Optimizing Inventory and Sales of Seasonal Products

A shopper entering a convenience store is very likely to buy on impulse. Very often weather drives those impulses, and may even be the principal reason for stopping at the store in the first place. Weather directly affects the number of store transactions in any given week, as well as which products and types of products those transactions represent.

Convenience stores can satisfy these consumer impulses and increase basket size by stocking, prominently displaying, and promoting items that are appropriate not just to the season, but to the actual weather.

Retailers' information systems already capture the impact of weather on their businesses. When retailers aggregate sales data to provide weekly sales figures, within those numbers is the impact of weather on the products that make up those sales. Extensive statistical analysis of retail POS data in recent years reveals that consumer behavior is even more influenced by weather than previously thought. It is interesting to note, however, that the relationship between weather and consumer demand is not always clear, simple, and linear. For example, it is not always obvious how weather affects demand for weather-related items, versus how it affects overall volume and store traffic.

Analysis of retailing and weather also discloses significant differences in the ways that weather affects consumers in different regions of the country. For example, a consumer in Syracuse has a very different perception of "cold" weather than does a consumer in Houston. These regional differences indicate that it is the relative change in the weather that triggers a particular response on the part of consumers.

Despite all the talk of global warming and El Nino, weather hasn't changed that much in the past 50 years. But consumers' lifestyles and the shopping environment have changed dramatically in ways that make weather's influence more important. In short, these changes mean that people are in a hurry and buy closer to need, often without much forethought or planning. Thus, while retailers and consumer product marketers are planning according to normal, seasonal, predictable, climate patterns, consumers are actually ignoring the calendar and reacting to the weather with all of its abnormal, unseasonal, and seeming unpredictable fluctuations.

In fact, consumers have learned to tune out advertising and point of purchase promotions that use a "changing seasons" theme or general threat of future weather as a call to action. Messages such as "A nasty winter's coming! Buy a snowblower today," or "If hell freezes over, you'll be ready with Antarctic Antifreeze." They are bombarded with this type of "empty threat" advertising for everything from SUV's to cough syrup.

But once consumers see those first snow flakes, it's a different game, in which the winner is the one who gets their attention first. For convenience stores this means that a gas pump LCD message reminding people that you have window deicer or hot cocoa can be very effective in luring them from the gas island into the store. Likewise, stacking firewood or bags of rock salt high and deep outside the store will bring them into the store and ring up additional sales.

Unfortunately, stock outs of seasonal and weather-related products are common in convenience stores. Indeed, as retailers explore new areas of opportunity to gain competitive advantage and market share, it is surprising to see how common stock-outs are and how so many retailers accept them as inevitable. Survey after survey reveals that shoppers' most important measure of customer service and satisfaction is that a retailer be in stock on the items they want to buy. If not, they'll go buy them elsewhere, and might not come back.

When retailers use last year's, or the last 2-3 years' sales figures as a planning and forecasting tool, they are assuming that the weather that contributed to those figures will be the same for the next year as it was in the past. Yet the weather will not be the same next year as in the past one, two, or three years. For example, the graphs here show ice cream and bottled water sales correlated to outdoor temperatures in June.

"Weather conditions, and the key timing dates determined by those conditions, repeat from year to year around 30 percent of the time," said Peter Kienzle of Planalytics Inc., whose Impact LR application measures the specific effects of future weather on consumer demand up to one year in advance in order to support more effective merchandise planning and forecasting, product distribution and allocation, and advertising and promotion timing (www.planalytics.com).

Even the most sophisticated retail forecasting systems are highly vulnerable to weekly and monthly weather fluctuations -- putting retailers at the mercy of unseasonable weather. Unseasonable weather can be extended periods of warmer-than-normal temperatures in fall or winter, or colder-than-normal temperatures in spring or summer. This throws the timing of traditional seasonal product merchandising schedules and selections right off course. That is why planning based on seasonal weather so often results in stock-outs or inventory backup. When the merchandise is finally delivered to the stores, the weather may have turned and the brief window of opportunity has passed.

When product is allocated to stores based on the previous year's sales patterns, those patterns can change dramatically due to different weather trends than the previous year, leading to overstocking in one region and stock-outs in another region.

Knowing how much weather helped or hurt sales last week, last month, or last year is very valuable. Knowing when and where seasonal goods will start selling, when sales volumes will be highest, and when season sales will slow is a considerable business advantage. Acting on this insight can ensure product is positioned in the right place at the right time.

Weather-Related Convenience Store Products

* Hot Dogs
* Sandwich Meats/Cheeses
* Soups
* Ice Cream/Frozen Desserts
* Packaged Ice

* Juices
* Sodas
* Sports Drinks/Isotonics
* Beer
* Bottled Water
* Hot Cocoa

* Gasoline
* Windshield Wash Fluid
* Deicer
* Ice Scraper/Snow Brush

Health and Beauty Aids
* Cough/Cold
* Allergy
* Tanning Lotion/Sun Screen
* Band-Aids/Bandages

* Coolers
* Disposable Plates/Cups/Cutlery
* Firelogs/Firewood
* Batteries
* Charcoal
* Umbrellas
* Rock Salt/Ice Melt
* Sunglasses
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