Weather Data is Transforming Consumer Demand Planning

“It’s tough to make predictions, especially about the future.” — Yogi Berra

For retailers and CPG companies, predicting what consumers will be needing and wanting, months into the future, is an exercise fraught with uncertainty and risk.

Complicating this is the realty that about one-third of consumer products and services (representing revenues of approximately $3 trillion in the US) have some degree of weather and climate variability.

Complicating this even further is the reality that the impact of weather on consumer behavior is increasing.

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.

This uncertainty is creating increased risk.

It’s also creating opportunity.

As I noted in a previous post, retailers have historically 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 its 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.

An example of how this works is in demand planning — we know from benchmarking analysis done by colleagues at the IBM Institute of Business Value that a 1% increase in demand forecast accuracy yields $10M in revenue for every $1B in sales.

We also know, from work we’re doing with retailers in the US and Europe, that including weather forecast data in demand forecasts for seasonal product categories increases forecast accuracy 20% or more.

See: Just add Weather

When you do the math it’s clear that the value from integrating weather into demand forecasts is far beyond table stakes — in fact, combining weather information with other external variables will be literally transforming how consumer businesses are serving their customers.

And it’s happening now.

I’m looking forward to discussing this at the Climate City Expo on April 2d in Asheville next month.

CCX: Business

“Ensuring humanity’s future in a changing climate presents unique challenges and opportunities to drive innovation. CCx: Business is a cross-industry conference that convenes business executives, entrepreneurs, climate scientists, investors, and many more to explore solutions at the leading edge of climate resilience.”

If you’re coming to the event let me know. Would love to see you there.

If you’re not, here’s a short video that will give you a sneak peak of what I’ll be discussing.

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