Walmart and Other Retailers Adapt to Climate with Air Analytics
Retail giants like Walmart, operating under NYSE: WMT, are increasingly incorporating weather analytics into their business strategies to mitigate the unpredictable effects of weather on shopping trends. These companies are fine-tuning inventory planning and localizing advertising efforts using artificial intelligence and weather data. For example, after weather forecasts indicated an unusually rainy autumn, Walmart adjusted sunscreen prices earlier than usual in certain U.S. regions.
Kirby Doyle, a supply consultant at Beiersdorf, which supplies personal care products to Walmart and trades as ETR: BEIG, emphasized the evolution of using weather data, which has become an integral part of seasonal planning and promotional scheduling rather than merely forecasting. Despite these insights, Walmart has not publicly commented on its strategy.
Consulting firms like Germany-based Meteonomiqs and U.S.-based Planalytics and Weather Trends International are at the forefront of this trend, utilizing cloud computing to analyze large volumes of data. A report prepared in July, led by a Walmart executive in collaboration with Planalytics, called for retailers to focus more on weather analytics due to the increasing variability caused by climate change.
Planalytics is collaborating with management consulting firm BearingPoint to develop new tools to help retailers integrate weather data into pricing models. As Ryan Orabone from BearingPoint noted, while weather is uncontrollable, analytics and pricing are under a company's control.
Other retailers, such as Tractor Supply, listed on NASDAQ: TSCO, and Dick's Sporting Goods (NYSE: DKS) and Ross Stores (NASDAQ: ROST), use weather analytics to make informed decisions about discounting seasonal products. Planalytics CEO Fred Fox pointed out that discount opportunities could be missed if they do not align with weather forecasts.
Conversely, Lowe's (NYSE: LOW) CFO Brandon Sink attributed weak sales from a previous quarter to the cold and rainy weather in May. This claim was contested by Bill Kirk from Weather Trends, who noted that May was actually the warmest in the last six years. Lowe's did not respond to these comments.
With the U.S. facing increasingly frequent multi-billion dollar natural disasters, the demand for weather analytics is rising. Planalytics has seen a significant increase in the number of models provided to clients, and this trend is expected to continue.
Retailers are recognizing the correlation between weather patterns and sales. Stefan Bornemann from Meteonomiqs highlights the potential for greater impacts due to severe weather events. Kirk's analysis shows how temperature changes can affect sales of specific products, such as heated blankets and Starbucks coffee, although Starbucks did not comment on this relationship.
Based on Kirk's data, retailers are implementing dynamic pricing strategies to avoid significant discounts by making smaller and earlier price adjustments when necessary. Kirk argues that using the weather as an excuse for poor performance is no longer acceptable, as it indicates a lack of control over business operations to investors.