Weather and Retailers

March 19, 2008

Weather and Retailers

For Mitchell Brown, Canadian Retailer

By John Schofield

At a Home Depot store in the heart of Toronto last March, manager Dan Blair would have happily sold you a rake, a patio set or a barbecue. But in the midst of one of the worst winters in decades, he couldn’t stock a snow shovel to save his life. Retailers like Blair may have wondered where global warming was when they needed it. “Every year, we’ve been stocking shovels and taking them off the shelves early when there isn’t any snow,” he told a local newspaper. “Now we’ve got people coming in needing to replace their broken – or stolen – shovel, but we don’t have any more.”

Rapidly changing weather patterns are leaving a lot of retailers feeling snowed under – and not just in winter. In hopes of staying one step ahead of the next storm, drought or flash flood, some companies are turning to consultants or weather services such as Planalytics Inc., a Pennsylvania-based firm that promises “Business Weather Intelligence.” Other retailers, like Mississauga, Ont.-based Wal-Mart Canada, continue to trust their own ability to read the meteorological tea leaves and respond quickly to changes. Regardless of how they cope with it, climate change is making retail management more complex than ever. “Retailers are vulnerable to the winds of nature, and nature is getting more weird, wonderful and wacky,” says David Phillips, a senior climatologist with Environment Canada and perhaps Canada’s best known weatherman. “It’s almost as if we know less about weather now than we ever did.”

Weather has always played an important role in influencing customer buying decisions, and can be a convenient excuse for poor retail performance. But increasingly, says Phillips, retailers can no longer rely on what was traditionally considered “normal” weather. The new normal starts with rising temperatures: Our winters, on average, are 2 C to 3 C warmer compared to the 1940s. The impact of higher temperatures, however, is hard to predict. One of the wettest summers in 2006 was followed by one of the driest in 2007. And after an extremely mild winter in 2006-07, this year’s edition saw the highest snowfall in eastern Canada in nearly 70 years. That’s frustrating for both retailers and consumers because shoppers base their buying expectations on the previous season, says Phillips. “Who ever would have thought that our seasons would be this unpredictable?” asks Phillips. “You get to the point where people don’t trust the weather anymore.”

That may be good news for companies like Planalytics, which promise to make Mother Nature less risky. Based in Wayne, Penn., near Philadelphia, Planalytics compares a retailer’s point-of-sale data with its own extensive database to predict how certain products will perform in certain weather conditions in certain markets. In its news releases, the firm prides itself on providing “actionable business information” along with the weather. Take a merchandise category like shorts, for example. Scott Bernhardt, the company’s chief operating officer, says Planalytics can tell a retailer that temperatures will need to be three degrees warmer for three days before female shoppers in Toronto are ready to buy shorts. If the numbers are not close, shorts sales can be expected to drop.

The impact of weather on shoppers varies from product to product and from city to city. In Toronto, says Bernhardt, the first dusting of snow will motivate consumers to purchase boots. In Montreal, by comparison, it takes more snow to trigger boot buying. Weather can also affect retailers in unexpected ways. A warmer than average fall often benefits sales of electronics, says Bernhardt. In many cases, the money that parents might have spent on winter hats and scarves for their children ends up going to the electronic gizmos that the kids keep asking for.

The weather’s increasing variability is motivating retailers to use every tool in their arsenal to keep ahead of the curve, including weather consultants. Last year, New York-based apparel maker Liz Claiborne Inc. hired a climatologist from Columbia University to assist its designers and better time shipments of seasonal clothing to retailers. U.S. discount giant Target formed a “climate team” to provide advice on what kind of apparel to sell during the year. Weatherproof Garment Co., a New York-based coat manufacturer, even bought a $10-million insurance policy to protect itself against unseasonably warm weather.

Planalytics claims that its updated database helps retailers stay on top of rapidly changing weather patterns. But Bernhardt says shifting economic winds are also increasing the demand for its services because retailers have less room for error in a slumping market. He says Planalytics has added about 30 U.S. and Canadian retail clients in the past year, including Montreal-based footwear and leather goods retailer Aldo Shoes. “Our perspective is you need to be more aware and know which way the wind is going to flow,” says Bernhardt. “If you don’t have a handle on the weather, you’re not going to have a handle on your markdown situation or your replenishment system.”

Calgary-based Mark’s Work Wearhouse, a division of Canadian Tire Corp. Ltd. of Toronto, has used Planalytics for about five years to help guide the merchandise flow at its 360 stores across Canada. Colin Laker, the company’s vice-president for merchandising services, says the service is about 75 per cent accurate, but its 18-month forecasts become less reliable the further out they go. Mark’s provides Planalytics with POS information on products that are particularly weather-sensitive, such as men’s and ladies shorts, parkas and winter footwear. While it’s a useful tool and can provide a competitive advantage, Laker says the company does not rely on it exclusively, and he is hard-pressed to attribute any specific sales increases to it. “It allows us,” he says, “to not necessarily change the quantification of products we would buy, but it allows us to shift where we place products and how much.”

Tabi, a Toronto-based women’s apparel and accessories retailer with 114 stores from coast to coast, signed up with Planalytics two years ago, and uses the data to plan its overall merchandise clearance and promotions strategies. Lara MacGregor, Tabi’s vice-president for planning, allocation and logistics, says the company does not yet use the service to determine merchandise allocations store by store. Weather, she says, is just one piece of the retailing puzzle. Shoppers sometimes buy out of season, and are motivated by many factors, including holidays and special occasions like Mother’s Day. But Tabi is expanding its selection of more weather-sensitive merchandise like outerwear, and Planalytics is particularly useful for that. She says the data also backs up the qualitative information that Tabi presents to its investors. “In the past 12 to 18 months, it’s just been crazy weather,” says MacGregor. “It’s good to have planning information that puts it into perspective.”

At Wal-Mart Canada, executives have not yet seen the need to hire high-priced weather wizards. With its industry-leading logistical capabilities, the company can move quickly to meet increased customer demand for weather-related merchandise like snow shovels or road salt, says Jim Thompson, senior vice-president of operations. As storms approach, the chain also anticipates increased demand for games, movies, chips and pop as people prepare to cocoon. Wal-Mart Canada also tracks weather-related patterns at individual stores. In the Toronto suburb of Markham, with its large Asian population, managers keep umbrellas near the front of the store even in the summer because many Asian women use them as parasols. With 293 stores across the country, Wal-Mart Canada can use its national presence to predict weather-related demand. With the West Coast’s early spring, shoppers at Wal-Mart garden centres can help the company decide what to stock in its garden centres in eastern Canada. In the end, Thompson believes, the impact of weather on sales is balanced out over the course of a year. “If you have a bad winter, you’ll always have a good summer,” he says. “Retailers are eternal optimists.” And in these changing times, optimism is a useful commodity.