What to Watch: Confronting Climate Change, What Retailers Should Do

Heat domes, flash floods, wildfires, droughts, hurricanes and tornadoes are escalating in frequency and intensity, disrupting consumer demand and supply chains — and that’s raising concerns that retailers aren’t doing enough to mitigate the impact of climate change.

Retailers must rethink investments in stores, particularly in coastal towns where Mother Nature strikes the fiercest. In 2005, when Hurricane Katrina devastated New Orleans, hundreds of thousands fled to Houston. El Niño will lift global temperatures to record levels this year into 2027 as warmer temperatures in Pacific spread around the world. . . .

“There is a maturity curve here,” said Evan Gold, executive vice president of global partnerships and alliances at Planalytics, which helps retailers plan for weather changes and quantifies how weather impacts business. “The most mature businesses measure and proactively account for climate and weather in their systems and processes to drive value and improve operations. Some retailers are proactive on an ad hoc basis when they are able to do so. Others are only measuring the impact for reporting, although they have not yet become ‘proactive’ in addressing a changing climate. The least mature do nothing on an organizational basis.” . . .

According to a whitepaper on climate change coauthored by the National Retail Federation and Planalytics: “By proactively including weather analytics into demand forecasting, dynamic pricing models and personalized marketing campaigns, retailers can optimize inventory management and customer satisfaction. These innovations enable retailers to respond swiftly to changing weather conditions, ensuring that the right products are available at the right times.

“Furthermore, supply chain optimization through predictive analytics can prevent disruptions and maintain the seamless flow of goods, even during adverse weather events,” it continued.

“The path to climate proofing retail lies in embracing technological advancements and innovative planning strategies. By staying ahead of weather-related challenges and committing to sustainable practices, retailers can protect their businesses from the impacts of a changing climate and thrive in the future where adaptability and resilience are keys to success.“ . . .

Planalytics estimates that more than $1 trillion in global retail sales are directly impacted by a volatile climate and weather each year. “In the U.S., we experience one extreme weather event, defined as those causing at least $1 billion insured losses, on average, once every three weeks. In the 1980s, this was experienced once every four months,” Gold said.

Asked what retailers should do to minimize the impact of extreme weather, Gold said: “Start by measuring/quantifying how much weather and climate impacts the business across all areas of the retail enterprise. Once measured, retailers can identify areas to be proactive like planning, allocation, replenishment, marketing and operations.”

According to Planalytics statistics, better forecasting can reduce the amount a retailer “throws away” by up to 35 percent annually, while having the right amount of inventory in the right place and at the right time can drive 2 to 6 percent annual improvements in net income by reducing lost sales and improving product availability. . . .