You’ve Got to Love This Weather (But Some Retailers Don’t)
It’s February 22 and it’s going to be nearly 60 degrees today in New Jersey. Many of us here in the Northeast are loving it. I mean, I’ve only had to pick up a snow shovel once since winter began. It seems the least Mother Nature could do for us after record snows last winter followed by a hurricane, flooding and, oh yeah, a big snowstorm on Halloween weekend that cut off power to communities all over the region for days and even weeks.
But on to the purpose of this discussion: what the mild winter has meant for retailers.
On one hand, it has meant that consumers have been able to get to stores unimpeded. That’s good. People do most of their shopping in stores so access is key.
On the other hand, mild weather has not driven any of the pantry-loading frenzy that normally comes with an impending storm. One of my favorite retail moments ever came while working at a local Trader Joe’s a day before a storm hit (six inches). When one of the crew saw customers getting worked up, he got on the intercom and said (paraphrasing), "Attention Trader Joe’s customers. We love having you shop our store. It’s only a snowstorm. You’ve seen these before and done just fine. Please have a nice day." (Customers all over the store began laughing, as did all the crew.)
A number of retailers have not done well as products such as winter clothing and footwear have languished. Stores have resorted to cutting prices to move inventory.
"The reality is that we are ‘buy-now, use-now’ consumers," Paul Walsh, VP-weather analytics at The Weather Channel, told Advertising Age. "When it comes to weather and driving demand, timing is everything. … By the time you get to President’s Day, it’s all about spring."
Other retailers, notably Home Depot, have benefited greatly from the mild winter as homeowners and construction professionals have not had to shut down projects due to inclement weather.
Discussion Questions
Discussion Questions: On balance, do you think more moderate temperatures have been a net positive or negative for retailers this winter? What would you do as a retailer being negatively affected by warm winter weather this year?
It’s a mixed bag, and it is worth looking at stores’ levels of same-store inventories as they end their 4th quarters. You can clearly see heavier pockets of seasonal inventory in apparel retailers than last year — gloves, boots, coats and the like. (You can also see which stores bet too heavily on fake fur and brightly colored plaid flannel.) On the other hand, the good weather will probably drive February comp sales, since people can get out of their houses and shop for early spring needs. The first week of February 2011 in particular was a terrible weather week around the country, and should provide some favorable comparisons.
For my Northern based friends, this has been a milder than anticipated winter. Some businesses, especially seasonal like fire wood and ski resorts are down. Municipal government budgets are saved because the snow removal expenses are down. Are we that concerned that food frenzies are not happening? Wait until hurricane season gets here and the weather reports drive us, in those affected areas, to get everything off the grocer’s shelves that we can never use in our lifetime. But we buy it just in case. More flashlight batteries have come and gone in my house because of false hurricane alarms than anything I can think of. But I am told it is better to be safe than sorry.
Winter is not over yet. Perhaps it may be a bit milder at this point. Here in Wisconsin I’ve seen snow storms come as late as mid May. It all evens out. So you don’t sell as many snow-blowers. You make it up with mosquito spray in June.
Net/net, I’d say it’s been a positive.
The average American home saved about $400 this winter in home heating costs. Presumably some of that savings found its way over to the disposable income column.
And not all buying is rational. Sales of winter parkas, for example, have actually increased despite the warm winter. Fashion, it seems, will not be stopped by a small thing such as climate change.
As to the second part of the question, I guess I’d do what retailers have always done — find something else to sell.
I’m an old rags lady. Mild temperatures are never a good thing for apparel.
As with all things, the answer is clearly based upon your retail business. Taken on balance, the (very — as I live in Minneapolis) moderate winter has had a negative impact on local retailers. The inventories that retailers stock are based upon a typical winter here in the Twin Cities. From clothing to coffee, the temperature certainly affects shopping decisions. I have noticed that people are purchasing ‘iced coffee’ drinks at the coffee shops as opposed to the special hot chocolate reindeer drinks that were being promoted. Those rows of snowblowers at Home Depot and Lowe’s are still there and are being heavily discounted. There is certainly the necessity to move inventory and discounting is an effective method of moving product, but has anyone ever tried ‘bundling’ a package? As an example- Buy the snowblower and get a shovel and a 40 pound bag of sidewalk de-icer. It may be one of those ideas that retailers would have a difficult time to execute and therefore never try even though it may be a more valued (and profitable?) customer-centric solution.
Some categories (winter apparel, snow shovels, etc.) and some businesses (ski resorts) have suffered, a few grievously. But on the whole, retailers should be happy. Unplanned and unscheduled spikes due to storms are great, however, they do not make a business. If a business depends upon them, it is on shaky ground. The key factors are greater mobility to go to stores, and extra cash freed up from lower usage of heating oil (although at nearly $4 a gallon, this is not nearly the windfall it should be).
