Impacts of Extreme Weather in Retail

Excessive heat waves, deep freezes, severe floods, frequent hailstorms, widespread tornadoes, stronger tropical cyclones, and other extreme weather events, although typically short in duration, often have significant effects on communities and commercial activity.

Planalytics, in partnership with the National Retail Federation, published Climate-Proofing Retail: Proactively Managing the Opportunities and Risks of Weather Volatility, a report that covered the opportunities and challenges that weather volatility brings to the industry, including the specific impacts of extreme weather events.

Store traffic and the sales of specific products can dramatically increase or decrease before, during, and after extreme weather events, and the impacts often vary across different retail segments. Depending on the type of extreme weather and the severity of the situation, retailers may benefit from demand spikes, suffer lost sales, or see sales pulled forward or delayed.

ACCELERATED SALES

• Supermarkets, mass merchants, and drug stores often benefit from elevated traffic and sales in the days just before and after an extreme weather event
• Sales are pulled forward due to “pantry loading” of food and other necessities pre-event
• Although there can be some replenishing of staple items post-event, sales tend to return to normalize quickly, typically within days

LOST SALES

• Restaurants, gas stations, and event venues can all suffer a drop in sales that are not recovered later
• Daily coffee runs or the normal dinners out generally rebound within a few days, but the missed transactions are never made up. Similarly, one less gas fill-up or the extra discretionary purchases consumers fail to make because a canceled concert or sporting event, can all result in permanently lost revenue for retailers

INCREASED SALES

• DIY stores can capture additional pre- event sales when consumers buy products such as ice melt, plywood, batteries, and more to prepare for extreme weather
• Sales can increase post-event as shoppers focus on clean-up, repairs, or buying replacement products and, depending on the degree of damage, sales gains can be significant weeks or months later due to unplanned spending on costly durable goods purchases

DELAYED SALES

• Clothing stores, home décor stores, and other specialty retailers are often de- prioritized as shoppers focus on need- based purchases
• These discretionary purchases are usually only delayed, and business returns to normal within a few days or a week or two
• While sales can generally be made up, there is the potential risk for lost sales if consumers must direct their budget to major unexpected repairs, or if it is late in the season, delayed sales can become lost sales and markdowns can erode margins

Planalytics Xtreme℠— a demand analytics solution — specifically quantifies the unique consumer purchasing impacts of extreme weather. With Xtreme, businesses can address extreme weather-driven demand swings in existing processes and technology solutions with purpose-built, standalone analytics that account for the unique impacts of these events. Learn more >