{"id":12939,"date":"2016-11-04T17:27:13","date_gmt":"2016-11-04T21:27:13","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/to-shop-or-not-to-shop-depends-on-the-weather\/"},"modified":"2016-11-04T17:41:09","modified_gmt":"2016-11-04T21:41:09","slug":"to-shop-or-not-to-shop-depends-on-the-weather","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/to-shop-or-not-to-shop-depends-on-the-weather\/","title":{"rendered":"To Shop, or Not to Shop: Depends on the Weather"},"content":{"rendered":"

The winter of 2015 \u2013 2016 was one of the warmest on record in the U.S. Driven by El Ni\u00f1o, the average temperature was a record 4.6\u2070F above the 20th<\/sup> century average [1]. The precipitation total for the U.S. was 1.26 inches above the 20th<\/sup> century average, and ranked as the 12th<\/sup> wettest winter on record [1]. During one of the warmest and wettest winters in history, many fashion retailers, including Macy\u2019s, faced a dilemma: no one wanted to shop.<\/p>\n

Figure 1:<\/u><\/strong> [1]<\/p>\n

\"temperature-average\"<\/a><\/p>\n

It\u2019s estimated that fashion retailers in the U.S. lost about $572 million in sales because of the mild weather in November and December 2015 versus the same period in 2014 [2]. In Macy\u2019s January 2016 press release, the Company announced that comparable sales declined 4.7% in the months of November and December 2015, compared with the same period in 2014, and of that, approximately 80% of the declines were because of misses in expectations in cold-weather goods [3].<\/p>\n

For fashion retailers such as Macy\u2019s, the holiday season can account for almost 30% of sales. Given the long lead times needed to source products from manufacturers to vendors to distributors to retailers, fashion retailers like Macy\u2019s typically plan their inventories and promotions for the holiday season during the first half of the year. Coming off one of the coldest winters in 2014 \u2013 2015 in the Northeast, Macy\u2019s over \u2013indexed on cold weather goods for 2015. When the cold weather never came, Macy\u2019s blamed the 60\u2070F temperatures for interfering with its holiday inventories and promotions, and was forced to offer heavy discounts in an effort to move inventory [4]. Even this wasn\u2019t enough to counteract the negative sales impact, though, and in January 2016, the retailer announced that it was cutting 4,000 jobs due to the huge miss in sales expectations [5].<\/p>\n

While it can be argued that there are many other factors that contributed to Macy\u2019s poor financial performance during the 2015 \u2013 2016 holiday season, I do believe that as a general trend, dramatic variability in weather patterns caused by climate change has a negative impact on fashion retailers such as Macy\u2019s because of their inability to correctly forecast demand, and therefore to manage inventory and plan promotions. Experts argue that between 2% \u2013 8% of retail revenues per year are affected by the weather [6]. As climate change causes weather patterns to become even more unpredictable, the impact of weather on retailer financial performance can only become more pronounced. To mitigate against the risks, I think that Macy\u2019s will need to change its business model to either place less emphasis on holiday and promotions, or significantly shorten supply chains to be able to adapt to weather-driven consumer demand on a timely basis.<\/p>\n

Macy\u2019s has not been sitting idle though. The company recognizes that it has a social responsibility to combat climate change. Macy\u2019s has committed to reducing its impact on the environment by eliminating wasteful behavior, pursuing programs to consume less electricity and water, use more environmentally friendly solutions, and advocate sustainability and renewability with vendors and customers [7]. Macy\u2019s has also committed to short-term, quantifiable goals, including:<\/p>\n