My Weekly Weather Means Business Tweet Storm

Welcome to the very first edition of what I’m tentatively calling my weekly “weather means business” tweet storm.

As a matter of course I closely follow press reports and the twitter-verse for weather and business related content.  It’s my thing. It’s what I do.

My plan is to regularly collate my favorite stories and publish them here.

The goal is to post this every weekend but, since this is purely a labor of love and my weekend priorities are often not mine, it may be every weekend-ish.

At any rate, welcome to the first edition and feel free to reach out with questions or comments or, even better, links to great stories that I can include.

McDonalds Buys AI Tech (Note: Watch this Space!)


“It can know time of day, it can know weather. We can also have it understand what our service times are so it only suggests items that are easier to make in our peak hours,” said McDonald’s chief executive Steve Easterbrook.

The ultimate aim was to provide a “much more personalised experience” and to be able to suggest additional items based on the customer’s initial order, he added.

Also see — McDonalds Leverages IBM Watson Advertising to Drive In-Store Visits 

Retailers come in from the cold

Relatively mild weather and a very easy comparison combined to help drive an “unexpected’ spike in March retail sales in the UK.

I discussed this in my blog post last month:

Record February UK Warmth: Retail Boon or Fool’s Spring?

My guess at this point is that the “unexpected spike” in retail spending is in large part the result of the easy comparison to last year and the record warmth at the end of February which provided a tail wind into March.

The late Easter and very warm temperatures this week will help overcome the difficult comparison to last year and continue the strong sales trend in April.

But, the May / June weather comps may prove tougher sledding as retailers will have to overcome last year’s weather-driven sales surge.

U.S retail sales soared in March 

Weather wasn’t just driving sales in the UK, US retail sales “soared” in March also.

And again, I think this is at least partially due to the combination of a relatively easy comparison to March last year and a rebound from the terrible weather in February.

The March sales trend is another very strong tell that’s signaling a very positive April retail sales environment.

See: Expected Milder Spring a Godsend for U.S. Retail 

Did a Bomb Cyclone Blow Up Spring Retail Sales?

In a word:  nope!

I’ve been bullish on the impact of weather on spring retail this year as noted in the following blog posts published in late January and late March, respectively.

I’m still bullish.

Even given the dramatic media coverage and significant regional impacts of the early April “bomb cyclone” my reasoning for a much more favorable late March and April  still holds.

Here’s what’s true regarding my expectation of the effect of weather on spring demand this year:

Screen Shot 2019-04-18 at 8.54.57 AM

We’ve had an incredibly easy weather comparison to last April.  Warmer temperatures this year will translate into increased demand for spring merchandise — particularly lawn & garden and apparel.

It was a late winter with a colder than normal February and first half of March.  When the weather breaks cabin fever sets in and consumers break out.  It happens every year.  This year it happened 3 to 4 weeks earlier than last year.

A later Easter meant a longer pre-holiday selling period with (much) warmer temperatures than last year.

When comparing the weekly temperature trends to last year it’s clear that about 80% of U.S. consumers have been enjoying milder temperatures this year and that trend is likely to continue though the balance of April.

Screen Shot 2019-04-17 at 4.50.07 PM

There’s been a lot of dramatic and high impact weather events, but from the perspective of the national change in weather-driven demand for spring merchandise and consumables the trend has been very positive.

The so-called bomb cyclone event and subsequent snow and bitter cold no doubt had a significant regional impact.

But, the macro-level impact on U.S. retail was not enough to change the very positive spring weather-driven demand trajectory from last year.

it almost doesn’t get better than this.

The Reverse Bath Tub

The challenge for retailers will come as we move into the second quarter and the weather comparison becomes far more difficult against what was a very late (but strong) start to spring last year.

For example, here’s how Kantar Retail IQ described last year’s weather impact on Home Depot —

Home Depot’s Q2 2018: Strong results as warm weather sets in

While a late start to spring weather dampened sales in Q1, Home Depot experienced what it refers to as “the bathtub effect” in Q2, in which most lost sales from Q1 spilled over into Q2. During a critical selling period for the DIY channel, many seasonal categories, such as lawnmowers, watering, and patios, posted strong comps. Notably, the lawn category, which suffered in Q1, posted record comps in Q2, highlighting the benefit from delayed weather.

This year we’ll likely see a reverse bath tub with (beneficial and profitable!) demand sloshing forward into April (and Q1) but leaving a comp challenge for May and early June.

