ON WEATHER SENSITIVITY IN RETAIL INDUSTRY: CONCLUSIONS

Results of many empirical studies show that weather significantly affects store traffic and retail sales. Further on, results imply that weather sensitivity is not uniform but varies between months, product categories and store types. That is why deductive conclusions about weather sensitivity cannot be made. Assessment of weather sensitivity should rather be carried out for each product category and store type separately.Having understood the nature and magnitude of weather impact on sales of certain product categories and store types, retailers may implement the appropriate strategy of protection against adverse weather conditions. Lowering the product price is effective in order to achieve planned sales when adverse weather occurs early in the season. Price reductions can also be effective when adverse weather occurs late in the season, as to avoid the storage costs until the next year. In case of favorable weather conditions, retailers may consider additional marketing activities to inform or remind consumers where they can buy necessary products.

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ON WEATHER SENSITIVITY IN RETAIL INDUSTRY: WEATHER RISK MANAGEMENT

WEATHER RISK MANAGEMENT

Retailers often blame the weather for poor sales, but the review of literature found a handful of studies that analyze the impact of weather in retail. Such discrepancy can be explained by the fact that many retailers are nonspecialized and offer diverse assortment of products which results with diversified and thus mitigated effects of weather on retail sales. Myers (2008) states that product line diversification is one of the basic tools for weather risk management in practice. Advantages of product line diversification are that it is easy to implement and that it is inherent in operations of many retailers. At the same time, product line diversification possesses many disadvantages compared to the other weather risk mitigating tools. The main disadvantage of product line diversification is risk retention within the company as opposed to the risk transfer tools that allow for risk transfer to other parties able to manage it more effectively.

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ON WEATHER SENSITIVITY IN RETAIL INDUSTRY: THE REVIEW OF STUDIES

Adverse weather is often blamed for poor store traffic and low sales revenue, but despite that the problem of weather risk in the retail remains insufficiently studied subject in scientific researches. Below is given an overview of empirical studies that examined the impact of weather in retail.

Starr-McCluer (2000) examined the effects of temperature on total U.S. retail sales. The analysis was performed at the aggregate level of sales and further refined by the type of retail capacity. The results show a noticeable seasonality in sales, both at the aggregate level and at the level of specific retail stores types. Aggregate sales peak in November and December which can be attributed to holidays. Car sales reach peak in May and June, and bottom in December and February.

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