October 3, 2014
Retailers look to outsmart Mother Nature
Many industry watchers point out that retailers conveniently use weather as an excuse to explain away a given quarter’s poor sales. While that may be true of some, there are plenty of indications (think grocery stores right before a winter storm is expected) that weather can affect a retailer’s sales for good as well as bad.
Macy’s Inc., a company not known for making excuses, provides an example of the influence of weather on sales. While the company has built a robust online business, it was not enough to help the retailer overcome the horrible weather that gripped much of the U.S. during the first quarter of this year. Conversely, the parent company of Macy’s and Bloomingdale’s reported a pickup in sales as soon as warmer temperatures began in April.
Retailers are increasingly making use of internal and external services to stay ahead of changing weather conditions and use that information to better serve customers and drive sales.
The City Wire reported yesterday that Walmart, for example, pairs weather information with sales data and merchandise to run targeted promotions. Those promotions could include offers on allergy medicines on the company’s mobile app, its in-store network and on social media when the pollen count jumps in a given area.
Target’s Corporate Communications Center (C3) in Minneapolis is used for around-the-clock monitoring to help the company respond to severe weather conditions.
A 2009 Star Tribune report provides insights into how C3 works. Teams representing every division within the company are assembled when a severe weather event such as a blizzard are identified. Merchandising makes sure that items such as shovels, batteries and bottled water are sent to stores in the storm’s path, human resources looks at ways to get associates to stores, etc.
- Walmart, retailers tune in weather forecasts to spur sales – The City Wire
- Macy’s blames/credits the weather for its sales performance – RetailWire
- Winter storms a good news/bad news scenario for grocers – RetailWire
- Target’s eye on the world – Star Tribune (tiered sub.)
- Keeping watch – Target Corporation
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Recent Discussions
Discussion Questions
Have you seen good examples of retailers using weather forecasting as a means of gaining a competitive advantage? What are the keys for retailers to gain the most benefit from bad weather today?
Poll
I’d probably defer to Walmart here.
I guess if you have a weather-based strategy it is literally mission critical to make sure your forecasting methodology is as accurate as possible. Of course, if you could do that, you could get out of retail altogether and create a media monopoly since the current forecasters seem to have trouble getting it right.
And that—tongue now out of cheek—is the issue. It’s really hard to accurately forecast both the weather and people’s reactions to it.
Most retailers I know have a list of items that index very high when bad weather comes and work hard to avoid out-of-stocks. The pioneer here, I believe, was Mrs. Field’s, which had a whole system worked out in stores on what to bake and when and in what quantity, based on weather reports. That goes back at least 20 years, probably more. For retailers, the key is logistics (getting needed product quickly when needed) and having enough in-store labor available to keep shelves stocked. It ain’t rocket science, and it fails a fair amount of the time, but it works enough so that it’s definitely worth the effort in terms of sales, profits and keeping shoppers happy.
I discovered Redbox use weather forecasting extensively. Redbox will send a coupon code for a free second rental when the weather forecast calls for rain or extreme temperatures.
I believe for retailers, there need to be data intelligence briefings send via alerts that not only show weather conditions but also if a big event or festival or a protest is in the area, with directives on how to address the situation to reduce risk or increase revenue.
As others have already mentioned, using weather to help forecast the business is nothing new for retailers. Most here would also remember the lessons learned by Walmart and the relationship with strawberry Pop Tarts prior to a hurricane landfall.
This is another step in retailers using additional data points to help forecast and influence future sales.
Weather is just one among many variables that can be used such as sporting events, cultural events and others that attract crowds or create a need for new or additional purchases.
Retailers will continue to seek out additional sources of data to correlate with consumer trends and use that to identify new ways to either influence consumers to purchase more product, or to at least be able to optimize the operational performance of their locations.
The key for retailers to gain the most benefit is to make sure that the data and information is being used to help the consumer in some way. Only then will it be a long term benefit to the retailer.
The grocery store sells more staple items just before the storm. The hardware store sells more snow shovels just before the storm. Weather is like history. It repeats itself. Sure, there are extremes, but overall you know it’s going to come. It’s easy to predict the weather. Be prepared with seasonal inventory.
Walmart has this down to a science — from the promo side all the way to the SCM and store stocking areas. I have seen how their stores overstock the floor in certain areas before a major weather change hits.
Retailers need to leverage the weather when they can and use technology to make the most of it. Also, Macy’s shifts channel focus based on weather issues, which is smart. Problem is that when major snow is on the way, you need the shovel and salt for the driveway now, not in 2 days.