Of course, while the weather impact on seasonal categories in April have been very favorable — particularly for Home Centers, Mass, Specialty and even Department Stores —  there are still underlying economic headwinds that may impact total sales.

But even with that caveat, Mother Nature delivered for retailers this spring with fair skies and, hopefully, following sales.

 

 

 

 

 

 

 

Tax Refunds, Marie Kondo and the Weather

In a (great!) article published on Forbes.com this past weekend retail contributor Pam Danziger pointed out 3 trends that are converging to create new demand for spring fashion this year:

  • a later tax fund windfall
  • Marie Kondo-driven closet cleaning
  • much warmer April weather compared to last year

See: 3 Trends Are Converging To Drive New Demand For Fashion Retail

For the first two trends I recommend you read the full article — it’s a very interesting take, especially the Marie Kondo-effect.

For the weather portion, Pam and I chatted on Friday and you can get the jist of our conversation from the snippet below.


The Weather Company just released its spring forecast, and Paul Walsh, IBM’s global director for consumer strategy, says it couldn’t be better for fashion retail. After a particularly late winter, spring will come early this year with milder weather than last. It will supply a favorable tailwind to fashion retail.


While fashion retailers think in terms of seasons, consumers react to weather. “Now a days, we don’t buy based on the calendar; we buy based on how we feel. For seasonal apparel, the switch is turned on when it feels like spring,” Walsh told me. “Only then do we look into our closets and say it is time to update.”


It’s what Walsh calls the “cabin-fever effect.” Last year it happened quite late as spring didn’t really turn until late April and early May. Combined with an earlier than usual Easter last year, people didn’t feel like it was time to refresh their wardrobes until much later in the year.


This year will be different, as a late Easter, April 21, will give a longer runway to sell spring and summer fashions. “When it starts to feel like spring, we will see an extra amount of demand,” Walsh predicts, which should start to happen next week.


Given the differences in last year’s and this year’s spring, he sees retailers will benefit from good weather-driven comps. “Our predictions show that it will be a warmer than normal April,” he says, noting that The Weather Company is a subsidiary of IBM.

I’ve been and continue to be very bullish on spring weather-driven demand this year — particularly for fashion retail.

See: Expected Milder Spring a Godsend for U.S. Retail

As a recap, here are the 4 reasons (incremental to the trends Pam noted) that will drive a weather-driven tailwind to spring fashion this season:

  • An incredibly easy weather comparison to last year.
  • Cabin fever. It’s been a late winter with a colder than normal February and first half of 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.
  • 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.
  • 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.

Transforming retail in a changing world

Retailers feel the pressure of bad weather where it counts — right in the earnings.

The impact is pervasive and the effect can be profound. This was very evident this year during the “spring” transition season when an early Easter combined with the coldest Aprilsince 1997 took a big bite out of sales and profitability for many U.S retailers.

Of course this is not just a US issue — the impact of weather on consumers knows no boundaries.

A case in point is the devastating retail impact from the so-called Beast of the East in western Europe and, especially, the UK.

The Weather Ate My Homework

The impact of weather on sales has been historically viewed as an uncontrollable negative risk and retailers by-and-large have planned their businesses with a mostly anecdotal and non-systemic view of the weather influence on customers.

In fact, according to a recent study conducted by IBM’s Institute of Business Value (IBV), 58% of retail executives surveyed believe that weather has a primarily negative impact on margins while only 18% have a positive view.

The outlook on operating costs was just as bleak. Of the executives surveyed, 66% view the weather as having a negative impact. Only 8% had a positive outlook.

This combination of what has always been seen as an unmanageable risk and the profound (and growing) impact of weather on consumer behavior is what leads to “but-for-the-weather” comments in earnings calls — what Wall Street analysts call, often unfairly, the weather excuse.

Of course the weather is not simply an excuse for shifting consumer buying patterns — it’s a bona fide reason. 

What’s changing (as indicated by the IBV weather study) is that retail leaders understand that changing demand caused by changing weather doesn’t mean customers aren’t spending. 

It just means they are spending on items that they need as opposed to what the seasonality would say should be sold.

The times (and seasonalities) are changing and that’s changing how retail leaders are, literally, re-imagining their approach to managing the weather problem. 

The Paradigm? Changing!

