How Retailers Can Protect Their Business Against Extreme Weather Patterns
Contributed by Salient CEO Guy Amisano.
There’s no question that extreme weather has become a much more common occurrence, and its impact on business has not gone unnoticed. In fact, according to IBM, weather now accounts for over $500 billion in business losses every year. This is especially prevalent for retailers who understand that weather helps to drive the flow of everyday business – meaning a stroke of bad luck with weather could translate to poor sales. As retailers continue to face extreme weather patterns, they need to be more cognizant about how it is impacting their revenue and what can be done to better protect its growth.
So, Where Should Retailers Start?
To begin, retailers should examine past performance in their store before, during, and after past extreme weather incidents in order to understand how to best determine new tactics to prepare for weather patterns in the future. When examining the data, retailers should focus on the following questions:
- How did this extreme weather disrupt the flow of in-store traffic?
It’s obvious that when a hurricane or blizzard comes through an area it can limit traffic to a store, but what about before or after the storm? Are customers really rushing to the store before or is the influx coming after when most people have a case of cabin fever? To understand when high volumes of customers will arrive, retailers should examine their past POS data to understand and predict traffic patterns during similar weather events.
When assessing data it’s important to also note how different weather events will influence different types of in-store traffic. For example, IBM through its partnership with The Weather Company, found that during the January 2014 polar vortex in the US, areas with greater than 10°F/12.2C drops in temperature saw sales fall 15.5 percent, while areas with a less than 10°F/12.2C drop saw sales fall only 2.9 percent. Gaining a more comprehensive understanding of how the storm impacts stores will enable retailers to ensure that they are properly stocked and staffed only when it’s truly needed.
- What new opportunities to increase buyer spend arise with extreme weather preparations?
Extreme weather also creates opportunities for increased demand in products that might not normally be a top selling item. Looking back at their data, retailers should seek to identify the outlier items that get a big boost in sales during blizzards, hurricanes or other weather events. Understanding which specific items will experience a surge can help retailers to ensure they have the right products in stock and even enable them to package these items into a sale or marketing incentive in order to maximize revenue.
Taking this a step further, retailers can also look to identify what items consumers commonly purchase together and revise their shelving strategy in order to increase consumer spend. For a grocer this could mean placing hot chocolate mix near check out lines before a blizzard , while retailers can put a sale on board games ahead of a hurricane. This helps to boost sales of other store staples and increase how much consumers are spending in-store.
- Are there common roadblocks that occur in the supply chain during extreme weather?
One of the biggest impacts extreme weather can have on retailers is in their supply chain. While certain tactics will enable business owners to ensure they have customers, if they aren’t able to have the products in stock, they’ll lose out on sales. When it comes to assessing the supply chain, retailers should take a look at how past events have delayed shipments and/or reduced product availability. Ahead of winter or hurricane season, it’s important to then develop a strategy to determine when it’s necessary to bring in extra products ahead of a big weather event to ensure items don’t go out of stock.
For grocers and other retailers who stock fresh products this can also become a balancing act between determining expected demand and shelf-life. Here, they should use the data they have on hand to identify which items are must-haves and which may be able to go out of stock with minimal sales penalty.
In an age of frequent and powerful storms year round, extreme weather is no longer something to just survive through – its something retailers can and must prepare for. Leveraging the data assets retailers already have at their fingertips can help them get the best sense of how to get ahead of upcoming weather events and more strategically work with supply chain partners to ensure they have a minimal effect on the business.
Contributed by Salient CEO Guy Amisano. Learn more about Salient here.