Weather – another tool to improve margins and leverage multiple channels of retailing.
Tom
…
Home Depot and Walmart are great examples of managing inventory in light of changing weather conditions, especially major storms. If other retailers find a relationship between types of products that sell in different weather situations, they could manage their inventory appropriately. In addition, if people are not able to move about easily in certain weather conditions, it would be a good opportunity for a retailer to highlight their online sales tools and give consumers the opportunity to let someone else deliver the products. Retailers will not know where the opportunities are until they look at their consumers’ sales patterns and the weather to find the opportunities.
Retailers have been using weather forecasting for inventory planning and price optimization for years. However, as the years have progressed, so have the metrics and the amount of planning behind them. Retailers like Walmart and Target are planning earlier and smarter than ever before. And that seems to be the key for future planning. Test promotional activities before, during and after major storms or weather changes and study the impact that has on inventory levels and consumer behaviour.
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I’d probably defer to Walmart here.
I guess if you have a weather-based strategy it is literally mission critical to make sure your forecasting methodology is as accurate as possible. Of course, if you could do that, you could get out of retail altogether and create a media monopoly since the current forecasters seem to have trouble getting it right.
And that—tongue now out of cheek—is the issue. It’s really hard to accurately forecast both the weather and people’s reactions to it.
Most retailers I know have a list of items that index very high when bad weather comes and work hard to avoid out-of-stocks. The pioneer here, I believe, was Mrs. Field’s, which had a whole system worked out in stores on what to bake and when and in what quantity, based on weather reports. That goes back at least 20 years, probably more. For retailers, the key is logistics (getting needed product quickly when needed) and having enough in-store labor available to keep shelves stocked. It ain’t rocket science, and it fails a fair amount of the time, but it works enough so that it’s definitely worth the effort in terms of sales, profits and keeping shoppers happy.
I discovered Redbox use weather forecasting extensively. Redbox will send a coupon code for a free second rental when the weather forecast calls for rain or extreme temperatures.
I believe for retailers, there need to be data intelligence briefings send via alerts that not only show weather conditions but also if a big event or festival or a protest is in the area, with directives on how to address the situation to reduce risk or increase revenue.
As others have already mentioned, using weather to help forecast the business is nothing new for retailers. Most here would also remember the lessons learned by Walmart and the relationship with strawberry Pop Tarts prior to a hurricane landfall.
This is another step in retailers using additional data points to help forecast and influence future sales.
Weather is just one among many variables that can be used such as sporting events, cultural events and others that attract crowds or create a need for new or additional purchases.
Retailers will continue to seek out additional sources of data to correlate with consumer trends and use that to identify new ways to either influence consumers to purchase more product, or to at least be able to optimize the operational performance of their locations.
The key for retailers to gain the most benefit is to make sure that the data and information is being used to help the consumer in some way. Only then will it be a long term benefit to the retailer.
The grocery store sells more staple items just before the storm. The hardware store sells more snow shovels just before the storm. Weather is like history. It repeats itself. Sure, there are extremes, but overall you know it’s going to come. It’s easy to predict the weather. Be prepared with seasonal inventory.
Walmart has this down to a science — from the promo side all the way to the SCM and store stocking areas. I have seen how their stores overstock the floor in certain areas before a major weather change hits.
Retailers need to leverage the weather when they can and use technology to make the most of it. Also, Macy’s shifts channel focus based on weather issues, which is smart. Problem is that when major snow is on the way, you need the shovel and salt for the driveway now, not in 2 days.
Weather – another tool to improve margins and leverage multiple channels of retailing.
Tom
…
Home Depot and Walmart are great examples of managing inventory in light of changing weather conditions, especially major storms. If other retailers find a relationship between types of products that sell in different weather situations, they could manage their inventory appropriately. In addition, if people are not able to move about easily in certain weather conditions, it would be a good opportunity for a retailer to highlight their online sales tools and give consumers the opportunity to let someone else deliver the products. Retailers will not know where the opportunities are until they look at their consumers’ sales patterns and the weather to find the opportunities.
Retailers have been using weather forecasting for inventory planning and price optimization for years. However, as the years have progressed, so have the metrics and the amount of planning behind them. Retailers like Walmart and Target are planning earlier and smarter than ever before. And that seems to be the key for future planning. Test promotional activities before, during and after major storms or weather changes and study the impact that has on inventory levels and consumer behaviour.