Extreme weather: Retailers need forecasting and risk models

Extreme weather: Retailers need forecasting and risk...

Weather plays a big part in retail activity. Blizzard conditions to sizzling heat, our habits vary and forecasts would help ease uncertainty in retail

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Press Release

The panel of industry commentators, who meet on a quarterly basis to provide an authoritative and independent view on issues affecting the retail sector, concluded in its latest session that better forecasting methods and risk management would enable retailers to limit the impact of extreme weather on performance.

The expert panel concluded that there are “some good reasons” why the weather can contribute to short term variations in individual retailers trading performances. However, its impact was sometimes “overplayed too heavily”, and rarely over the course of a year should it be considered anything other than a ‘business as usual’ factor.

Helen Dickinson, Head of Retail at KPMG, comments: “There is no doubt that the weather does impact retail performance. We see this most starkly in periods of extreme or unexpected conditions, the country grinding to a halt in December last year due to adversely snowy conditions or the Indian summer of late September this year.

“Indeed there will be sales lost (or gained for that matter) as a result and once forgone, a significant proportion will not be regained given the discretionary, ‘of the moment’ nature of so much of our shopping activity. However, year in, year out, there will always be anomalies and one-offs and therefore at a market level it has little overall effect on overall retail sales."

The best retailers really are prepared for the unexpected. They are getting the valuable insight from the mountains of data that they collect and interpreting it wisely. Their suppliers, logistics arrangements and store staff are sufficiently flexible to respond to fast moving conditions in an efficient and reliable way.”

Key recommendations from the panel: 

  • Better merchandising and buying strategy can beat short-lived weather blips 

  • Better forward planning and risk analysis by retailers is needed to tackle weather extremities 

  • Flexibility as well as autonomy at store level is necessary 

  • Utilise the tools you have when extreme weather conditions hit - during these ‘blips’ online marketing and communication should be increased to shift seasonal stock

  • Shorter cycles and more flexibility is needed – don’t stick to rigid plans 
There is also concern among the RTT members that referencing bad weather too often masks more concerning factors around how retailers are performing in an extremely volatile economy. Ignoring these issues will only prolong and most likely worsen them. The strongest retailers are able to forecast well and build flexibility into their offerings and supply chain. This enables them to respond quickly to changing conditions, reducing the impact that the weather has on them.
Neil Saunders, Conlumino, said:  “The bottom line is that retailers have a responsibility to be honest about the weather, and that includes pointing out when it has helped drive a strong performance as well as a weak one. Retailers also have a responsibility to build tolerance into their merchandise, sales and margin plans to account for weather variability. Just as a wise person will carry an umbrella even on a clear day, a wise retailer will have a plan for the inevitable shifts and fluctuations in our weather.” 
The panelists concluded that cash-strapped customers are the biggest problem for retailers right now. The growing uncertainty in the European and global markets is expected to keep consumer confidence low. However, the Chancellor’s forthcoming Autumn Statement is expected to shed some light on how the UK Government intends to boost growth in the UK economy and alleviate pressure on consumers. 
Helen Dickinson said: “Looking ahead to Christmas, inflation may have come down by a smidgen, but the cost of petrol and household utilities will continue to be the biggest contributors to the squeeze on personal disposal incomes. As a result, this squeeze will continue to affect retail spending which has remained largely subdued. As we approach Christmas, the busiest trading period of the year, retailers are bracing themselves for the worst.” 
- ENDS - 
Media Enquiries: 
Katrin Boettger 
Senior PR Manager, KPMG
T: 020 7896 4232 
M: 07824475168 
Theo Chalmers
MCIPR, Managing Director,
Verve Public Relations
T: 01908 275271
F: 01908 275272
KPMG Press Office: +44 (0) 207 694 8773
About KPMG
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff. The UK firm recorded a turnover of £1.6 billion in the year ended September 2009. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 144 countries and have more than 137,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

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