For retailers, snow would pile on
Saturday, December 19, 2009
Retailers can stop accusing the economy of holding back holiday sales. Now they can blame it on the weather.
The mighty blizzard expected to descend on the Northeast today comes on the last Saturday before Christmas, typically the busiest day of the year for retailers. But with as much as a foot of snow forecast from North Carolina to New Jersey, retailers are worried that their customers will spend the Super Saturday shoveling rather than shopping. One meteorologist predicts that could result in a retail snowmaggedon.
Weather is such an influential factor in consumer demand that retailers employ what can be called economic meteorologists to help guard against the vagaries of Mother Nature. This niche industry not only predicts rain or shine but also how consumers will react. An unexpected warm front in winter can decimate soup sales, while cooler air during a sweltering summer can actually encourage more people to shop. For the Washington region, the storm could mark the first time in at least a decade that snow has fallen on the Saturday before Christmas.
"Boy, duck," said Scott Bernhardt, chief operating officer at Planalytics, one of the companies that advise retailers. "People can handle flurries. They can handle rain, a little bit of icing. But when it starts to accumulate, that's the tipping point."
The firm, based in Wayne, Pa., also advises energy companies, hedge funds and commodities traders. For retailers, forecasts span 11 months. The company analyzes weather patterns for every day in every Zip code across the country to calculate statistical norms. Then it compares that data with detailed sales results to determine that when the mercury dips below 32 degrees, for instance, JCPenney tends to sell 10,000 more sweaters. Such corporate secrets are heavily guarded: Planalytics' servers are stored in a secure facility in a no-fly zone outside Philadelphia that requires a retinal scan to enter.
Planalytics began alerting clients to the possibility of a snowstorm Dec. 10 that could be particularly troublesome because it is likely to blanket major shopping metropolises. The firm estimated about 30 percent of Target and Wal-Mart stores will be affected. About 40 percent of Kohl's stores are exposed along with more than three-quarters of Bon-Ton department stores.
Some of Saturday's sales were expected to shift to Friday night as shoppers scramble to cross off their Christmas lists before the first flakes fall. And hardware stores and supermarkets typically get a boost from panicked purchases of shovels, salt and toilet paper. But Paul Walsh, an economic meteorologist with Atmospheric and Environmental Research in Massachusetts, said they are unlikely to make up for lost holiday sales.
The Saturday before Christmas functions as the safety net for procrastinating shoppers. According to the National Retail Federation, a trade group, the average person had only completed 46.7 percent of his holiday shopping by the second week of December, the lowest percentage since 2004. On Super Saturday, Walsh said, people feel they still have time to browse, in other words, make indulgent impulse buys for themselves and loved ones. As the big day creeps closer, time-crunched consumers tend to buy only what is on their lists.
"Lost sales also equal lost opportunities," Walsh said Friday. "I can guarantee you there are retail executives that will not be sleeping well tonight."
But weather is a subjective issue. The prospect of a foot of snow sends Washingtonians into a frenzy, canceling college finals and holiday parties and scaring shoppers away from malls. Across the country, however, December has been a particularly un-snowy month.
Bill Kirk, chief executive of Weather Trends International, calculated that during the 10 days before Super Saturday last year, the nation was covered with a total of 1,230 inches of snow, the most in more than a century. Although the impact of the weather on holiday sales last year was eclipsed by the crippling financial crisis, the snowstorms were like rubbing de-icer into an open wound.
As of Friday, Kirk said, the country had only recorded 69.8 inches of snow in the past 10 days. Even accounting for Saturday's expected storm, Kirk estimated that snowfall would decline roughly 70 percent from last year.
Still, even a whiff of bad weather could be bad news for an industry still struggling to recover. The NRF anticipates retail sales will drop 1 percent this holiday season compared to last year, well below the 10-year average growth rate of 3.4 percent.
Plus, winter doesn't officially begin until Monday. Planalytics has sent out alerts for a snowstorm on the horizon in the Northeast that should hit about Dec. 25 -- perfect for those dreaming of a white Christmas.
But snow the day after? Unfortunately for retailers, that's a shopping day, too.