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©2017 The Weather Company, an IBM Business. All rights reserved.
The ReTail holiday Playbook 2017The smart retailer’s forecast to seasonal profits
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Table of conTenTs
The holiday shopping imperative 3
2017 seasonal forecast 10
a Winning strategy 16
Weather solutions that scale 23
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billions of dollaRs aRe aT sTakeThe National Retail Federation projects the U.S. consumer retail spend will grow 3.6-4% this holiday shopping season.
That means more than $670 billion dollars of consumer spending is up for grabs in the months of November and December – that’s 10x greater than the second-highest-grossing time of year, the back-to-school season.
Spurred by growing consumer confidence, Europe is also expected to have strong holiday sales: Shoppers in the U.K. are projected to spend 3 billion pounds on Black Friday to kick off the holiday season.
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4 keys To consumeR behavioRWhen planning a seasonal strategy, it’s important to account for the critical factors that influence consumer behavior:
1 2 3 4 Location Where is the consumer located?
Emotions How does the consumer feel today? Are they optimistic, or is today likely to stir the holiday blues?
Activities What are shoppers likely to be doing today? Is it an ideal day to be outside, or is a cozy chair and cup of tea calling consumers to stay hunkered down at home away from frigid air?
Needs Is it freezing cold outside? Will shoppers need a new coat or gloves? Does it feel unusually mild?
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The logic is sound, but how does a retailer execute against this vision? With the forecast! Weather is the most accurate predictor of consumer behavior and provides the critical link between shoppers and inventory planning, staffing, and promotional outreach. Best of all, the weather can be predicted in advance, so consumer behavior and its impact on sales can, too.
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A retailer’s year can be made or broken during the two months of holiday shopping. That’s why we believe retailers and merchandisers deserve every advantage in planning their holiday season. Smart businesses will turn to the biggest predictor of consumer behavior and operational efficiency, weather, to optimize holiday 2017 profitability.
Paul WalshDirector of Weather Strategies, IBM
nearly 74% of retailers in the u.s. and u.k. report that holiday sales (november and december) contribute 20% or more to total annual sales.
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Weather and seasonality Play a major Role in driving demand While it’s obvious that colder temperatures… • Drive ice scraper sales, not air conditioning coolant
• Encourage people to stay home instead of going out to eat
• May increase demand for cold and flu relief products
… it’s the less obvious insights that create differentiation and a competitive advantage. did you know:
• Soda sales increase during snowy or rainy winters.
• Cold, crisp weather provides an ideal context for pasta consumption, aligning with feelings of comfort and escape from the elements.
• The flu survives and spreads when the air is dry.
To act on these insights, retailers must understand how much demand for specific products will be created, and when and where the can capitalize on them. They must identify the impact of temperature fluctuations and account for myriad other conditions that affect demand beyond temperature, such as wind speed and cloud coverage.
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an imPeRaTive To WoRk diffeRenTlyIn a world where consumers have many choices, including online options, creating exceptional shopper experiences while controlling costs is paramount to profitability.
While retailers can’t change the weather, they can control its economic impact. Through the use of analytics, retailers can learn how consumer interaction with their brand will change based on the weather and leverage this insight to:• Plan orders from suppliers and align promotional calendars for the holiday season, accounting for seasonal weather variance. • Predict buyer demands and shopping preferences by location and time of day. • Improve the shopper experience by matching products and staff levels to predicted demand. • Create personalized offers that motivate shopper action when conditions are right to buy.
Used across marketing, supply, store, and online operations, weather will help retailers effectively reach and engage millions of shoppers this holiday season.
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case sTudy: home improvement Retailer Trims Trees to better conversions
objecTive A leading home improvement retailer – and the largest seller of live Christmas trees – wanted to better capitalize on consumer desire to decorate during the holiday season.
Not only did this retailer want to sell trees, it also wanted to drive awareness of its home décor solutions such as blinds, furniture, and home accents to enhance holiday decorating, as well as top home improvement items such as tool sets, which are sure to be on holiday wish lists. soluTion Capitalizing on the insight that seasonal firsts drive energy, optimism, and a strong consumer response, the retailer leveraged WeatherFX, a winter seasonal first-trigger designed to align promotional offers to mindset and engage holiday shoppers during key shopping times, including Black Friday and the Friday before Christmas. ResulTs The results were a stunning 1,000%+ improvement on all advertising click-thru rate benchmarks.
