How retailers can stay ahead of weather-related challenges

Episode transcript, edited for clarity

Bill Thorne: Welcome to Retail Gets Real, where we hear from retail’s most fascinating leaders about the industry that impacts everyone, everywhere every day. I'm Bill Thorne from the National Retail Federation, and on today's episode, we're talking to my friend, Evan Gold. He's the executive vice president of global partnerships and alliances at Planalytics. We're going to talk to Evan about NRF and Planalytics recent report, “Climate Proofing Retail,” discussing the increase in weather volatility and the impactful climate related risks retailers face today.

Evan Gold, welcome back to Retail Gets Real.

Evan Gold: Thanks so much, Bill. It's great to be back and talk with you again.

Thorne: So, tell us about your role at Planalytics, and then let's get into this newest report that you did with the National Retail Federation.

Gold: Sure. Happy to do that, Bill. In my current role, I lead partnership and alliances for Planalytics. For those not familiar with Planalytics, we're a demand analytics company, and we help retailers and other consumer-centric businesses around the globe both measure and manage the impact of climate and weather. So, on a day-to-day basis, my role, and as well as members of our team, we collaborate with technology partners, consulting firms, data partners, so that our customers can quickly gain value from our weather-driven demand analytics.

So, in addition to that, partnerships and alliances also works with industry leaders, which includes universities, as well as organizations such as the NRF — of which we've enjoyed a long-term partnership and really enjoy collaborating together on various projects and thought leadership activities — and we've done a number of activities together, Bill.

We are really excited about this latest research report that we put together. As you said, it's titled “Climate Proofing Retail,” available for download on NRF dot com slash research, as well as Planalytics dot com. The paper, as you said, focuses on how the changing climate and related weather volatility is influencing retailers, their customers, and really how they're adjusting their purchasing behaviors.

And we go into the practical steps that companies can take to manage the risks as well as opportunities that it brings. And I know we're going to talk about it in a minute, but before we dive in, I would be remiss if I didn't start off by thanking everyone involved in putting it together.

Specifically, you know, the team in NRF, a huge shout out goes to our friend, Katherine Cullen, VP of retail and consumer Insights. She helped to incubate this idea, and was very supportive as well as Scot Case, NRF's VP of corporate social responsibility and sustainability. He provided some great insight, support, guidance, as well as the Planalytics team. Everyone involved there to help create, fact check, support the research and content.

As you can imagine, Bill, there is a lot of effort, coordination, collaboration and partnership, and we are very grateful to the NRF and everyone involved, and extremely proud of this paper that we put out together.

Thorne: Certainly, takes a village. So, I don't think people really think about weather when it comes to impacting retail, and it plays such an important part in how retailers can successfully, you know, conduct their business.

And it is, and it has so many different aspects. I mean, you think about the supply chain. You know, probably number one. But also, you know, store closures, electricity, big storms. I mean, all of these things together — this has got to keep retailer CEOs, you know, supply chain officers, just awake at night, wondering what's next.

Why is talking about weather's impact on retail so important right now?

Gold: Yeah, that is a great question, right? Start with “why.” For starters, climate and weather-related variability has a huge impact, as you said, on retail. And our study, according to the American Meteorological Society, over 3% of all retail sales are directly affected by changes in the weather. That's over a trillion dollars today.

However, recent changes in climate and increasingly volatile weather have resulted in a lot more pronounced impact. So, weather volatility, it's the most impactful climate-related risk that retailers face today. No other external variable has an influence on consumer demand as frequently, directly or meaningfully as changes in the weather. That said, climate risk of weather-related sales volatility. It's the least understood, least measured and least acted upon external factor that affects retail performance. So, this paper is really to highlight, you know, some strategies and tactics that retailers of all sizes channels and sectors can do to manage the impacts.

