Preparing for Extreme Weather
CSP Daily News
By Erik J. Martin
Plan ahead to ease the blow to sales and help the community
Most people consider words about the weather to fall into the category of small talk. But for c-store operators, it’s serious business, not idle chatter.
Severe storms and extreme events involving the elements can threaten c-store retailers’ bottom lines as well as their employees’ safety. But planning for and talking about these Mother Nature-induced adversities can help soften the blow—and even recoup some lost sales.
Since Dev Chaudhari opened his five Green Apple and Stop N Go c-stores in the Gainesville, Fla., area 19 years ago, he has weathered several hurricanes and suffered only minor losses. So when Hurricane Irma arrived last September, he was ready.
“I had stocked up on plenty of hurricane supply kits, batteries, water, bread and other grocery items,” says Chaudhari, who was able to keep his locations open during the storm. “Before Irma hit, we had customers lined up for blocks to use my stores. We had to put limits on sales, like 10 gallons of fuel, 1 gallon of water and one loaf of bread per customer.”
Fuel was a particularly hot commodity, and Chaudhari benefited from the fact that many other stores in the area closed up shop or ran out of supplies, including gasoline. Virtually every segment in his stores sold well, he says, especially alcohol and cigarettes, which patrons tend to buy more of when stressed.
“We had sales four times stronger than normal,” he says.
Meanwhile, few weather calamities are as common—or as crippling—as a nor’easter, which brings powerful winds, heavy snow or rain and coastal flooding to New England. Jane Doonan, manager of The Store at Sandy Pond Inc., in Plymouth, Mass., endured three nasty nor’easters in a two-week period in March. But like Chaudhari, Doonan was lucky enough to benefit from the weather’s wicked turn.
“Inclement weather actually increases our sales,” she says. “We have no local competition, so our neighbors come to stock up on our grocery, alcohol, tobacco and deli offerings just before a storm rolls in.”
Helping matters was the fact that The Store at Sandy Pond turned to backup generators to maintain operations when power was lost for 10 hours. On the flip side, Doonan was sold out of staples such as milk, bread and cheese for long stretches.
Even when her c-store lost power during past storms, Doonan has identified products that can keep sales afloat.
“We’ve sold thousands of dollars in bundled firewood and ice so that homeowners lacking electricity could heat their homes and keep food cold,” she said.
Feeling the Heat
Yet sometimes no level of preparation or luck will help stave off the trauma of extreme weather, such as the wildfires that wreaked havoc in Northern California last fall.
“Some of our employees lost their homes,” says Pervez Pir, chief operating officer for Fremont, Calif.-based AU Energy, which owns and operates 126 Loop Neighborhood convenience stores. “Our executive staff and employees from all over the Bay Area came to help our stores and team members that were impacted.”
While many Loop locations were forced to close due to evacuations, others kept the lights on, often running at less than full capacity.
“We wanted to make sure the doors were kept open so people could get food, water and emergency supplies,” Pir says. “We incurred sales losses as well as structural damage.”
David Frieberg, vice president of marketing for Planalytics in Berwyn, Pa., says retailers should expect the unexpected.
“Sales can fluctuate wildly for c-stores as the result of major weather events, depending on the type and magnitude of the event and where the business is located,” Frieberg says. Convenience stores typically see an increase in traffic and sales just prior to a snowstorm, as consumers rush in to gather food and household staples in case they’re snowed in. That prestorm spike is then usually offset by a dearth of traffic once the storm hits; traffic can drop 25% or more by that time, he says.
Case in point: Boston’s nor’easter snowstorm in mid-March resulted in a 22% decrease in demand for hot coffee but an increase of 2.5 times regular sales of ice melt, according to Planalytics data.
“Discretionary items tend to take the biggest hit. For c-stores, that might be ice-cream novelties or charcoal or prepared foods,” Frieberg says. “If it’s difficult to travel, people will focus only on getting the things they need.”
