What’s the Story?

We count down to the holiday season with a 12-week series focused on the data, trends and observations surrounding the end-of-year peak. In this report, we discuss weather-driven demand for the 2020 holiday season.

Why It Matters

Weather is a significant input for estimating retail sales and traffic. Retailers can use weather to determine inventory allocation and assortment, including location, in order to meet demand and avoid stockouts or excessive discounting. Businesses can typically raise topline sales by 200 basis points and net income by 2–6% annually by correcting weather-related distortions in past sales, according to business weather intelligence firm Planalytics. Weather analytics and other data comprise a key input for demand-forecasting platforms (and therefore also for inventory and assortment optimization) and can greatly improve their accuracy. Weather analytics can improve the accuracy of demand by up to 30% annually for individual products as well as reducing waste by up to 35% for fresh grocery items, according to Planalytics.

Holiday Weather: In Detail

In the sections below, we discuss the temperature and precipitation outlooks for November (including the weekend of Thanksgiving and Black Friday) and December, including weather-driven demand for specific items. Holiday 2020 Weather Outlook Figure 1 summarizes temperature, precipitation and weather-driven demand forecasts for November and December.

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Figure 1. US Holiday Weather Summary [wpdatatable id=569 table_view=regular]

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Source: Planalytics/Coresight Research November 2020 Weather: Warmer and Wetter The weather forecast expects November to be warmer and wetter than last year.

• Temperature—Temperatures are expected to be much warmer than last year, particularly in markets in the western half of North America.
• Precipitation—Overall trends are for wetter weather than last year.
• Weather-driven demand—The warmer weather supports the purchase of nonseasonal goods such as electronics, outdoor lighting and home goods while reducing demand within cold-weather categories. The strongest seasonal demand will be in the Western US.

The image below shows the expected temperatures and precipitation in November 2020 versus 2019, which indicate that the month will be warmer and wetter across significant parts of the country. [caption id="attachment_119771" align="aligncenter" width="700"] Note: “LY” stands for “last year,” referring to 2019
Source: Planalytics [/caption]   The weather will impact demand for selected products across different areas of the US, as shown below, based on the forecast for November. [caption id="attachment_119772" align="aligncenter" width="700"] Source: Planalytics[/caption]   Thanksgiving and Black Friday Weekend: Warmer Temperatures Expected The Black Friday weekend is expected to trend warmer than last year, particularly in the east of the US. For reference, November 2019 was the warmest and driest since 2017, yet Black Friday weekend was the coldest since 2013. Implications

• The expected warmer temperatures should drive demand for nonseasonal products and reduce demand for winter items.
• The combination of warmer temperatures and lower precipitation is positive for store traffic.
• Falling on November 26–29, the Black Friday weekend is earlier this year than in 2019 (November 28 to December 1).

December 2020 Weather: Cooler and Drier The forecast indicates that December is likely to be cooler and drier than last year.

• Temperature—Temperatures are expected to be colder than last year in North America.
• Precipitation—Overall trends are for drier weather than last year.
• Weather-driven demand—The cooler weather supports demand for cold-weather items such as blankets, gloves, jackets and sweaters, as well as hot foods and drinks.

The image below shows expected temperatures and precipitation in December 2020 versus 2019. [caption id="attachment_119773" align="aligncenter" width="700"] Note: “LY” stands for “last year,” referring to 2019
Source: Planalytics [/caption]   The weather will impact demand for selected products across different areas of the US, as shown below, based on the forecast for December. [caption id="attachment_119774" align="aligncenter" width="700"] Source: Planalytics[/caption]  

What We Think

Weather is an important input for retailers’ sourcing, inventory and assortment plans, and this is most significant during the crucial holiday season. Integrating a holiday weather forecast into their planning enables retailers to fine-tune their inventory and assortment allocations. In prior years, we would have pointed to warmer, drier weather as supporting retail traffic. However, amid the current Covid-19 pandemic, the weather impact is likely to be minimal and, for the total holiday season, we expect total US nonfood retail traffic to be down by around 30–35% year over year. Implications for Brands/Retailers

• Retailers can consider weather in determining their inventory and assortment decisions to realize the maximum benefit from weather-driven demand.
• Retailers can also benefit from including weather analytics and other alternative forms of data as inputs to their demand-forecasting software.

Implications for Technology Vendors

• Technology vendors can enhance the value of their demand forecasting, and therefore inventory allocation and assortment planning platforms, by adding the ability to include weather analytics and other forms of data.