ShareThisBy PIA SARKAR
Monday, November 06, 2006
Most people rely on day-to-day weather forecasts to figure out how to dress in the morning.
Retailers, on the other hand, must anticipate the weather months in advance in order to outfit their customers year-round.
Weather influences everything from what a shopper buys to how much he or she is willing to spend. For retailers, it can make all the difference between a robust month of sales and a weak one.
A warm October, for instance, can delay shoppers from trying on sweaters and wool coats for the winter, which forces retailers to cut prices to get rid of unintended inventory. Likewise, a rainy May can postpone purchases of summer-related items like flip-flops, suntan lotion and bug spray.
For that reason, retailers depend on accurate weather predictions to determine how much of which items to stock and when to roll them out. Some even hire forecasters to chart the weather a year ahead of time so they can prepare for changes in seasonal patterns.
"Seventy-five percent of the time, the weather is different year-over-year," said Paul Walsh, vice president and senior business meteorologist for Planalytics, a weather forecasting company in Wayne, Pa. "That means that consumers are buying different."
Not only that, but consumers in the last several years have tended to make purchases based on need and not so much on desire. For retailers, that means that sweaters will not sell in stores until the weather is cold enough for them to be worn.
"With that kind of change in buyer behavior, weather has more impact," said Mike Niemira, chief economist at the International Council of Shopping Centers. "There's less interest in buying too far in advance."
Holiday shopping _ the most important time of the year for retailers in terms of sales _ is often immune from weather because most people will buy gifts regardless of what the temperature is outside, especially as they get closer to Christmas. Still, Walsh said that weather can influence what types of gifts shoppers will buy.
This year, for instance, he expects temperatures across the country to be warmer than last year during the first half of the holiday season, which goes from Nov. 17 until the week before Christmas. As a result, more shoppers will gravitate toward electronics rather than winter apparel.
During the second half of the holiday season, which goes from Dec. 17 until Jan. 13, Walsh predicts temperatures to drop lower than last winter, giving apparel merchants a chance to make up for lost time.
"It's really a tale of two seasons," Walsh said.
As anyone who watches the local news can attest, meteorologists do not always forecast the weather accurately. And Walsh admits that his company is right 75 percent of the time. Bill Kirk, chief executive officer of Weather Trends International in Bethlehem, Pa., also claims a 75 percent accuracy rate. But both say their numbers are still better than the old formula some retailers fall back on.
"The alternative is they plan off last year and they'd be right 20 to 25 percent of the time," Kirk said.
Weather Trends and Planalytics charge a high price for predicting the future. An annual subscription fee at Weather Trends can run anywhere from $35,000 to $150,000. Walsh would not disclose the fees at Planalytics but said some clients can pay close to $1 million.
Niemira said businesses are starting to become more savvy about the weather rather than surrendering to its whims.
"More and more retailers get it as a risk factor, and one that you need to at least have some thoughts on in terms of the planning process one year out," he said.
On average, weather can impact monthly sales by 5 to 10 percent, according to Niemira. But during abnormal conditions, it can affect monthly sales by as much as 50 to 60 percent.
To minimize the risks associated with seasonal changes, Weather Trends makes its forecasts one year out for clients. Even if the weather veers from what the company predicted, Kirk said it will not adjust forecasts because many retailers cannot plan their inventories based on shifting reports.
Planalytics, on the other hand, will provide its clients with updates on changing weather so that they can adjust their inventory appropriately. Walsh, the company's vice president who previously served as a meteorologist for the Air Force for 20 years, said that when parts of the Northeast got socked with a freak snowstorm Oct. 13, he sent out an e-mail alert the week before predicting a spike in demand for items like outerwear, space heaters, electric blankets and hot beverages.
The company, however, did not anticipate the severity of the snowstorm, which paralyzed parts of Buffalo, N.Y., for several days. "Only God could do that," Walsh said.
