Why Retailers Need A Weather Strategy Beyond Inventory Forecasting

Pedestrians crossing the street on a snowy day.

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Weather is a perennial wildcard in retail performance. It’s frequently blamed for poor quarterly results – like last fall, when Gap, Target, Shoe Carnival and Columbia Sportswear credited unseasonably warm temperatures for weak apparel and footwear sales. Yet skeptics could argue that weather is a convenient scapegoat. The U.S. spans diverse weather conditions and with online shopping reducing the need for shoppers to venture outdoors, the weather’s impact on overall results should be limited.

Less often retailers credit weather for strong results, though common sense suggests it drives performance both ways. A study published by the Federal Research Bank of San Francisco confirmed weather’s significant influence on retail sales, especially during severe weather events, but offers little insight into how retailers might strategically use weather forecasts to minimize losses and maximize gains.

The Weather Company has a fix for that. “Companies need weather to be part of their overall strategy. It’s getting less and less acceptable to use weather as an excuse for poor performance,” shared Weather Company president Sheri Bachstein. “Especially now, with AI, it’s just so easy to apply weather data to a company’s business intelligence system to shape a retailer’s marketing, inventory and logistics operations to improve efficiency and drive topline revenue.”

She also points out that climate change is accelerating shifts in weather patterns, with more weather events occurring outside their seasonal norms – making predictive weather data more critical than ever for retailers.

“In the past, businesses saw weather more as something to mitigate against and now they are seeing that it can be used more strategically to drive revenue,” she continued.

Making More From Weather Data

Eight out of ten C-suite retail executives surveyed by the Weather Company agree that “enhanced weather intelligence has the potential to contribute positively to annual revenue growth,” and 92% said weather has impacted their company’s operating costs.

Yet, despite this recognition, many retailers still treat weather data as untapped potential, rather than using it proactively to reduce costs and drive sales.

“It largely remains untapped and it’s amazing to me that companies aren’t taking advantage of this more opportunistically,” Bachstein said, though she admits, “We’re starting to see a shift here.”

She didn’t name names; however, a quick search revealed that Lowe’s, Home Depot, Target, Walmart, Costco, Burlington, CVS, and Tractor Supply have integrated weather analytics into their enterprise resource planning systems for inventory management and some are also deploying it for marketing and promotions.

Change In The Weather

Last year, the National Retail Federation released the “Climate-Proofing Retail” white paper in association with Planalytics. Their study found that 3.4% of retail sales are directly affected by weather changes, though it didn’t report the direction of change. However, that 3.4% might be just the tip of the iceberg.

“Climate risk and weather-related sales volatility remain the least understood, least measured and the least acted upon external factors affecting retail performance,” the report states, adding that using weather data effectively can be problematic.

“Unlike other common time-series data sets, the weather is geo-diverse, and it has unique characteristics that make developing reliable, granular and scalable demand analytics challenging.”

Easy Does It

The Weather Company has solved for that. It has developed what is called the weather coefficient, which combines a number of different weather data points, such as precipitation, temperature, humidity and dew points, that can be applied to a company’s internal business intelligence system to help forecast demand more accurately, optimize inventory and staffing and time promotions and advertising.

It also provides an analytical platform – called a weather engine – that identifies coming changes and historical trends that can help retailers lift sales before, during and after specific weather events.

“Accurate weather data can provide a powerful signal to help retailers make decisions about when to market, change inventory, what should be on end caps or promoted locally and all the other decisions they have to make,” Bachstein said. “And we’ve made it so easy to apply to the normal planning data a company uses.”

For example, a retailer can use the local weather forecast to launch a promotion to clear out last season’s inventory earlier, speed up or slow down the arrival of new seasonal merchandise and adjust staffing levels to match expected changes in customer traffic.

Weather’s Impact on Consumer Psychology

While everyone acknowledges that weather affects emotions – high pressure systems boost mood and low pressure when its stormy can increase stress and induce fatigue and lethargy – the Weather Company worked with Neuro-Insight, specializing in brain-based marketing research, to measure how weather-driven emotional states can enhance the effectiveness of advertising and marketing.

By electronically mapping brain activity in 182 participants when exposed to different weather conditions paired with advertisements, researchers found that aligning ad messages with weather-driven emotional states could boost return on investment between 10% and 18%.

Specifically, the study measured the levels of engagement, detail memory that is a predictor of purchase intent and what was called global memory, which correlates with retention of brand storytelling. Interestingly, it found GenZ participants had stronger neurological responses to weather changes than older participants. They had up to 13% higher level of memory encoding and 12% increased engagement on sunny days compared with the general population.

“We’ve long sensed that weather influences behavior – and marketers have always craved a way to harness it,” Neuro-Insight CEO Pranav Yadav explained. “With this study, we now have the neurological evidence to prove it, connecting the dots between weather, emotion, memory.”

Beyond Inventory Planning

This takes weather analytics to a whole new level. It can support advertising, so the most relevant and emotionally-resonant marketing messages are delivered to the optimum audiences in real time based upon weather signals.

“Now marketers can take cues from the weather to change their messaging. With generative AI, marketers can create different campaigns on the fly suited to different moods,” Bachstein said. “Marketers now have the ability to serve up different creatives at different times based on the weather, greatly improving their effectiveness.”

Weather analytics can go beyond its obvious value in inventory planning and operations – making sure snow shovels and ice melt are in stores before the Nor’easter hits. It unlocks hyper-local forecasts and personalization capabilities to enhance marketing, boost advertising ROI and drive real revenue growth.

Soon, retailers won’t be able to blame bad weather for not making their numbers. Retailers who embrace a comprehensive weather strategy won’t just forecast storms – they’ll be forecasting greater business success.