Everybody thinks about the weather as Labor Day approaches. Will it rain and ruin our outdoor grilling plans? Should we make alternate arrangements? If it’s sunny and warm, should we make one last day trip to the lake?
For retailers and manufacturers of seasonal merchandise, Labor Day is not just a weekend or a back-to-school sale. It’s an important change in seasons, bringing with it new supply chain and pricing issues.
Sales change with the weather
For businesses that deal in seasonal goods, there’s a strong reverse correlation between temperatures and same-store sales in the fall. If the temperature goes up two degrees, sales fall by 1%. On the other hand, if the temperature goes down, sales go up.
This impact can be huge.
A study from last year’s autumn in Great Britain found that business owners who relied on seasonal items lost a collective 700 million pounds in September and October, due to warmer than expected weather.
Clearly, it pays to know what weather is coming after Labor Day.
Is last year a guide? Maybe not.
Lacking better information, businesses tend to (unconsciously) use last year’s weather as a predictor of next year’s business performance. This is because, by and large, most businesses use last year’s sales to plan for next year.
The problem with using last year as a guide in determining next year’s sales for seasonal merchandise is two-fold:
- Last year’s weather nearly always has a material impact on last year’s sales
- Next year’s weather (in this case fall of 2015) is rarely the same as last year
As it turns out, the U.S. experienced an unusually warm fall in 2014 — in fact, October was the 4th warmest on record.
This had a significantly negative impact on retail apparel sales.
The Comparison to Last Year is Key
For this upcoming fall, despite our prediction that we may experience relatively mild temperatures across a large section of the country, the temperature trend compared to last year (particularly in October where the weather impact is the strongest) will almost certainly be cooler.
For retailers this is hugely important because it means there will be stronger and earlier demand for winter apparel and hardlines.
Act now and avoid the scramble
This unexpected turn in the weather could have a big impact on some businesses, not just in the store but upstream through the supply chain. Manufacturers may be expecting another warm fall and have planned their production runs accordingly. Warehouses may already be stocking supplies similar to last year. And stores may be planning their fall pricing and quantities based on last year.
So what happens when the cold weather arrives early? Everyone will be left scrambling, trying to restock their shelves. Urgent calls to manufacturers may not solve the problem since the manufacturers could well be back-ordered.
Some things you should do to get ready include:
- Call your manufacturers and suppliers early
- Modify stocking plans versus last year
- Plan a cold-weather promotion and have it ready to go
- Check back here often for updated forecasts as we roll into autumn
While seasonal forecasts are not perfect, they do provide context for the upcoming several months.
By combining long-range forecasts with statistical sales and weather information plans are more objective and precise and a scientific forecast is always better than a guess.
It would be a good idea to hedge your bets and prepare now for a cool October, so your business won’t be left out in the cold!