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NEWS / NOAA's weather data helps U.S. retailers stay ahead of the competition
Category: Latest News, Retail & Supply Chains

Image: When large snowstorms occur late in the winter, the pre-season (fall) is likely to be strong on snow blower sales. Photo by Air National Guard photo by Staff Sgt. Julio A. Olivencia Jr.

By Amanda Rycerz

America’s retail and manufacturing industries are major generators of economic growth and employment (NRF, 2014). The retail and manufacturing industries contribute a combined US$ 3.23 trillion to the U.S. economy, representing almost 18% of GDP (U.S BEA, 2016). It is therefore not surprising that retail activity is often used as a barometer to gauge the health of the American economy (RILA, 2016). However, the welfare of the retail and manufacturing industries are influenced by a host of external factors including weather. A recent study released by NCEI shows how leading companies are using data from NOAA’s National Centers for Environmental Information to understand the impacts of weather on their business, and make decisions accordingly.

Weather impacts demands for goods and services as well as customer shopping habits, making retail and manufacturing among the most weather sensitive sectors. Warmer weather conditions during winter months can decrease the demand for a range of costly seasonal apparel items including cashmere sweaters and winter boots, industrial items such as snow blowers, food items such as canned tomatoes commonly used in crockpot dishes, and recreational items such as snowboards. On the flip side, a strong winter storm may impact the ability and motivation of consumers to get to stores, or the ability of products to get to market. This may however prove profitable for online retailers that allow customers to shop from the comfort of their own homes (Hatzius et al, 2015).  The retail industry tends to suffer from unseasonal weather patterns and extreme events, however there are indeed winners and losers within this paradigm.

NOAA’s National Centers for Environmental Information (NCEI), the largest archive of climate and weather data in the world, has released their latest case study on how retail and manufactures use NCEI’s climate and weather data. The report, video and infographic are informed by interviews with representatives from major retail and manufacturing companies, and financial firms who invest in these industries. These sectors utilize NCEI’s products to understand the impacts of weather to their businesses or investments, and make decisions accordingly.

There are two data NCEI data products that are particularly useful to support retail and manufactures in weather-related decision-making. These include the State of the Climate Summaries, monthly summaries that recap climate-related conditions on a national and global scale (NOAA NCEI, 2017a), and the Regional Snowfall Index, an index that ranks snowstorm impacts on a scale from 1 to 5 based on the spatial extent of the storm, total amount of snowfall and 2010 census data (Squires et al, 2014). 

These data are used in the preparation of quarterly, year over year (YoY) and month over month (MoM) reports. YoY and MoM analysis are used to evaluate a company’s performance on an annual or monthly basis, as compared with a prior year or month, respectively. These analyses can shed light on the factors affecting business performance, for example, weather (‘Year over Year – YOY’, ND). When paired with climate outlooks, aggregated analysis of climate and sales data help inform future-decision making including how much product to manufacture, or how to stock items in various markets. The NCEI report contains several examples of company specific use-cases of these data.

Silvercote, a manufacturer of high-quality metal building insulation products, uses the State of the Climate Summaries to create a YoY and MoM analysis, to understand how their business is operating relative to prior years and months. If a sales region is not meeting sales targets due to weather, and similar weather trends are projected to continue, Silvercote could readjust the size of the sales territory or prioritize sales in regions where weather conditions are anticipated to be more favorable for construction (NOAA, NCEI, 2017b).

When large snowstorms occur late in the winter, the pre-season (fall) is likely to be strong on snow blower sales. Honda Power Equipment, a manufacturer of snow blower equipment, can use RSI to identify highly populated regions where snowstorms occurred late in the last season, and make recommendations to retailers to stock their merchandise in the most strategic locations to optimize sales (ibid).

Foot Locker Inc relies on the monthly State of the Climate Summaries to understand the weather-related drivers that cause utility costs at its 3,000 U.S. nation-wide stores to be higher or lower than budgeted. An analysis performed by Foot Locker Inc. revealed that the January 2017 temperature increase of 1.5°C compared to January 2016’s national average, meant decreased energy demand and correlated to 1 cent per square foot savings in energy costs (ibid). More accurate budgeting mean that more money could be allocated away from expenses and toward capital investments, which would contribute to the overall profitability of the company (ibid).

While the weather cannot be controlled, having the right data to understand, quantify, and measure its economic impacts is an asset for information-driven companies. Companies are continuing to discover applications for climate and weather data to understand risk and opportunities, and are becoming increasingly sophisticated in their usage. This report unpacks some of these applications showing detailed trajectories of NCEI’s data usage (ibid).

Video "The Value of the Data: How NCEI supports the U.S. Retail & Manufacturing Sectors"

Infographic of the study (click to enlarge)


This summary is based on excerpts from: ‘NOAA NCEI. (2017). Success Stories on User Engagement 5: Retail and Manufacturing. Global Science & Technology, Inc., & Acclimatise Group Ltd. The full report is available here.