Thorne: Yeah, you know, you think about the — I always refer to them like the bigs, the mids and the smalls. The bigs, you know, I've seen some of their operation centers that they have for weather events, things that do impact their stores in communities that are hit by, you know, like tornadoes or, again, the supply chain, you know, if there's a typhoon or a hurricane. But the mids and the smalls, I think that, you know, they're, they're the guys that are really just, you know, out there, and being prepared is the most important thing that they can do.

I mean, there's not much more they can do than be prepared. And these kinds of reports, these kind of, this kind of research, I think really does help them prepare in a way that the bigs and the, and some of the mids, do on a day-to-day basis because they have both the resources and the impact in the communities that they serve.

But what are some of the different ways that weather impacts retailers? I mean, we've talked about the supply chain, but I mean, you know, like the big weather events. Or even, even just the everyday changes in weather, like, you know, one day when it's 78 degrees with low humidity and the next day it's 112, “feels like” temperature in the middle of a big city.

Gold: Sounds like you're speaking from experience.

Thorne: I am. I definitely am. Especially today.

Gold: Yeah, exactly. There's a lot of ways …  you know, when retailers think about whether, you're right, they often do map to the extremes and, and you're absolutely right: the climate, and the changing climate is driving more volatile weather. You know, (just as an example) here in the U.S., we have a billion-dollar weather disaster on average every three weeks …

Thorne: Wow.

Gold: In comparison, back in the ‘80s, it was once every four months. So, you are right: the weather is a lot more volatile. Nine of the top 10 warmest years on record have occurred since 1998. We're getting more frequent rainfall, extreme rainfall events. So, tornadoes, hurricanes, even heavy or deep freezes — all of these factors are having an impact on consumers [and] their purchasing habits.

But like you said, Bill, considering all of that, interestingly (and this is really important), over 90% of the sales volatility that a retailer experiences comes from the day-in and day-out changes in weather, and not from those extreme events.

Thorne: Is it because how the consumer reacts to the weather? When we say that those everyday shifts have an impact, I mean, what does that impact? I mean, it's not big, but it's got to be, you know, little things that add up.

Gold: Yeah, obviously the weather happens every day. The extreme events don't. They just get magnified by, you know, the media and everyone carrying around smartphones. But the everyday weather, like you were just talking about, the extreme heat and its changes, that's influencing us all every day, whether we recognize it or not.

You know, the influences they do change by sector. For some sectors of retail, the sales actually get accelerated, especially for like need-based products. If you think about people going in for groceries or into supermarkets or mass merchants, convenience stores, right? So, they will often see a lift. And accelerated sales in advance of weather conditions.

For others, it's a net positive. They actually wind up with increased sales. So, think about DIY stores or home centers in advance of a storm. Certainly, people go in and they're buying all of those activities and on the back end to do some cleanup.

While some, unfortunately, sales wind up getting lost, right? They're not able to be made up. So that's especially true for restaurants, right? If you go out to your favorite lunch spot and you don't go because of the weather, you're not …

Thorne: Because it’s 112 “feels like” temperature outside? Yes, I know exactly what you're talking about.

Gold: … the next day you're not going to buy two lunches right. Those sales are absolutely lost there. They are not made up.

And then sometimes the sales wind up just getting delayed, right? For discretionary things like apparel or home décor, other specialty retailer that may get disrupted, but ultimately those sales come back. But again, from a retail perspective, even if the sale is made a week or a few weeks later, there are some margin implications, so there's profitability impacts there too. So, there's a lot of different nuanced influences based on the type of business.

Thorne: Well, you know, as I said, the bigs, the mids, and the smalls. Bigs, you know, they're doing it every day. They've got the, you know, the centers where the call ins, and you've got everybody ready for, the big event.

How should all retailers, however, I mean, if you look across the board, be thinking about managing their businesses in light of the weather's impact, and especially today as we're seeing these extremes in, you know, climate changes?