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u.s. seasonal forecast for november–january
2017 holiday foRecasT
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a cold sTaRT To holiday shoPPing is good neWs foR ReTaileRsLong-range weather forecasts suggest that the days leading up to Black Friday and Cyber Monday may be colder than last year for much of the country, putting shoppers in the mood for seasonal items.
imPacT: While the first chill of winter is often good for brick-and-mortar retailers, a cool Thanksgiving night or Black Friday might encourage shoppers to go online instead of leaving the comfort of home for their local store.
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2017 u.s. holiday sTaTisTical change
u.s. Weekly naTional TemPeRaTuRe change comPaRed To PRioR yeaRNovember 2017 through January 2018
mildeR
coldeR
Thanksgiving week ChrisTmas week
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NOVEMBER DECEMBER
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Trends across a 7-day week ending SaturdayCalendar based on the National Retail Federation fiscal calendarStatistical trend assuming typical seasonal weekly temps
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u.s. foRecasT The Weather Company is predicting below-normal temperatures and more precipitation across most of the northern half of the country with warmer-than-normal temperatures and less moisture for the southern half for most of the holiday shopping season. The largest positive temperature (warm air) anomalies are expected in the South-Central and Southwest U.S. Unlike last year, expect colder temperatures in the North-Central and Northeast U.S., especially during the first half of winter. The more persistent winter cold will be found in the Northwest U.S., similar to last winter.
For northern states, the colder-than-normal temperatures will leave a big impression, as Mother Nature has been pretty kind early in the winter season for the past two years. This is good news for seasonal apparel and outdoor winter activity sales.
november • Northeast, Central, and Southwest continue with above- normal temps• Southeast and Northwest will experience colder temp earlier in the season
december• Northern regions showing below-normal temps, while the South across the country will see warmer temps.
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euRoPe foRecasT The Weather Company is forecasting above-normal temperatures and below-normal precipitation across most of the eastern half of Europe, with slightly below-normal temperatures and wetter conditions confined to parts of western Europe.
november • Nordic region – Warmer than normal• U.K. – Slightly warmer than normal• Northern Mainland – Warmer than normal• Southern Mainland – Warmer than normal west, colder east
december• Nordic region – Colder than normal• U.K. – Colder than normal• Northern Mainland – Colder than normal• Southern Mainland – Warmer than normal
Precipitation forecast Temperature forecast
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Weather impacts every part of retail operations from staffing to deliveries and even shopper sentiment and propensity to purchase. Yet, despite the essential role weather plays, many brands think of weather as an unfortunate obstacle that must be worked around. Top-performing retailers reject that notion and are instead using a documented weather strategy to increase revenues while driving down costs.
Although extreme weather events get all the headlines, there’s real money to be made in everyday weather fluctuations. The current and anticipated weather can be used to forecast consumer needs with incredible accuracy. This is a particularly valuable differentiator during the holiday season, when capturing the largest possible share of consumer spending is so instrumental.
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Revenues
cosTs
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align camPaigns by locaTionContext matters. What initiates a splurge for a new sweater in Arizona is likely to encourage a short-sleeve walk in South Dakota.
Consumer behavior is contextual to location. A study by The Weather Company surveyed 6,586 consumers about what they consider “sweater weather.” The results show a stark difference in temperature triggers based on the context of average weather patterns at their location. In Arizona, a 65° day calls for toasty cover, while in South Dakota it’s not until 51° that sweaters are likely to be used.
The same principle applies for all types of seasonal items. The most effective marketers will trigger campaigns based on the consumer’s local context and the weather forecast.
60° 58° 55° 51°65°
Texas new york minnesota south dakotaarizona
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sTock invenToRy To PRedicTed demandsMany inventory decisions must come months in advance of actual consumer demand. By relying too heavily on a prior year’s sales, demand forecasters miss shifts in behavior predicted by the seasonal forecast. Although orders for this year’s holiday season have been placed, there may still be time to make final adjustments by location before it’s too late.
Expect strong demand for traditional winter seasonal items including:• Apparel & footwear• Cold-weather accessories and sporting goods• Cold-weather home improvement products• Beer, wine and spirits
Southern regions with higher-than-normal temperatures should extend demand for warmer weather products through the early weeks of December.
The cost of buying, moving materials and converting them into services or goods for sale—represents approximately 60 percent of manufacturers’ costs, on average. Because these costs involve shipping and transporting of goods, they are heavily weather-impacted.
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dRive in-sToRe visiTseCommerce is a rapidly growing segment of holiday shopping, but brick-and-mortar stores still account for most end-of-year sales. Take advantage of the season by using incentives to influence purchasing decisions and drive more traffic to the stores.
