How climate change is changing the game for retailers
Retailers are already adjusting the way they operate because of climate change. They just might not recognize it.
“Climate is something that, unbeknownst to them, most retailers are dealing with every day,” said IBM Global Business Services’ director of weather strategy Paul Walsh.
Coastal cities aren’t inundated with water just yet. But intensifying storms and rising global temperatures mean retailers can no longer expect the kind of weather they’ve counted on in years past to inform future business decisions. New norms require new thinking on everything from purchasing to product design to distribution. Fortunately, many retailers are working to meet this challenge head on.
“As these businesses really start to leverage data and analytics to better anticipate and execute against these impacts, we’re seeing that they’re creating systems that are more adaptive to the reality we’re facing right now,” Walsh said.
Warmer winters, for example, have caused fashion retailers to reassess the kinds of clothes they sell and when they sell them. It’s also made them rethink the design of the clothes they carry. Some are opting for lighter materials that are better suited for milder weather. Others are researching smart materials designed to adjust to shifting temperatures.
“At least 30 percent of what most retailers sell is tied directly back to the weather, the seasons. That’s a big chunk of their business. By using weather data and analytics to anticipate what customers are going to need, they’re better able to execute against that,” Walsh said.
Traditionally, retailers plan their inventories based on historical trends. If an item does well one season, retailers tend to expect similar performance for the item the same time the following year. But erratic weather patterns are making demand forecasting a more complicated pursuit, one that requires more intuitive insights derived from huge amounts of data.
“This past summer was relatively cool, but if you plan to sell as many A/C units next year as this year, you’re likely to undershoot,” Walsh said. “What AI is enabling us to do is take all these data pieces and use those learnings to drive a distribution system to influencing pricing, to shape how a store is going to staff on a given day, to create marketing campaigns.”
Increasingly extreme hurricanes, meanwhile, present major challenges for retail supply chains. In today’s global marketplace, a disruption in one area can create ripples on every continent. By streamlining and strengthening their supply chains with cognitive analytics, retailers are becoming better equipped for disasters.
“They’re basically creating the capability to be better prepared, more proactive and less reactive, and at the same time in a better position to serve their customers,” Walsh said.
Climate change can sometimes seem a far-off issue. But the impacts are here now, and the sooner retailers realize that, and plan accordingly, the better off they — and their customers — will be.
“This is not a 2070 issue. This is not a polar bear issue. This is a retailer issue,” Walsh said.