Gold: Yeah, that is a great question. I don't think … naturally, a lot of people just simply want to look at weather data, and that might work for a small business, like you said, if they have one location. But some of these mid-sized, big ones, you know, looking at weather data can cause more harm than good, because if it's 70 degrees, you know, that may mean different things to different people. Seventy in July is going to be different than 70 in January. Seventy in Boston is going to be different than 70 in Austin.

So, looking at the weather data itself doesn't translate well from a business perspective because it's subjective and unfortunately putting that in the systems can cause disruption and noise and more harm.

So, really to understand the nuances, the paper, what we talk about is leveraging the power of analytics to get a fact-based objective answer to exactly how and how much the weather impacts sales of specific products as well as traffic in the stores and sites. So that analysis will unlock some key understandings like weather drivers, what are the conditions that impact sales. As well as weather sensitivity, right, the percent of sales that are directly attributable to the weather. So that step does involve some math, statistics, and analytical tools to correlate historical performance with weather and do so at a localized level. But that's really the key to unlocking it.

So, in our study, we showed that, and gave some examples of things like, you know, heaters have a 40% weather, 42% weather sensitivity in January, lawn fertilizers 19% in March. But again, that sensitivity will change by time, it'll change by location, and some frankly are less intuitive, right? Things like barbecue meats have an 11% sensitivity in September, 6% of apparel traffic in April, or even things like, you know, 5% of tomato sauce sales in January. You know, and that could be a lot of business for some retailers, right?

You can measure that weather sensitivity across all types of categories. We've looked at trillions of them, and found some unique sensitivities across things like, you know, foods like peanut butter, fruit, vegetables, even pet food, paint, furniture, health and beauty, home goods, automotive, shopping mall, traffic — every type of business is impacted by the weather, as well as the customers that go to the stores and the sites. So, measuring that first step is really the critical first step to manage it.

Thorne: So, it's not just stocking … you hear storm’s on its way, what is it, the toilet paper, and the bread, and the milk. Gone.

Gold: That's right. Yeah,

Thorne: It goes well beyond that.

Gold: Well beyond it, yeah. Because once you've unlocked that impact of the of the weather and how it adjusts from a consumer behavior perspective, really the possibility to leverage those analytics are wide ranging. They're constant, right? Mother Nature is always providing businesses with opportunities to better serve their customer or to mitigate risk. So, we call out in our paper, a lot of use cases around business functions, around marketing, finance, planning, allocation replenishment. Even reporting, right? 

Reporting is one of the most commonplace, and frankly, one of the easiest places for retailers to get started — simply by reporting on the impact of weather on performance. It's an ideal way for businesses to leverage these analytics, to provide a single version of the truth, and ensure that everyone understands how the weather impacts the business.

Again, there are some great examples and use cases in the paper. So again, I encourage everyone to download it. Suffice it to say, the use of those analytics again, historically or proactively can drive significant benefits around sales increases, forecast accuracy, improvements, driving in stocks, customer loyalty and satisfaction increases, overall profitability.

So, the possibilities and applications really build. They're virtually endless.

Thorne: I, one of the stats that I used to love — I still love — from my Walmart days was the strawberry Pop Tarts. If a hurricane was predicted, they would sell seven times the number of strawberry Pop Tart boxes than they would in a normal sales period. It's pretty …

Gold: It is, and you have to understand those insights and then be prepared for them, right? Because the customer is going to come in looking for strawberry Pop Tarts or whatever the item is because of the weather. You better be prepared to make sure that that you have those products on hand.

Thorne: How, I mean, you're at Planalytics, how long have you been there?

Gold: I've been here 18 years, Bill.

Thorne: Eighteen years. Did you, as a youth, say, one day I am going to get an education so I can work on research programs that consider the weather and its impact on industry?

Gold: It's evolved that way. But I will tell you, my entire career has been in retail. Either working directly for retailers or, you know, consulting or with companies like Planalytics that help retailers. So, I've been in retail my entire career, and I've just kind of followed that passion, that North Star, if you will.

