Retailers far more exposed to vagaries of the weather than they once were

Greenlight has on several occasions talked about the role weather plays out online in relation to sales, how consumer searches can shift swiftly and consequently, the need for online vendors' search engine optimisation and paid search campaigns to be well prepared in advance to adapt when the tide turns. So it's interesting to see retail research agency and consulting firm, Conlumino, in its analogy of the BRC's  latest retail sales results, note just how much of a role the weather - aside from the economy, has shaped sales when compared to the same time last year.  Neil Saunders, Managing Director at Conlumino, explains.

BRC Retail Sales Results Sep 2013

Source: BRC

LFL (Like-for-Like % change on a year ago) / Total (% change on a year ago)

 

After a run of reasonably solid growth, September's sales numbers bring the retail sector back to  earth with a slight bump. Growth is still present, which indicates that there is still forward momentum in the consumer recovery, but it has moderated significantly from the relatively heady levels seen in both July and August. While this might be the cause of some initial concern, it should not necessarily be a cause for alarm.

In the first instance, patterns of recovery are rarely even: seeing month on month of ever inflated growth certainly makes for a pleasing looking chart but, judging by historic standards, the exits from downturns are normally characterised by periods of growth which wax and wane. In essence, a reduced growth rate is not an indication of impending doom for the retail sector.

Impact of weather on retail sales growth rate

The further point to make is that, to a degree, a shallower growth rate was always to be expected as we exited the summer months. The sun had an overall net positive impact on sales which, when combined with some modest growth due to the natural uptick in consumer sentiment and spending, created some very rosy looking figures. This was never likely to continue ad infinitum, and what we are now seeing is the more natural, underlying growth rate which is reflective of the true pace of recovery.

Of course, the outturn could well have been different should the weather had been firmly on the side of retail. Unfortunately, it wasn't. As autumn and early winter stock arrived on the shop floor what most retailers, especially those in clothing, wanted was a sharp cold snap; what they got was rather murky but fairly warm and humid weather. This tells us something interesting about the consumer psyche: while many people do have the capacity to spend, large numbers are reluctant to do so unless they feel a real need or justification.

Consumers purchase on a 'need to buy basis' however upward momentum still remains

Before the downturn it is likely many consumers would have been willing to invest in a new coat in anticipation of colder weather to come; nowadays attitudes have hardened and significant numbers will only buy if and when the need arises. This change, a switch to a slightly more hand-to-mouth pattern of purchasing if you will, ultimately means retail growth rates are much chopper and leaves retailers far more exposed to the vagaries of the weather than they once were. 

At Conlumino, our view is that this consumer mindset will prevail, even as we move into recovery . As such, we are unlikely to see retail rocket back to health; instead, it will more likely take a rather gentle upward glide path. Ultimately, the positive news is that, the exactitudes of the numbers aside, upward momentum still remains.

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