If you can’t stand the heat…
Only a few months ago, the Arctic chill that engulfed the UK was blamed, at least in part, for the month of poor retail sales that saw HMV, Jessops and Blockbuster all call in the administrators. A casual observer would have been forgiven, therefore, for expecting to see universal appreciation on the high street of the glorious summer weather that eventually arrived.
Not so. John Lewis was quick to blame the heatwave for lower-than-expected sales, down 8.7% year-on-year to £64.2m in the week to 13 July. Not content with complaining about the weather, the nation’s favourite department store also took a swipe at Andy Murray for winning Wimbledon, and at the national cricket team for its performance in the Ashes, both of which kept us out of the shops and off our computers, and either on the sofa or in the sunshine.
Studies conducted to date highlight three key effects of weather on consumer behaviour:
- Bad weather makes shopping less appealing, reducing footfall and sales
- Fluctuations in weather drive consumers towards (and away from) certain product categories (e.g. towards charcoal and sausages in summer, and porridge and clothing in winter)
- Weather can positively or negatively affect mood, which can influence a consumer’s general propensity to spend money
So what does this mean for retailers? At the simplest level, the weather should have not only encouraged us outdoors (and therefore on to the high street), but also improved the national mood, leading us to part with our hard-earned cash more easily. In fact, as the Telegraph reported, the combination of victories in tennis, rugby and cricket, and the arrival of the Royal baby should have made for an even more favourable retail environment.
The true picture is more nuanced. In the fashion world, prolonged periods of unseasonable weather can be disastrous. The combination of a late Easter and a seemingly interminable winter, for example, can leave fashion retailers struggling to move summer collections, often leading to premature and acute discounting to shift stock: instead of demand simply being shifted from one period to another, it is suppressed, and margins are squeezed even further as result of discounting. The instinctive reaction of cutting future orders to offset the cost of one bad season can put a retailer into a spiral of decline that becomes increasingly difficult to reverse.
Outside the fashion world, the impact of unusual weather tends to be a case of swings and roundabouts, with suppressed demand in one period generally being mitigated by elevated demand later on, and vice versa. In fact, looking at the wider John Lewis Partnership, John Lewis’s sales decline was countered by strong sales growth at Waitrose as consumers cram in as many barbecues as possible before the summer ends. Companies are used to these seasonal fluctuations. Notwithstanding the bitterly cold weather at the start of the year, the fate of HMV, Jessops and Blockbuster were already all but sealed, as has been well documented: retailers in stronger positions survived the winter and were subsequently enjoying the summer.
So how can consumer businesses minimise (or, indeed, capitalise on) the impact of unseasonable weather?
- Avoid knee-jerk reactions: In fashion in particular, it can be tempting to discount too quickly and too steeply in the wake of unseasonable weather, and to follow this with sharp reductions in future stock orders. Unnecessary discounting cheapens brands, which is difficult to reverse. To make matters worse, a sparse and lacklustre range creates an unattractive in-store offering and limits potential future sales: avoiding this vicious circle is essential. Retailers must learn from a poor season, hold their nerve and invest appropriately for the next – not retreat altogether
- Invite customers in: At the simplest level, a pleasant environment makes us happy, and happy people spend more money. And yet at Pragma we are consistently surprised by the slow pace at which this fundamental principle is often applied to capital investment in retail portfolios. Uninspiring window displays, cramped stores, poor lighting, inappropriate music and long waits for assistance add up to make a miserable shopping experience: provided the necessary stock control systems are in place, reducing the volume of product on the shop floor to create a lighter and more pleasant shopping experience does not need to mean lower sales
- Get creative: It came as no surprise to hear that Waitrose’s sales grew while John Lewis’s declined, as we gorged on burgers, beer and Pimm’s: it has been hot, and as the Aussies know, we have plenty to celebrate. More interesting is the statistic that nearly 30% of ice cream sales in the convenience channel occur during the winter months, with flavours like Rum & Raisin, or seasonal variants like Christmas Pudding, Gingerbread and Eggnog insulating the category from the winter chill. Be careful, though: demonstrating the more unsavoury possibilities the weather presents, Coca-Cola tested vending machines with dynamic pricing, which made changes to pricing in line with changes to the ambient temperature. Unsurprisingly, the programme was abandoned.
One-off sporting events aside, good weather gets consumers outdoors, and with online sales still only accounting for around 10% of all retail, getting them to the high street remains critical. No one can predict the weather, and seasonal fluctuations will always create ‘winners’ and ‘losers’, but as we look towards the autumn after a long, hot summer, it’s worth noting that displaying a cool head and some creativity means ‘losing’ may not be quite so painful.
Nick Ashcroft, Associate Director, Pragma Consulting – a St Ives Group company
