story by Kim Souza
ksouza@thecitywire.com
Nasty winter weather throughout large parts of the U.S. in the first quarter of 2014 resulted in a swift kick to the bottom line of many companies. Wal-Mart Stores reported weather-related losses of almost $100 million. Fort Smith-based ArcBest said the bad weather shaved $10.5 million off its topline.
Planalytics estimated that businesses nationwide during January suffered $5 billion in weather-related losses. Retailers, airlines and logistics firms led the pack. By April that figure swelled to $15 billion.
Retailers have long understood the relationship that weather plays on their net profits from tracking dangerous storms like Hurricane Sandy and the run on grocery staples and generators to more umbrella sales during spring showers and Gatorade sales spikes during the dog days of August.
With the Farmer’s Almanac forecasting a frigid winter throughout most of the country, retailers have opted to embrace Mother Nature all year long in a more proactive manner. Wal-Mart has worked with Weather FX for almost two years to try and get a handle on optimizing sales based on weather patterns – favorable and otherwise.
WEATHER TRIGGERS
Weather FX is a division of The Weather Company, which is also parent company of The Weather Channel. Sara Livingston, director of market solutions for Weather FX, said she works closely with Wal-Mart and a host of other retailers large and small who want to be proactive about merchandising around the weather all year long.
Wal-Mart’s chief merchandising officer Duncan Mac Naughton first referenced the partnership with Weather FX in March during a speech at the ISI Retail Summit.
“We work with Weather FX to identify emerging weather patterns and then trigger advertising direct to customer. So for instance in Atlanta, you wake up maybe it is 55 degrees out this morning, 30% humidity by this afternoon it is 70 and 90% humidity. That would trigger, for instance, Gatorade ads or bottled water ads. It would go directly to the store's Facebook page to mobile applications and to our in-store network,” Mac Naughton said.
He said the same thing is done when pollen count rises, “we would immediately start to feature over-the-counter medication as well as all the other things folks are looking for.”
Wal-Mart spokewoman Molly Blakeman said one use this summer by the retailer involved featured ads online, mobile devices and social media sites for patio furniture and grills. She said the retailer continues to use the collected weather data paired with its sales data and merchandise across the company’s entire big box format.
Livingston said Weather FX makes thousands of data points available to retailers and other clients who get real time data in thousands of locations. That data includes temperature, precipitation, dew points, wind speeds and the combinations. She said they map sales data against weather data to try and derive optimum times to promote certain items which are communicated back the retailer in real time.
WEATHER NOW
Local companies have also joined forces to harness the power of weather-related sales. “Weather Now” from Crossmark is one example.
Corey Paquette, vice president of client service in Crossmark’s Walmart Division, said his company partnered with local tech startup Atlas Technology to offer clients weather merchandising services. They are four months into the service offering.
“At Crossmark, on the Walmart team, we have 2,200 reps covering all Walmart Stores. This allows our reps to be in the stores two to three times per week, every week. With this coverage model we are able to go in at the beginning of the week and then again at the end to drive sales and capitalize on the weather event,” Paquette told The City Wire.
Outdoor paint sales is a prime example of where data and sales work together. The weather may be glorious all week long but if it is rainy on the weekend paint sales won’t lift. He said the timing of activity around expected weather is perhaps more important than the weather itself, Paquette said.
“There are companies that can send out weather models for next spring and let us know that a region will be X degrees cooler, warmer… wetter or drier than last year or average but it doesn’t allow us to capitalize on sales now. What Atlas and Crossmark are doing with Weather Now is taking an accurate, real 10-day forecast and putting resources against it,” Paquette said.
On Thursday of this week, he said Weather Now can provide retailers a 10-day forecast so they can plan for weekend sales. From there they can deploy a rep to a store to go in at the beginning of the week, order product, secure a location by working with a store manager and then return at the end of the week to build a feature to be ready for the next weekend weather, he said.
Atlas Technology provides the big data crunching by gathering thousands of weather-related bits of information from multiple sources like Weather Underground and the National Oceanic and Atmospheric Administration (NOAA).
REMOVING EXCUSES
Shawn Beckwith, executive vice president of operations at Atlas, said this data has become a hot commodity for retailers and suppliers as well as third party merchandising groups. The partnership began with Crossmark because one of their customers requested the service. They needed to drive more sales of a particular item inside retail outlets.
Beckwith said the first cold snap of fall is a great time to promote weather stripping, but it has to occur on the weekend for optimum sales. He said if it’s cold on Wednesday but warms up by Friday consumers won’t take the bait.
He said their research shows the onset of soup sales aren't necessarily related to cold weather, but more importantly the downward trend in average temperature. For example, if a particular climate zone's average high temperature for the season is 75 degrees, a drop to 72 degrees is enough to trigger the mood.
"It's more about how you feel than the actual temperature for some categories," Beckwith said.
He said having good forecasts and reacting accordingly can help retailers and suppliers guard against losses. Beckwith said eggs are one of the items that sell out ahead of ice storms and snow blizzards, because they can be boiled ahead of time and are a protein source. But they have a short shelf life.
The one thing that tends to happen if retailers are not plugged into weather-related demand is that the store sells out of eggs, but bad weather may prevent the truck returning the store to restock the coolers. Stuck trucks result in eggs expiring in a distribution center, which is a double hit for the retailer and the supplier, Beckwith said.
Beckwith also said the combination of data and marketing is already changing the retailer and supplier's behavior from explaining lower-than-expected sales to capitalizing on sensor driven demand, such as the weather.