - but credit goes to its off-price chain Nordstrom Rack.

That’s because there’s still a sense that all department stores offer the same stale brands, many of which could be found at discount retailers or online, often at a lower price. By contrast, revitalised mall chains like Abercrombie & Fitch and PacSun lure shoppers with the promise of something unique and appealing.

“Most department stores are neither great value for money nor super premium — this makes them very easy to overlook,” said Saunders of GlobalData.

Slowly, mid-tier department stores have begun differentiating their offerings, aiming for a mix of well-known national brands, emerging labels and in-house lines offering basics at attractive prices.

Nordstrom and Macy’s have refreshed their product offerings in recent years by signing on new vendors, launching new private labels, and building online marketplaces that allow for even more brands to sell through their e-commerce stores via dropshipping. (Macy’s launched its marketplace in fall 2022, while Nordstrom will debut its version this spring).

Under its new executive overseeing private brands, Emily Erusha-Hilleque, the former design director at Target, Macy’s in particular has seen early success with its new private labels On 34th and State of Day, according to Duval. In recent years, it has phased out some of its older private brands such as Karen Scott and Alfani. Another in-house womenswear brand, And Now This, which was introduced in 2021, has also been popular and compared to premium basics label Aritzia by customers, Duval added.

Kohl’s has effectively grown its base of customers through a shop-in-shop partnership with Sephora, which will be available in every Kohl’s location by the end of 2025. To keep these new shoppers in its orbit, Kohl’s will introduce a slate of new brands this year, such as Quiksilver and Roxy and expand its new dress shop concept in select locations.

Nordstrom, meanwhile, has excelled in merchandising new products in a fun and discoverable way, according to Wasserman, pointing to its new “pop-in” collaboration with Liberty London in its New York City flagship store.

“It’s like turning around the Titanic,” said Duval. “These are massive retailers with many vendors and so much inventory coming in. But I do think there is a place for them.”

So far, these tactics have not yielded positive sales results. Sceptics say these retailers are simply too large and too set in their ways to pull off a radical transformation, and are chasing a middle class consumer who is rapidly disappearing. These sentiments have been seized upon by activist investors.

But they are making the right moves, analysts said, by offering a more convenient way of shopping, elements of surprise and delight, and most critically, a fashionable product with competitive pricing and quality.

After all, a store that offers a large selection of products and reliable service will never go out of style. In theory.

“If department stores did not exist today, then some creative young people would say, ‘Hey, why don’t we invent a retail store where you can shop for multiple categories, multiple brands, in a physical space, with some big stores and some smaller stores, as well as an online presence that allows for an omnichannel experience?’” said Lundgren. “Why wouldn’t I invent that?”

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