By Evan Gold, VP of client services, Planalytics
The winter of 2014 brought record cold and snow throughout North America and its impact on business and consumer spending were widespread and significant. How impactful was it? Well, for the S&P 500 companies, the word “weather” was mentioned in almost 200 earnings calls from January through March, which is a 81% increase compared to last year.
As retailers look back on this past winter, there are several lessons to be learned, lessons that can and should to be applied to winter 2014-15 plans: The lessons are just a few tips to help retailers “weatherize” their businesses to improve how they manage through winter weather volatility.
While Christmas falls on the same date each year, Mother Nature doesn’t always follow a traditional calendar. Most retailers are setup for spring by February or March, but this year cold temperatures and snowfall lingered around in key markets, particularly in the Northeast and Midwest. The reality is spring doesn’t come early (or “on time”) every year, so companies that can match the extra end-of-season inventories with markets where “need based” purchases will be extended can gain incremental sales and end the season clean from an inventory perspective.
While cold and snow enabled many seasonal categories to have a record breaking winter, the extreme conditions caused people to hibernate for an extended period of time. Unfortunately, from a foot traffic perspective, the most impactful days likely saw a drop in store traffic and sales as consumers (and employees) could simply not get out to the stores. As businesses think about next season, there are several strategies to employ to mitigate these “lost” days:
As we live in a world of “constant connectivity”, there is continuous access to information. From a weather perspective, consumers get their local forecast on multiple device and media outlets. Weather is one of the most local items to each person and therefore, it’s typically the first thing people check on when they wake up in the morning, and one of the last things they look at before going to bed.
From a business perspective, consumers often make purchasing decisions based on the forecast of weather, rather than the actual weather that occurs. Therefore, if the forecast calls for six inches of snow in Chicago, many consumers buy winterwear, shovels, etc., in anticipation of snow. How much snow actually falls is almost immaterial from a business perspective.
Consumers are acclimated to the environments they live in. A forecast of two inches of snow in January in Albany, New York is hardly newsworthy, while the same forecast in Atlanta had schools closed, transport centers shut down, and consumers gearing up to be housebound. Having a clear understanding of weather’s impact on consumers on a market-by-market basis will help determine an actionable plan for your business.
While markets that experienced a record cold and snow-filled winter should not expect to have as extreme conditions next winter, there is a “hangover effect” for the home center space that is real. Analysis of historical spending patterns shows that the forecast of the first winter “event” in the season following an active season drives significant demand for seasonal products.
Those consumers who decided to forego a snow thrower this past winter are more likely to make a purchase during an early-season snowfall next season, regardless of the accumulation amounts. Therefore, businesses should expect a nice spike in pre-season and early season demand for snow removal items.
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