The Mother of all Mother’s Days?

For retailers it certainly could be and there are 25 billion reasons why — but the weather ain’t one.

According to the National Retail Federation this year is expected to deliver the highest consumer spending to date.

WASHINGTON – Mother’s Day spending is expected to total a record $25 billion this year, up from $23.1 billion in 2018, according to the annual survey released today by the National Retail Federation. A total 84 percent of U.S. adults are expected to celebrate in honor of their mothers and other women in their lives.

With consumer sentiment at record highs and unemployment at record lows there’s really only one thing that could disrupt this sunny outlook.

The Weather

Mother’s Day is ranked as the third largest retail holiday of the year in the U.S (behind the Christmas holidays and back-to-school) and is, arguably, one of the most weather impacted holidays as well.

The fact that it’s a “day” means that an ill-timed storm or cold weather (as we’re seeing in real time) can have a dramatic and, in many cases, non-recoverable impact on sales and profits.

There isn’t much room for do-overs.

The Reverse Bath Tub

This is my new favorite weather–impact-on-retail-spending term as related by Home Depot during their Q1 earnings call last year.

I referenced this in a post I authored last month — it refers to the effect that weather has on driving the timing of sales of seasonal items from one week or month to the next.

It results in significant sales and margin volatility that can have a material impact on monthly and quarterly sales.

This year demand for seasonal products sloshed forward (see what I did there?) into April and out of May leaving a pretty challenging comp environment for retail sales in May and into June.

Cooler, Wetter, Weaker

While it may be a great Mother’s Day for retail overall  — as noted by the NRF — it likely won’t be great for all categories.

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Cooler, wetter weather will put a damper on demand for seasonal products

For example and perspective, my colleague Dr Mike Haydock is expecting about a 2% decrease in women’s apparel sales in May.

While he doesn’t publish a specific prediction for lawn & garden sales it’s pretty intuitive to expect a corresponding decrease there as well.

That’s bad news for the month of May (and Q2) from a retail fiscal calendar perspective.

But the good news is that the sales that pulled (sloshed?) forward into April were likely much stronger than last year and likely delivered higher margins.

So there’s that.

 

My Sunday Tweet Storm: Bad Weather Means Bad Restaurant Reviews

I started my weekly Weather Means Business Tweet Storm series two weeks ago and as predicted it’s morphed into more of a bi-weekly-ish effort.

Even that may be overly ambitious.

Never-the-less, there’s been some really interesting weather / business impact stories and studies over the last week that I’m excited to share.

Here are some of my favorites  —

Bad weather leads to bad restaurant reviews 

Bad weather has a fundamental impact on both  what we do and how we feel. It’s a universal truth that has both economic and social impacts.

Turns out the impact of the funk brought on by rainy weather has a measurable impact on the snark (and, presumably) tip level of diners at restaurants.

You can get a copy of the full study at the link here — It’s raining complaints! How weather factors drive consumer comments and word-of-mouth — or you can watch the short video below.

Fascinating study!

The Reverse Bath Tub 

Retail sales in both the US and western Europe will be facing strong weather-driven headwinds in May as colder temperatures will be slamming the brakes on demand for all things spring.

Apparel and Lawn & Garden categories and seasonable consumables (think BBQ’s and beer) will be particularly hard hit.  This will negatively impact home centers,  mass merchants, specialty apparel and department stores — essentially all of retail.

Making this worse will be the incredibly difficult comparison to last year’s record warm weather in both the US (warmest in 124 years) and the UK (warmest on record)

It’s a case of Mother Nature playing hard ball — and below the belt.

For more on what I call “the reverse bath tub effect” read my post from last month — Did the Bomb Cyclone Blow up Spring Retail Sales?

The Sport Performance Summit Atlanta

This tweet references an interesting and very timely topic:  using weather data and analytics to optimize performance —  in sport and  business.

It’s timely in that I’m going to be speaking about this topic at The Sport Performance Summit Atlanta at Mercedes Benz Stadium next month.

I’m particularly excited to be sharing the same stage as the Commandant of the Marine Corps and the GM of the Atlanta Falcons.

Four Reasons The Weather Impact on Consumers is Increasing

My (very smart!) colleagues at Blue Wolf interviewed me last week for this lofty sounding article and did what I would have thought impossible — they made me sound relatively cogent.

Well done, Taylor Price! 

You can read the full interview here  — (and thanks for the share @ericberridge)

In the interest of not burying the lead here are the four reasons that I called out —

Forecast accuracy: Consumers expect the forecasts to be correct and subsequently, plan their lives based on the data they receive.

Mobile access: We are connected to weather forecasts instantly, on-demand, and at all hours of the day. Access to weather information anywhere around the world allows businesses to adjust how they manage their supply chains, inventory, pricing, product assortment, promotions based on local weather forecasts.

Social media: Even mediocre weather events are now amplified to reach more people than ever before. Our awareness of extreme weather events is at an all-time high and can directly impact those who are indirectly impacted. For example, the California wildfires might motivate someone to buy fire retardant clothing.

Climate change: Increasingly volatile changes in the weather are impacting more people. The less predictable the weather, the more we want to rely on forecasts for a sense of certainty and stability.

For more color – direct from the horse’s mouth — below is a short (9-minute) video from an interview I did at a Shopper Insights conference in Chicago back in 2015.

This was before The Weather Company was acquired by IBM — if nothing else, I’m consistent!

 

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 

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.

Expected Milder Spring a Godsend for Spring Product Sales

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 Product Sales 

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 seasonal retail products :

  • 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.