Will retail sales prevail come rain or shine?

  • News
  • July 9, 2015
  • Elly Strang
Will retail sales prevail come rain or shine?

It’s common knowledge that the weather affects people’s spending.

It’d be a rarity to find jandal sales on the rise in the middle of an icy winter, just like thermals in the middle of a stinking hot summer.

Recently, The Register found the things people like to buy in the cold include dehumidifiers, electric blankets, slippers and flannels. These are all key purchases during the chillier months, according to The Warehouse Group and PriceMe.

Sometimes, there’s no rhyme or reason to the items bought in different seasons, as ice cream is surprisingly still a big seller in the wintertime.

Giapo Grazioli recently told The Register people are still queuing for one of his infamous creations even on cold, winter nights, while Tip Top reports a third of all ice cream sales are made in winter.

So with that in mind, does the weather seriously have that bigger impact on retail sales?

Infometrics senior economist Benje Patterson says it’s fair to say that it can have some impact, but not to the point where it causes broad changes across the entire retail sector.

“Stores like Kathmandu may find that in extremely cold periods of winters they sell a lot more jackets and so on, but its not going to be across retail sector. Overseas you do see greater disruption,” Patterson says.

Many Kiwi retailers have said their sales have felt the brunt of a season that’s gone on longer than expected.

Notably, Kathmandu had a less than stellar financial year and posted a $1.8 million loss in the six months ending January 31.

Finance director Mark Todd told The Press in Christchurch that the poor result had been affected by New Zealand’s long hot summer, which reduced sales of its cold weather gear.

Large retailers like The Warehouse Group have also been affected.

The Warehouse Group partly attributed a 19 percent drop in annual profits to softer trading at the “Red Sheds” to the weather.

It said The Warehouse stores were impacted by a late start to summer seasonal trading.

Patterson says retailers are good at “anecdotal” evidence when it comes to the weather.

“A lot of it at the moment is very good anecdotal snippets, as retailers have a good handle on what sales they expect at each time of the year,” he says.

However, to prove the changing seasons are truly having an effect, he says you’d need an econometric or statistical study.

A study by US weather experts has done just that and released a new report aimed at the British retail market.

Data released by The Weather Channel indicates that a seasonal temperature of 1 degree celcius higher or lower than average should lead to a 1 percent change in sales.

The Weather Company’s study looked at last year’s warm autumn in Britain, which reduced demand for clothing and footwear to the tune of £700 million in lost sales during September and October alone.

The excess stock went on to disrupt sales across the rest of the year, forcing many retailers to introduce heavy discounting prior to Christmas.

A similar situation happened in New Zealand in 2013, as it was the warmest winter on record.

The average temperature was 9.5ºC, which is 1.2ºC above the 1971 to 2000 average.

In the September 2013 quarter, the total value of retail sales only rose 0.6 percent.

Clothing and footwear sales dropped $61 million (6.8 percent).

Statistics NZ says a high number of survey respondents reported lower sales than expected this quarter.

 Patterson says it’s a bit of a stretch to connect the weather to the drop in sales.

“It’s interesting to observe and could have been one factor, but it’s only one of the things happening over the past couple of years,” Patterson says.

 “The dollar has been strong as a retailer you have to consider that, because that’s the cost of getting alternatives overseas and it can constrain the value of retail sales, as it’s making them cheaper to import.”

He also says rising online retail purchases could have contributed to this decrease.

“Consumers are also buying online overseas more and those purchases are inadequately captured in data and hard to reconcile,” he says.

What about applying The Weather Channel’s logic to the hot summer just been?

Temperatures must’ve risen at least a degree or two and the total value of retail sales rose 1.7 percent in the March 2015 quarter – a movement worth $329 million, according to Statistics New Zealand.

As well as this, the total volume of retail sales rose 2.7 percent – the largest percentage increase since December 2006. All 15 retail industries experienced a rise.

“What I would caution is while a change in the weather may cause a reasonably noticeable change in retail sales patterns, these things don’t occur in isolation,” Patterson says.

“It’s also going to be very business-specific rather than generalised, and even for businesses that do well out of a season, if the economy is moving in another direction then that’s going to be the more important factor for them.”

If this graph by Statistics New Zealand is anything to go by, both the September quarter (winter months) and March quarter (summer months) have had highs and lows.

 It shows that there are too many irregularities to decide which season retail sales perform the best in New Zealand.

Over all, Patterson says though the weather may have an affect, there are so many other factors that affect sales simultaneously, such as the economy, consumer confidence or overseas sales.

Perhaps worrying about the weather might just be a storm in a teacup.

​ ​

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