• Create store experiences that make shopping a social event. Target is bringing digital interaction in- store with playful holiday-themed photo booths that can show shoppers coming down the chimney. • Encourage customers to get out of the comfort of their homes with weather-triggered advertising or email campaigns when weather conditions are optimal for in-store shopping. • Use the milder weather in most southern regions to drive in-store shoppers. Shift promotions in November to gifts that aren’t just for winter but make sense year-round, such as music, electronics, sneakers, and jewelry.
OPENHoliday spending still takes place in brick-and-mortar retail stores. A Deloitte study reports that consumers expect to spend almost half their budget in-store.
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oPTimize sTaffingOptimizing staff levels is a tricky balance. Overstaffing wastes resources, while understaffing leads to subpar customer experiences and lost sales. Leverage short-term (10-day) local forecasts to predict foot traffic and adjust weekly schedules as needed.
• When the weather forecast favors in-store shopping, consider asking staff to stay for a few extra hours.
• When road conditions predict slow foot traffic, don’t replace staff that call in sick.
• Allocate staff to weather-safety tasks such as clearing the parking lot and walkways, mopping wet entrances, or rearranging displays when weather conditions require.
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For retailers like Target, who plans to hire 100,000 workers for the 2017 holidays (up more than 40% from last year), effective resource allocation is essential to profitability.
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bRace foR holiday ecommeRce deliveRiescolder temperatures in northern states may drive more shoppers online. be ready for more holiday deliveries than in 2016.
• Deliver on time by checking road conditions that might be impacted by weather and traffic.
• Put agile communication plans in place to address last-minute shipping delays caused by winter storms.
• Add delivery hubs to respond to the higher demand and minimize shipping delays.
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online holiday sales are on the rise. eMarketer predicts that U.S. ecommerce holiday sales will increase 16.6%, up from 14.3% in 2016.
Forrester reports that the online spend will grow 11.2% in Europe.
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The WeaTheR comPany,an ibm business, can helpData packages and advanced analytics solutions allows retailers to make smarter business decisions that optimize consumer interactions and back-end operations using the industry’s most accurate weather data.
With The Weather Company’s best-in-class suite of custom weather, traffic, and location datasets, forecasts, and alerts, you can better understand how weather affects retail production, manufacturing, staffing, and even store traffic patterns.
leverage the predictive data assets of weather, location, and Watson to effectively reach and engage millions of holiday shoppers this season.
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Predict demand – Understand the impact of weather conditions on product category demand, optimize production, and maximize sales.
optimize supply chain management – Identify and respond to potential disruptions to your supply chain, keep workers safe, and optimize performance.
delight in stores – Predict weather’s impact to adjust staffing strategies and take a more proactive approach to customer service.
better manage inventory allocation, refine staffing and operations, generate geo-targeted weather triggered ads that drive sales, and increase brand loyalty – all with confidence in the insight you get from The Weather Company solutions for retail.
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advanced messaging Alert your staff to prepare the stores for any possible safety hazard as a result of the weather and protect them from harm.
Deliver customized messages to your personnel via email, SMS, push, or an existing messaging system to help them avoid weather-related disruptions and accidents.
optimized Planning Stay aware of incoming weather and traffic and take actions such as fine-tuning tasks or adjusting staff to better serve clients and promote weather-appropriate products.
optimized Routing Optimize workforce productivity and route selection to keep distribution, dispatch, driving, and delivery of freight on schedule.
impacting Trends Understand variations in product sales and store traffic by weather thresholds, and identify positive/negative weather drivers of store performance over a timeframe and location.
Thresholds insights Leverage data science to uncover thresholds of various weather types by roadway segment, analyze freight and cargo damage rates, and quantify inventory losses due to transport damage or delays.
integrated delivery Integrate weather data and interactive content into your analytics or apps to extract business insights and improve your existing supply operations.
WeaTheR aleRTsfoR WoRkeR safeTy
oPeRaTionsdashboaRd
WeaTheRsignals
WeaTheRaPis and WidgeTs
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mediadynamic ad formats and Personalized user experiencesReach our 244M global engaged users with brand-safe, personalized experiences that help acquire new customers: media solutions, sponsorships, video, and programmatic media.
daTaWeatherfX and journeyfXLeverage weather’s impact on emotion- and location-derived audience targeting by using one of the world’s largest first-party datasets to find and reach relevant audiences and deliver messaging that drives consumer action.
TechWatson ads, ibm marketing Planner, Targeting, bidding optimizationUse AI and Watson’s APIs to enable 1:1 personalized consumer engagements. Leverage Watson and neural networks to effectively plan and develop customer segments, identify audiences, and reduce customer acquisition costs.
WaTson adveRTising
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Take youR fiRsT sTePit’s not too late to improve your holiday season marketing effectiveness.
Schedule your personalized weather and location strategy consultation today.
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