Four Reasons the Polar Vortex will be a Boon for Spring Retail

As widely predicted the dreaded polar vortex is back and it has “seized the Midwest with the coldest weather in a generation.”

These kind of events — if they persist for weeks — can have huge negative impacts on consumer spending and economic activity.

For context, check out this article by Andrew Freedman on the 2014 Polar Vortex event:

“Frigid Winter Takes a Toll on the Economy

But the impact of short spells of bitterly cold weather, in the winter, typically don’t have a major long term impact on consumer demand and retail.

Why? Seasonality. It’s supposed to be cold in winter and retailers and consumer packaged goods companies generally plan for January and February to be, well, wintery.

Where the impact of colder than normal and extreme weather gets dicey for consumer businesses is when it persists for long periods into times where it’s supposed to be getting warmer (i.e. spring). It’s what happened last year.

See: Q1 / 18’s Big Retail Chill

The extreme and life-threatening cold we’re currently experiencing will certainly have a major short -term impact.

But the key here is short-term.

By this weekend and into next week the forecast is calling for an incredible warm up.

For example the temperature in Chicago is expected to increase 63 degrees (-22F to +41F) between tomorrow and next Monday (2/4).

Even with a continuation of these kind of volatile spells of extreme cold across the eastern half of the country in February, the negative impact on retail is likely to be minimal for the reasons noted above.

On the contrary, a cold late winter this year will likely contribute to strong and high margin early spring sales.

4 Reasons for a Retail Silver Lining this Spring

For most retailers in the U.S. the fiscal year starts in February with the spring quarter spanning February through April.

Along with the third quarter (August – October) the spring quarter is the most exposed to weather volatility and hits to profits.

Again, for context, last April was the 13th coldest in the US in 124 years of history.

That coincided with a very early Easter (week 5 March) and it had the effect of essentially kiboshing the normal first quarter Easter sales stimulus.

So there’s four key reasons the late winter polar vortex this year will likely be a boon for spring retail:

  1. An incredibly easy weather comparison to last year.
  2. Cabin fever. There’s still a lot of winter to come and the predictions are continuing to call for periods of very cold weather right into March. When the weather breaks consumers will be breaking out, and spending. It happens every year and it will likely happen 3 or 4 weeks earlier this year.
  3. A later Easter means a longer pre-holiday selling period with weather conditions that will be much milder than last year. More time to shop due to the earlier break to spring weather means more money in the cash register.
  4. The weather impact is greater than ever due to the combined effect of better forecasting, mobile access to more accurate forecasts, and the synergistic impact of social media (weather is nearly always a number one topic on social — it even trumps sex).

When you combine all four elements — easy comp, earlier break, later easter and the weather “forecast factor” — it’s adds up to a very silver lining for US retail this spring.

Weather a Hot Topic at the National Retail Federation Big Show

Had the opportunity to chat with my friend and former colleague (and self-described weather geek), CNBC Senior Economic Analyst Steve Liesman at the National Retail Federation Big Show last week in New York.

He’d just finished interviewing former Chairman of the Federal Reserve Janet Yellen and Kara Swisher, Host of the Recode Decode Podcast.

The topic of the panel?

Impact at scale: Leading in prosperous yet uncertain economic times

While the discussion wasn’t directly related to weather and climate, the spirit of the title at least was relevant to the uncertainty consumer businesses face every day as it relates to the volatility in consumer demand that is created by the weather and, by proxy, the climate.

See: “Climate is just a thousand little weather’s

An alternative title could have been framed as: “Impact at scale: Leading in prosperous yet uncertain climatic times.”

The combination of a changing climate and consumers that are more connected, more demanding and with more retail choices means that the effect of the weather (and the weather forecast!) on consumer demand is increasing.

The uncertainty is creating increased risk … but also increased opportunity.

See: Just add weather

As someone who’s been at the bleeding edge of the topic of weather integration into retail systems, I was very encouraged at the NRF show to see weather data integrated across nearly all IBM’s consumer offerings — from commerce and marketing to supply chain and block chain.

Weather data is now also showing up in SAP and JDA integration’s and the topic of managing consumer weather risk is no longer a curiosity — it’s becoming, dare I say it, mainstream.

See: The Effects of Weather on Corporate Earnings are Gathering Forc

Historically retailers have viewed weather as an uncontrollable and therefore unmanageable risk factor — what Wall Street analysts call the “weather excuse.”

That paradigm is now rapidly being turned on it’s head — rather than a risk, leveraging digital insights mined from weather data is creating opportunities to better serve customers, capture market share and delight shareholders.

It’s how the best retailers and consumer packaged goods companies and quick serve restaurants are, indeed, prospering in uncertain times.

To quote Sun Tzu (because, why not?) —

“Know the enemy, know yourself; your victory will never be endangered. Know the ground, know the weather; your victory will then be total.”

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