Sunny with a Chance of Sales

Poor weather can put a damper on business, but c-store operators can turn it to their advantage

Successful convenience store operators make a habit of being on top of every variable involved with running their business. Whether it’s making careful choices about the right products to stock, planning new promotions or simply taking care of the many factors involved in keeping a store running smoothly, retailers must work actively to give consumers what they want. However, no matter how many hours they put in, there’s one factor they can’t control that still has a major effect on sales — the weather.

For years, Bonnie Herzog, managing director of tobacco, beverage and consumer research at Wells Fargo Securities LLC, would hear beverage companies blame the weather for weak financial results. This seemed to be an overly convenient excuse and prompted her to conduct research to discover whether temperature and precipitation truly had an impact on sales.

“I was hoping to prove them wrong and I found the opposite,” she said.

This year, cold, wet weather over Memorial Day weekend put a damper on beverage sales, which fell 10 percent from the previous year, according to Herzog’s Beverage Buzz survey. Sixty percent of survey respondents also said weather had a “much worse” impact on beverage sales during the second quarter of 2013, compared to 2012. Conversely, the survey found that sunny and pleasant weather throughout much of the United States over Labor Day weekend resulted in 4-percent beverage growth, prompting optimism for many retailers.

“The key holiday weekends are very, very important for the full year. It’s critical that your weekend weather is also nice,” Herzog explained. Regular weekends can make or break sales goals since those days are when consumers are more likely to go out and shop, or purchase beverages and snacks for parties.

Although c-store retailers can’t control the weather, they can prepare for its effects if they understand how customers respond to both good and bad weather patterns.

A sudden shift in temperature can help or hurt, according to Herzog’s research. For instance, extreme heat spurs drink sales. While cool weather in the summer may slow purchases of food and drink, customers are more likely to enjoy planned picnics anyway, unless the temperature dips too low. Precipitation of any kind, though, has a sharply noticeable effect.

SEASON BY SEASON

While convenience store operators share the same core business practices, the weather-related changes they face may be drastically different depending on the location of their operating footprint.

“Most people from around the country generally assume that Minnesota’s only extreme weather is that of extreme cold,” said Jared Scheeler, director of retail operations for Minnesota-based Bobby & Steve’s Auto World. “Even though we do experience cold, snowy winters, we also generally receive some periods of extremely hot and humid weather each summer.”

While ice and snow present obvious difficulties, the chain experienced surprising difficulty last spring, when Scheeler said the Twin Cities saw more rain during the months of April and May than the previous three years combined. This resulted in a challenging second quarter, just when their winter difficulties should have been easing.

“We noticed that the high levels of precipitation actually contributed to less store visits, presumably because consumers had less desire to get out of their vehicles,” Scheeler said. “For us, the cooler temperatures were one thing, but the seemingly constant rain was a real downer for business.”

On the East Coast, late summer into fall and winter usually produces weather-related challenges for Tedeschi Food Shops Inc. The 188-store New England-based chain expects to face “everything from hurricanes to blizzards to ice storms,” said Category Manager Dan Powers. “We’ve dealt with just about everything.”

Of the less-catastrophic weather conditions, severe Nor’easter rainstorms are the most common, and the major problem that results from them is the loss of power at stores. If Tedeschi has enough warning from the weather forecast, sales of “everything from bottled water to milk to ice,” as well as bread, canned goods, batteries and emergency candles are likely to spike in what Powers terms “panic buying.” If possible, stores will overstock milk 33 percent higher than usual and bottled water 50 percent higher or more in advance of such storms.

While Tedeschi benefits from helping customers prepare for storms, business often falls off during the actual storm and its aftermath. “Everyone gets stocked up, then [there’s] no business for days after,” Powers said.

GETTING PREPARED

Many retailers pay little attention to the weather unless a severe weather event appears and inconveniences them, but a simple shift in thinking can help retailers take advantage of any weather condition, according to a recent webcast presented by Planalytics, a global source of business weather intelligence, and Brand Networks, a social marketing and technology company.

Lessons about the weather can be boiled down to three simple principles:

1. Weather alters consumer priorities by creating a basic need, an elevated want or an immediate problem.
2. Weather breaks through the barriers of consumers being more cautious, planned and price-sensitive than in the past, and prudence is trumped by what they need or want right now.
3. The weather window of opportunity closes quickly since the weather is always changing, so businesses must identify and act on opportunities when they arise and before they disappear.

In other words, retailers can’t control the weather, but they can control their response to it and learn to recognize how it will affect the needs of their customers.

“The weather’s like politics: it’s all local,” said Scott Bernhardt, president of Planalytics, referring to “the many perceptions of 47 degrees,” which he explained could be a cold snap in one region or the expected temperature in another region on the same date.

What seems straightforward can be more complicated than people think, he said, and the weather’s impact varies by product, market and time of year. For example, research has shown that early cold weather is not enough to change purchasing habits in Boston, but precipitation is. It depends on what is out of the ordinary for local consumers.

Planning a weather response is as much a part of sales strategy as deciding which products to stock and promote, but putting a plan into action must be done quickly in order to be effective.

“I believe the key is to react as quickly as possible to ‘non-compliant’ weather conditions,” said Scheeler of Bobby & Steve’s. “When watching a football game, you hear the announcers talk about half-time adjustments made by each team. We’ve noticed this year that we’ve also had to make some mid-month adjustments in promotions, product placement and displays to assist us in driving more sales. We’ve found that if we wait until later in the year, or if we wait until the weather gets better, it’s usually too late to meet our sales goals and objectives.”

During the most recent excessively rainy spring, Bobby & Steve’s temporarily offered 20-packs of cans from Coca-Cola at a special, low-margin price to drive sales volume. While the multipacks weren’t extremely profitable for the chain, the uptick in volume made the 2012 comparison gap easier to make up during the summer months, Scheeler said.

Preparation is also key, according to Powers of Tedeschi Food Shops. The chain’s weekly forecast includes notes on what stores can expect, such as increased demand for beverages and ice cream products if several days of 90-degree weather are on the way.

Promotions on particular items are generally set too far out for Tedeschi to make changes in response to weather conditions, but distributing as much information as possible does make a positive difference.

Adjusting the presentation of weather-relevant items is also an effective tactic. If a big storm is on the way and a store sets up a display of bottled water, it’s likely to stick in customers’ minds whether or not they purchase any on that particular trip, Powers said. “We’ll look like we’re prepared whenever they might need it, even if they don’t need it at the time.”