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

One of the biggest takeaways from the weather study wasn’t that the retail C-Suite understand the importance of the impact of weather on their consumers (literally 100% agree).

See: Just Add Weather — How weather insights can grow your bottom line

Rather it was that they understand that by better integrating weather-driven insights (as opposed to simply tracking the weather) into both demand and supply chain systems as well as in store operations, they can better serve their customers and, in-turn, create significant earnings / share growth … all while reducing costs.

In just one example, our research suggests that a retail organization which weather-optimizes their up-sell/cross-sell rate can increase their revenue by $45M for every $1B of in-store sales.

When applied strategically across the entire retail ecosystem, the retail C-suite participants we interviewed estimated (depending on the sector) up to a 5% overall revenue opportunity and up to a 10% cost reduction opportunity.

See: How Marketers are Harnessing the Power of the Weather
See: The Weather Company Now Also Forecasts What You’ll

Weather trumps Trump!

Coincident to the IBM study, S&P recently also published research on the increasing impact of weather and climate on earnings for companies in the S&P 500.

Here’s a quotable quote:

“A review of the earnings call transcripts of S&P 500 companies in the past ten years revealed that “climate” and “weather” were among the most frequently discussed topics among executives, even more than “Trump”, “the dollar”, “oil”, and “recession”.

Following are some of the key takeaways from S&P’s research.

It’s clear from both pieces of research that the impact of weather on corporate earnings is growing and there is a growing realization from the C-Suite in a need for an integrated and scalable weather-solution.

You can download the entire S&P research report here:

The Effects of Weather Events on Corporate Earnings are Gathering Force

Getting Started

Leading retailers are approaching the weather opportunity strategically understanding that the real benefit lay in the systemic integration of weather insights across the entire enterprise.

Following are some of the leading business practices and technical challenges we’ve identified as part of the IBV study and work we are currently doing with retailers across the globe.

The times? Changing! 

“You better start swimming, or you’ll sink like a stone … ” — Bob Dylan 

Whenever you can quote a Bob Dylan verse in a LinkedIn post it’s a good day. 

Of course Bob wrote this iconic lyric in the early ’60s and the theme was much broader and profound than the topic of retail sales and demand generation and fulfillment. 

But, the combination of a changing climate / increased weather exposures and consumers that are more connected, more demanding and with more retail choices means that rethinking weather integration into retail systems is no longer an option. 

For retail C-level exec’s at least, it’s becoming clear that, in fact, it does take a weathermanto know which way the wind blows.

The Resilience Imperative and the Power of Data

 

I stumbled across this video of my presentation at the Sun Valley Forum from the Summer of 2017.

Paul Walsh, Director, Weather Strategy, IBM Global Business Services/The Weather Company spoke at the Sun Valley Forum 2017.

Rethinking Weather: The Resilience Imperative and the Power of Data.

In a time of increasing weather chaos, weather data is empowering companies, saving ecosystems, protecting communities, engaging consumers, and informing investors to build a more resilient world.

Please see www.sunvalleyforum.com for more information; hosted by the Sun Valley Institute, www.sunvalleyinstitute.org.

This event is a particular favorite!

Each year the Sun Valley Forum gathers innovators from government,
business, nonprofits, investment, and academia, as well as local leaders,
visitors, and residents, to share strategies, broaden thinking, and ignite
new partnerships at this groundbreaking event with a goal of building
greater resilience. Environmental shifts and economic interdependence,
as well as social and political upheavals, call for proactive leadership to
build resilient communities, companies, nations, and economies.

You can see all the presentations from the last two years HERE.

 

Expected Milder Spring a Godsend for U.S. Retail

The Weather Company released their spring forecast yesterday and the news for consumer businesses is … great!

“After an extended cold period across much of the Northern U.S. during the last month, the pattern finally appears to be relenting as we head into spring,” said Dr. Todd Crawford, chief meteorologist at The Weather Company.

I wrote a post on the potential for this back in January.

Given the latest update I thought I’d re-up the message as the stars are aligning to produce a bigger than normal weather-driven boost to this year’s spring retail season.

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

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.

For context, last April was the 13th coldest in the U.S. 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:

  • An incredibly easy weather comparison to last year.
  • Cabin fever. It’s been a late winter with a colder than normal February and first half of 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.
  • 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.
  • 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 increased impact of weather on consumers — it adds up to a very silver lining for US retail this spring.