I can remember just like it was last year, (likely because it was), as a dozen senior supermarket executives debated “What happened to our comp sales this past week?” More often than not, upon investigation it was Mother Nature effecting a group or even all of our stores a year ago with storms with resulting power outages, or forecast snow.
Of course, the following week was the dreaded “payback” when sales plummeted because of all the hoarding that was done the week before. In short, weather related sales behavior provides both peaks and valleys and usually amounts to a “wash” in terms of long-term sales benefit. It is true that during snow scares or actual snow storms, if schools close and kids are home munching on sandwiches, chips, and consuming gallons and gallons of milk, there is some short-term incremental gain for the supermarket. But in most cases, weather events are more trouble than they are worth.
So let’s enjoy this mild winter and rely on our retail savvy to drive sales, not the weather. And for those retailers who have budgeted a few snow storms into their sales forecast, perhaps they will get a lift this year during the week before December 21st (End of the Mayan Calendar)!
I think the big plus is that sunny days encourage optimism. People shop when they are optimistic, In short: All good.
We as grocers like the “threat” of a good snow warning, as it drives people to the stores that usually shop elsewhere, because we are closer to their homes. Restaurants suffer with bad weather, and my friend owns an Army-Navy clothing store, which is down about 20% from last year. All in all, the economy still drives business, and it is brutal around here until summertime, when the tourists come up to save our businesses. Good jobs can create business in any climate.
Many retailers’ businesses are built around the changing season and the weather they bring. However, the warmer weather’s impact varies based on the specific business you are in. For example it has been a disaster for many ski shops but certainly had less impact on food stores who may have lost the impact threatening weather may have (certainly less peaks and valleys), but that has been balanced by easier accessibility. Certainly those who bought extra inventory of winter clothing find themselves with inventory that now has to be move at a discount.
One cardinal rule in retailing is “don’t blame the weather.” It is up to logistics, buyers, and planners to shift according to what is observed or projected. Now, if you are dependent on snow thrower sales and peaks due to oncoming storms, you have a lot of inventory today and may be putting 2011/2012 models in storage or clearance depending on your strategy. Those who clear our parking lots and driveways in snowy climates across the US are gearing up for Spring clean up and making a push for custom landscaping jobs to compensate for 25% of historical revenue. At sporting goods stores in particular I’ve seen significant markdowns well ahead of traditional timing, with Buy One Get One Free offers on hats, gloves and running gear. We still could be in for some big storm surprises in the month plus ahead. I can recall a major snowstorm here in Chicago on my birthday, end of April, so Mother Nature has plans even the best planner can’t anticipate!
One of the major benefits of mild weather is the increase in disposable income consumers have because they aren’t having to pay horrendous bill for heating their residences. With money left over they have it to spend. Pantry loading, in many cases, doesn’t really result in increased sales in a market. Sales shift in time and location, but don’t markedly increase or decrease. Restaurants lose business to grocers because people can’t get out. People load up on groceries because shopping is difficult. All travel related businesses suffer in bad weather. Good weather reduces costs and frees up consumers’ time and money to other things than to huddle around the heater and survive.
Some sales are made up as people switch to spring items earlier. Will $4-$5 gas this summer put a damper on some of the optimism for spring and summer?
This has everything to do with the segment of retailing in which you’re doing business. Apparel is definitely a challenge, since most stores buy products seasons in advance. Kudos to those very few retailers that shorten their “seasons” down to a matter of a week or two. Other non-food retailers may also be challenged with seasonal purchases, however those tend to be longer-term buys and may not be as affected as apparel.
All retailers should acknowledge the weather anomaly and promote what product they have on hand to address it proactively, and even poke fun at it.
We always say “weather plays” when it comes to retail sales — it definitely matters. A good snow storm can really throw things off, like last year with the Northeast. And conversely, if the weather’s great, at least you have a chance at consumer interest, maybe even an unplanned trip.
Having said that, if your assortment is off and your sales team and real estate is awful, weather only “plays” so much and can’t really take the blame or credit for anything that happens after that.
The National Retail Federation (NRF) reports that overall retail sales in the US were up 4% in January, but the winter has been anything but stable or predictable for retailers. For example, sales of outdoor apparel, footwear, and equipment came in more or less unchanged in January, but paddle sports are outselling winter sports at most specialty retailers and outfitters this winter! Retailers are discounting heavily to move seasonal products out of stock rooms and off the shelves and racks, which means margins are taking a hit. But…winter isn’t over yet….
Money saved because less home heating oil was needed hopefully went to stores as consumers bought stuff with more disposable income. Lack of heavy snow also means shoppers can get to stores without problems.
However, winter is not over yet. A big snow storm or two in March is common here in northeast Ohio.
And we are not out of February yet.
Net positive. Of course some products have sold more and others have sold less, but the fact that nice weather gets more people out and about is a positive for retailers.