Causing a storm: how the weather impacts retail
The Weather Channel’s Ross Webster explores how brands can stay ahead of the game, come rain or shine.
Weather patterns are changing. More periods of abnormal weather, such as long periods of hot, cold or wet weather, and an increase in the frequency of severe weather, such as heat waves, snow storms or flooding, are taking place.
Unseasonal weather can have an enormous impact on UK businesses, in fact just as much as extreme weather events. The impact of short spells of extreme weather can have a very different effect on business performance relative to long periods of unusually warm or cold temperature: 10 days of three inches of snow is much worse than one day of 30 inches of snow.
But commentators largely ignore the impact of weather on day-to-day business decisions and purchasing patterns. Yet in the USA, it is more widely accepted that extreme and abnormal weather has a significant impact on the economy.
So why is the impact of weather ignored in the UK? As an economic variable, weather fluctuates too much and is too unpredictable in the medium- to long-term to be built into most economic models. The marginal impact of extreme events is also seen as being difficult to measure and separate from other economic phenomena.
How does the impact of weather feature in this ever-changing retail landscape?
Psychologists believe that people are prone to inertia. For shoppers, when it’s raining or cold, it can be easier to shop online or in a shopping mall; when it’s warm, a stroll down the high street may be a more tempting prospect.
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Recent consumer research backs this up. Almost 60% of shoppers change their shopping patterns when it is raining or hot. When raining, a third of shoppers shop less, while one in eight shop more – but in covered shopping centres rather than high streets. And 16% of shoppers say they switch to online with it rains.
In large part, the success of shopping centres and the annual double-digit growth of online shopping can be attributed to the relative comfort a shopping centre or home rather than the often wet and windy high street and the equally challenging journey there and back.
Retail CEOs need to take note
Retail CEOs are praised or condemned for results where sales or profits rise or fall by a very small percentage point.
Yet CEOs rarely acknowledge the importance of weather on retail figures. John Lewis Managing Director, Andy Street, said in October 2014 “weather has a greater effect (on sales) than economic numbers, we’ve known that forever.”
This, however, is in contrast to former CEOs of Burton’s and M&S (Ralph Halpern and Michael Rose) who believed “weather’s for wimps” when used as an excuse for financial problems.
As with macroeconomists and government statisticians, weather rarely features in the analysis of retail analysts. The British Retail Consortium (BRC) never comments publicly on the impact of weather on retail sales and retail analysts are more comfortable explaining the demand in the shops using more traditional and easily-forecast factors such as wage price inflation, lower fuel prices, PPI payments and personal borrowing.
Yet, retailers often report sales growth or decline on a quarterly basis. When just 13 weeks and 13 weekends are reported, sustained hot or cold weather, or even two or three wet weekends can have a significant impact on sales of some products or certain types or retailers.
In September 2012, B&Q’s CEO announced that a wet summer had cost the group about £30 million in first-half operating profit: sales of outdoor seasonal items – bedding plants, BBQs and building products – shrank and it was forced to embark on aggressive promotions to clear stock.
Impact on different retail sectors
For different types of retailers, different periods of the year are critical to overall business success, and unseasonably hot or cold weather during these key periods can have a major impact on demand, or from a logistic perspective, on supply.
How can retailers address the issues and remain profitable
With up-to-date weather reporting, short notice decisions on media buying can help companies address the issues with immediate effect. Online advertising is particularly suitable for last minute changes in content: emails, search engine, social media, online display and mobile advertising are all particularly adept at targeting key customer segments with new messages at short notice.
More and more brands are developing weather marketing strategies in order to manage environment factors beyond their control. The concept of using historical and forecast weather data combined with industry-leading technology and analytics to really understand consumer behaviour delivers results.
Retail brands therefore need to ensure they are delivering contextually relevant, targeted advertising messages to drive marketing effectiveness, reduce campaign wastage and improve ROI.
Even the most minor changes in weather can affect consumer buying habits, so brands that are able to adapt their commercial message in real-time and at a hyper-local level will remain ahead of the game.
Ross Webster is managing director of international sales, The Weather Channel
Twitter: @rosswebster