Was this the winter of your discontent?
The winter of 2014 brought record cold and snow throughout North America, and its impact on business and consumer spending was significant. How significant? Well, for the S&P 500 companies, the word “weather” was mentioned in almost 200 earnings calls from January through March — that’s an 81% increase compared with last year.
For businesses in the home sector, which includes hardware stores, home centers, lumberyards and farm supply stores, this past winter was most definitely one for the record books. Need-based purchasing of seasonal items, such as ice melt, snow throwers, shovels, heaters and insulation, spiked significantly throughout the winter in virtually all markets in North America.
As businesses look back on this past winter, there are several lessons to be learned and applied to the planning of winter 2014-2015. The lessons can help “weatherize” businesses to improve and enhance their abilities to manage a winter such as the one we all just experienced.
• Lesson 1: It ain’t over till it’s over
Home centers and farm supply stores typically view spring as their “Christmas Season,” where a bulk of sales and profits can be made. Unfortunately, Mother Nature doesn’t always follow a traditional calendar. While most seasonal businesses were planning on spring breaking in February and March, cold temperatures and snowfall lingered around in key markets, particularly in the Northeast and Midwest. For businesses selling need-based items, particularly consumables such as ice melt, the long winter provided opportunities to gain incremental sales and end the season clean from an inventory perspective. As much as most businesses would like spring to break as early as possible each year, businesses should be planning on having a little extra of those “need-based” items should winter extend into springtime.
• Lesson 2: You can have too much of a good thing
While cold and snow enabled many seasonal categories to enjoy a record-breaking winter, the extreme conditions caused some people to hibernate. Unfortunately, the hardest-hit days likely saw a drop in store traffic and sales as consumers (and employees) simply could not get out to the stores.
As businesses think about next season, there are several strategies to employ to mitigate these “lost days.” First, plan for an increase before the event as well as after the event. Loading in inventory on the forecast of snow and cold is critical to meet consumer demand regardless of how the weather actually materializes. Second, a simple activity, such as sending a weather-relevant email to customers with a focus of key seasonal items, helps ensure that customers will come to your business when they are purchasing to need. Third, businesses should deweatherize their historical sales so they plan from a weather-neutral baseline.
• Lesson 3: Media drives demand more than the actual weather
As we live in a world of “constant connectivity,” there is continuous access to information. Consumers get their local forecasts on multiple devices and media outlets. Weather is one of the most localized items and is typically the first thing people check when they wake up in the morning, and one of the last things they look at before going to bed. From a business perspective, consumers often make purchasing decisions based on the forecast of weather, rather than the actual weather that occurs. Therefore, if the forecast calls for 6 ins. of snow in Chicago, many consumers buy salt, shovels, etc., in anticipation of snow.
How much snow actually falls is almost immaterial from a business perspective.
• Lesson 4: All snow is not created equal
Consumers are acclimated to the environments they live in. A forecast of 2 ins. of snow in January in Albany, N.Y., is hardly newsworthy, while the same forecast in Atlanta had schools closed, transport centers shut down and consumers gearing up to be housebound. Having a clear understanding of weather’s impact on consumers will help determine an actionable plan for your business.
• Lesson 5: The hangover effect Is real
While markets that experienced a record cold and snow-filled winter should not expect to have as extreme conditions next winter, there is a “hangover effect” for the home center space that is real. Analysis of historical spending patterns shows that the forecast of the first winter “event” in the season following an active season drives significant demand for seasonal products. Those consumers who decided to forego a snow thrower this past winter are more likely to make a purchase during an early-season snowfall next season, regardless of the accumulation amounts. Therefore, businesses should expect a nice spike in pre-season and early-season demand for snow-removal items.
• Lesson 6: Extreme weather is an opportunity for customer service to shine
During extreme events, consumers look to their local home centers and hardware stores to have the products they need, and also to be a trusted and valued member of their community. Certainly, availability of need-based products is critical. Moreover, businesses can also do a few simple things that help them serve their customers better. This includes shifting need-based products to multiple high-traffic locations throughout the store. Additionally, keep parking lots and walkways clear and dry to enable customers to have easy and safe access to your business. Position corresponding products near the ones you know customers are coming in for. For example, if customers are coming in for ice melt before a storm, merchandise additional inventory of batteries, flashlights, canned foods, consumables, etc.
As most consumers buy “at need,” customers typically look to make need-based purchases quickly in a store they know and trust. Having the right product simply isn’t enough for you to stand out.
During these intense events, businesses have an opportunity to shine. Provide additional value-added products and services to your customers at a time they want it, and need it. They will reward you with their business now, as well as loyalty in the future.
Evan Gold is senior VP client services for Planalytics, the leader of Business Weather Intelligence. Learn more at planalytics.com.