When it comes to the weather, retailers, like the rest of us, know they can’t control it, but they also know they can’t ignore it, so now they’re trying to find ways to make it an ally rather than an enemy.
The weather has always been a big factor at retail, playing either villain or hero as stores looked to move sundresses and snowsuits within full-price sales windows. But in today’s buy now, wear now market, changes in temperature can have an even bigger impact than before. Just ask retailers in Europe, who struggled this fall as the mercury continued to rise.
Citing “an extraordinarily warm September” and the decision to not go the discounting route to move goods, Zara parent Inditex fell short of sales estimates for the third quarter.
Asos too blamed “unseasonably warm weather” over the past three months for taking a bite out of margins and helping to drag its average selling price down by 6 percent.
Joining the chorus, British label Superdry listed weather among the leading issues zapping profits in the first half of fiscal year 2019.
“The challenges already being addressed by Superdry in terms of product mix and ranging were highlighted in the first half, with the unseasonably warm weather and a weakening, discount-driven consumer economy suppressing demand for the cold-weather clothing that has traditionally underpinned Superdry’s offer to consumers,” the company said in its earnings release.
Stateside, companies like PVH and Macy’s benefited from cool temps this October, which gave a boost to coats and other cold-weather goods.
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“We feel very comfortable in our cold-weather business. We did have good increases of that in the third quarter. We expect to have the same increases in the fourth quarter,” Macy’s chairman and CEO Jeff Gennette said.
In short, the weather is unpredictable and climate change, especially when seen through the magnifying glass of Facebook, Instagram and all the rest, has made it even more so. And retailers are finding that with the help of some technical expertise, they can use the weather to make decisions on production, distribution, marketing and even worker safety.
But the experts say past performance is not an indicator of future results.
“The weather is getting more and more weird,” said Paul Walsh, global director of consumer weather strategy for the Weather Company, a unit of IBM. “It’s climate change, we’re seeing the fingerprints of that, and the message is amplified downstream by social media.”
For decades, the traditional approach of retailers was either to throw their hands up and let the weather gods have their way, or to base next year’s business decisions on the previous year’s. Retailers that do the latter, said David Frieberg, vice president of marketing at Planalytics, which uses meteorological data to quantify the effects of weather on sales, risk being wrong just about all of the time.
“Weather volatility is not just the extreme events,” he said. “It’s the day-to-day, week-to-week, year-to-year changes. You proceed at your own peril to say, ‘Well, that’s that.’ Eighty-five percent of the time the weather is not the same as the year before.”
For instance, the retailers reveling in cold weather sales this fall had a very different experience last year. October 2017 was the warmest October on record in the Northeast, which accounts for 25 percent of U.S. retail sales.
Accuweather says it has an historical weather database going back at least 50 years, hour by hour. Jonathan Porter, the company’s vice president of business services and GM of enterprise solutions, says sales data is then run against that weather data to find correlations and create forecasts for categories of goods or a particular product.
“Many retailers understand that weather affects their business, but they haven’t been able to turn it into a predictive tool to drive revenue,” he said. “We can [home] in on even a zip-code level of detail to get the right product in the right place at the right time.”
In 2018 Porter says he saw a greater awareness among retailers of the impact of weather on business, driven in large part by the year’s extreme weather events: Hurricanes Florence and Michael and the wildfires in California.
Porter also pointed out that 2018 saw more companies having sales data aggregated in real time, more accurate data to be crunched with weather data.
When the use of this data allows retailers to unlock relationships between consumer behavior and weather that were not possible before, it can mean a real competitive advantage.
Using data to get in front of the consumer with the right message at the right time can influence marketing and loyalty, said Walsh, thus creating incremental demand.
Enter artificial intelligence.
Apparel isn’t the only industry that’s weather dependent. No one wants to eat soup when it’s 90 degrees, for instance. Companies like Campbell’s Soup need a way to stay top of mind. The food giant worked with IBM Watson, the company’s suite of AI services, on ads that would be prompted by a check of the weather at weather.com, owned by IBM. The program since has been expanded to food and recipe sites, but with the same weather trigger.
Campbell’s couldn’t have asked for a more soup-friendly year than 2018, with its long, cold winter that ran into Easter. “It was May before we saw any sign of spring,” said Walsh, so no one was buying shorts and tee shirts. “People don’t buy seasonal based on the calendar but when it’s time to buy it.”
So as we end 2018, the impact on retail, said Walsh, has been tremendous. “The cold now is very significant. It’s the snowblower effect,” he said. “Those first cold days in October trigger the memory of shoveling in January, and everyone says ‘I’m gonna buy that snowblower now. I’m not gonna go through that again.”
The downside for apparel retailers is that with all those coats and sweaters already in the closet, consumers are likely to focus on buying non-seasonal items at the beginning of 2019. “Electronics, toys and appliances—we’re expecting a 15 percent increase from 2018,” he said.
While consumers are buying high tech, retailers will focus in 2019 on e-commerce and reducing the impact of weather on package delivery, Walsh predicted. “They’re going to focus on preparing for extreme weather events that can disrupt shipments,” he said.
—with additional reporting by Caletha Crawford