Thorne: What is the best career advice that you've received, and what is the career advice that you give to others that are just starting out in their careers?

Gold: Such a good question. Such a good question. Yeah, I have been in retail for a long time, and I really have been blessed to have had the opportunity to work for some great companies, and more importantly, with some excellent people.

So, early in my career, when I worked directly with retailers, I tended to take things extremely seriously, and I had a manager who regularly reminded me that, you know, essentially, he was saying, “Hey, we're not saving lives here.” And it took me a while to truly understand what that meant. It wasn't that the work we were doing wasn't important. It was just a reminder that we're here to do what's necessary to delight the customer, make the lives of our employees and our customers around us better, while having a little bit of fun, being creative and having the latitude to try new things.

That was, you know, it's all really part of that retail experience. And as I've grown through my career, I've spent a lot of times and time in management, and I will honestly say that that is (for those that are in management) to me, the hardest part of the job is hiring well. Because if you hire well (and I've had the opportunity to work with some unbelievable people) it makes the job and everyone else around you so much more satisfying. That is definitely easier said than done. But hire well. Invest in people. Treat them well and with respect and you and your organization will be rewarded infinitely times over.

Now, the last thing I'll just kind of close with on that point is for people that are just now starting in retail, right? There is no better industry to get involved with, right? It is the most rewarding. It's the most upwardly mobile. It's the most versatile industry on the planet. And you know, retail can mean different things. You can mean working directly for retail and stores, and warehouses, and home offices. It could also mean working with a technology company, a service provider, a consulting firm, a trade organization — any number of retail-adjacent companies.

So, my advice to those that are just starting out is to forge and sustain some lasting connections because retail, while it's one of the largest industries on the planet) I think it's the largest private-sector employer) yet it often feels small and intimate, and many of the contacts that you're going to come across, they may shift roles and companies, but you're likely to continue to cross paths. So, build those meaningful relationships early on because that's an investment that will lead to future opportunities.

Thorne: You know, I was talking to somebody yesterday, and they happened to listen (for whatever reason) to one of our Retail Get Real podcast episodes. And they said, at the beginning, you said the industry that impacts everyone, everywhere, every day. And they said, you know, it really made me start thinking — it does. It really does. It's not just a, you know, throwaway, you know, slogan. It's, it really does impact everyone, everywhere, every day.

And, it is a phenomenal industry. And I think that people don't … it’s just there and they take it for granted. But when they start thinking about its impact on the communities, when they don't have it.

Speaking of retail, what excites you most about the future of this industry?

Gold: Yeah, that is also is a good question right seeing into the future right. It is, you know, the most exciting and innovative industry on the planet. It continues to be strong. It's growing, so I don't see that changing. It's really just about how that growth gets realized, right? So, there's a lot of talk, you know, at, about things like artificial intelligence, machine learning. Today, we talked about the power of analytics as an enabler to manage climate and weather volatility.

You know, I've been retail long enough to see various changes in product lines and technologies and operating models, but in the end, it's really all about having an engaging business environment. Providing exceptional value and delighting customers, right? That's that North Star that's going to remain.

So, the future is really all about how we — as retailers and those that support retailers — how are we able to evolve through our own journeys to support and enable that growth and success? And frankly, Bill, that's one of the main reasons why we enjoy collaborating with the NRF, right? From its research and industry insights, the advocacy you provide, charitable foundations, council organization, shows, events, right? You constantly have the pulse of the industry and help ensure that together we're all moving forward, and evolving, and making sure that retail continues again to grow and thrive.

Thorne: Evan Gold, it has been, always is, and I'm sure will be again — a pleasure talking with you and spending time with you.

Gold: Thank you, Bill, to you and to the entire NRF team. It was an honor and a pleasure to partner with you on this.

Thorne: And thank you all for listening to another episode of Retail Gets Real. You can find more about this episode and more at Retail Gets Real dot com. I'm Bill Thorne. This is Retail Gets Real. Until next time.