With the release of Britain’s Office for National Statistics (ONS) September 2011 Retail Sales Report last week there has been a lot of talk about the weather’s role in influencing sales. It’s true, there are many factors that influence retail sales, but weather, unlike the global economy and consumer sentiment, is one factor that retailers can actually leverage and use to their advantage. Had stores like John Lewis known that September 2011 was going to be warmer than normal, they may have planned to reduce inventory on autumn ranges, or Tesco may have opted to order more bottled water and barbeque foods than comfort foods like stews and hot beverages. A single decision based off of the weather can lead to millions in increased sales for retailers even during times plagued with a plethora of economic headwinds.
So, what did our forecast for September 2011 in the United Kingdom say a year ago? For the United Kingdom as a whole our forecast was for a warmer, above normal September with less precipitation than last year and that’s not too far off from what actually happened (see graphs above). Not too shabby for a forecast made a year ago. In last year’s report we even called out week 2 as being the only week in September that would trend cooler than last year and that the 1st and 3rd retail weeks of the month would be the only weeks to trend wetter than last year. What actually happened is depicted in the chart below where blue blocks represent cooler temperatures than last year and green blocks represent weeks that were wetter than the comparable week of last year. Using these year-on-year comparisons, retailers are able to leverage the weather and make more informed inventory and marketing decisions as just a -1 degree C difference in weekly year-on-year temperatures can greatly impact the amount of product sold, for example, for every -1C in weekly year-on-year temperatures there is typically a +2% increase in hot soup category sales during the cold weather season.
The British Retail Consortium’s (BRC) September 2011 Retail Sales Monitor Report places heavy blame on the weather for less than stellar retail sales results, especially for clothing. According to the ONS, clothing and footwear sales volumes were down -2.1% from last year. Meanwhile, the warmer weather, especially late in the month was cited as a boost for food and drink categories. Many of the same conclusions were drawn from our report issued a year ago, the following are some comparisons between our report and the BRC’s report:
Similarly, the forecast for the United States played out rather nicely as shown in the graphs below. We forecasted an above normal, but slightly cooler than last year September and that’s what happened. In fact, our forecast pinned September 2011 as the 5th warmest in 19+ years, it was actually the 4th warmest.
With this year-ahead guidance, retailers were able to anticipate that, for the country overall, sales of seasonal Autumn categories will have changed slightly over last year as temperatures were projected to be slightly cooler than last year (cooler is better for Autumn categories). Seeing that temperatures were projected to be above normal in September 2011, retailers would have been wise to be lean on inventories of cool weather products like sweaters, long-sleeved shirts, boots, and heaters. Analysis of 30 years of retail same-store-sales data shows that a -1F change in temperature for September overall can have a +1.1% impact on U.S. retail sales, which is huge when considering the volume of retail trade.
When the world is filled with so many uncertainties, why leave the weather to chance when there’s something that can be proactively done to prepare for what’s ahead? The technology to forecast weather a year-ahead is here and the forecast has proven skill. Although year-ahead weather forecasting may seem like “hocus pocus” to some (as a Meteorologist, I’ve been accused of witchcraft on almost a daily basis), but our forecasts have given hundreds of clients advanced insight and placed them in a position to leverage the weather rather than be a victim.