Pir agrees. “You may lose customer counts inside the store due to extreme weather,” he says. “But then you also may sell more cold and cough or flu medicine, something that may not sell usually, which could yield greater margin.”
Stores in busier urban metros fare better, “as they are less reliant on car traffic,” Frieberg says, “while stores in suburban or rural areas tend to see a bigger negative impact.”
Everything in Moderation
While cataclysms make the headlines, moderate, day-to-day weather changes have a greater long-term effect on store sales. Ninety percent of weather-based sales variations in a given year are the result of everyday temperature and precipitation changes, according to Planalytics.
And if a retailer had to choose between either end of the thermometer to positively affect sales, a heat wave is better than a wintry deep freeze.
“Overall, c-store business starts to grow once the average daily temperature climbs to 65 degrees Fahrenheit or greater,” says Don Burke, senior vice president for Management Science Associates (MSA), Pittsburgh, citing results of a study MSA conducted with Weather Trends International in 2013. (See chart below.) “That’s when sales of the largest convenience categories start to rise, like sports drinks, fountain beverages, beer, cigarettes, iced tea, ice and packaged ice cream.”
On the other hand, sales of hot dispensed beverages and cold/cough medications increase when the temperature dips.
“When the temperature is below 65 degrees, make sure there is window signage or gas tank messaging featuring a steaming cup of coffee,” Burke says.
Likewise, when the temperature is above 65 degrees, “adjust your window signage and make sure the most traveled path in your store is either stocked with or has messaging featuring the items they are more likely to purchase: beer, sports drinks and fountain beverages,” Burke says. “Price reduction is not always necessary for the items a consumer is likely to purchase. But it does work well to feature the item or size that appears to present a value, such as a 99-cent or two-for-$3 price point.”
Plan for Demand
Experts suggest pursuing proven strategies to prevent sales losses before, during and after a weather emergency. (Click here to read: 8 Ways to Weather the Next Storm.) First and foremost, use weather analytics to carefully measure the specific effects of weather on the demand for particular types of products.
“Retailers who do so are in a better position to see where more or less of a certain type of product will be needed,” Frieberg says. “Companies that ignore the weather are risking sales, because their inventory or replenishment systems are typically based on historical sales trends and the weather that is baked into those sales numbers. They’re not accounting for how demand trends change as the weather changes.”
Also, multiyear analyses of historical sales and the corresponding weather conditions on a market-by-market basis can reveal worthy insights into how certain weather conditions drive changes in buying behavior for individual products, as well as overall store traffic and transactions, Frieberg says.
“Planalytics does this and delivers a metric called weather-driven demand (WDD), which quantifies (in units or a percent change) how weather changes will affect sales,” he says. For example, he says, beer may have an increase of 8% WDD in a specific market next week. “Retailers could use this information to increase inventory they bring into stores in these markets.” The same insights could be used for marketing and staffing.
Chaudhari takes a more guerilla approach watching The Weather Channel religiously and planning accordingly. He also sees a greater responsibility for himself and his stores when inclement weather arises.
“If you’re able to stay open during a weather emergency, try to help the community by having extra supplies and staples ready to sell,” Chaudhari says. He recommends stocking up on water, batteries, flashlights and even portable radios.
Pir advises retailers to strategize ahead of time with marketing, category managers and operations. “Have a meeting to go over seasons and plan out what your plan of attack will be if you encounter a harsh winter or a heat wave,” he says. “You don’t want to bring in items that may never sell if the weather behaves. But you should know where to go if you need the item and are aware of turnaround times.”
And finally, keep things in proper perspective.
“Bad weather is unpredictable and uncontrollable,” Chaudhari says. “It’s all part of the cost of doing business and part of the risk of running a convenience store. The good news is that the extra high-demand sales you may get right before a storm can help offset losses if and when you have to shut down.”
Pir agrees: “There is no magic bullet here. You need to learn from the past and do everything you can to protect yourself in the future. Be proactive vs. reactive.”