How the weather impacts the UK retail sector

As Britain battens down the hatches in preparation for another winter cold snap, the impact of extreme weather on retail businesses is being brought into focus. Whether the damage is to property, perhaps through flooding or high wind damage, or to sales because of lower footfall, the risks are clear.

It isn’t only bad weather that can have an impact, either. Many reports suggest business in the UK suffered in 2018 because of a prolonged heatwave. Therefore, preparing for the impact of weather is not restricted to winter.

A report from the Met Office and the British Retail Consortium in September 2018 warned that non-food retailers could lose up to £80 million a week in sales because of warmer weather. It added there was a ‘clear relationship’ between temperature and retail sales and claimed that almost half of UK retailers say weather is among the top three external drivers of demand.

It is not only High Street stores that are affected. Events businesses and those in leisure, sport, film and television, agriculture, construction, energy and tourism could all be hit. A company can incur additional costs when keeping its doors open in times when adverse weather would normally cause facilities to close. Or it may suffer from business interruption when damage to the property makes it impossible to open. All this at a time when the retail sector is already under pressure from changing social and economic drivers…

Here are some examples of how the retail sector has suffered weather-related setbacks over the last year: 

When the heatwave hits sales

• British fashion chain Superdry reported reduced profits last year and blamed the drop on unseasonably warm autumn weather – which resulted in lower sales of winter jackets and sweaters. 

When the Beast from the East hit sales

• An icy blast in the UK in March 2018 left many retailers out of pocket, according to research from Ipsos Retail Performance. The report claimed footfall in non-food stores was down more than 30% between February 28th and March 1st that year compared to the same period in 2017. The figure in Scotland was even higher, at 54%.

When the cold hits sales hard

• Retails giants John Lewis and Debenhams both blamed poor sales in the first quarter of 2017 on cold weather. Sales at John Lewis were down 16% whilst Debenhams said like-for-like sales fell by 2.2%, with half of that decline down to weather. 

When relentless rain affects footfall

• Above-average rainfall in January 2018 led to the lowest high street footfall recorded in five years according to figures from the British Retail Consortium. 

Having said that, not all businesses were suffering from the weather lottery. The Financial Times reported that online sales rose in the cold months of January to March last year, even when overall retail figures in the UK showed a 0.5% dip from the previous year.  

Retail Week also claimed that online sales benefit from poor weather, claiming that sunshine was responsible for UK retail sales growing faster than expected in June 2017. 

But it appears to be an inexact science because the figures also depend on human behaviour. 

Other reports have claimed that footfall fell in July 2018 despite warmer weather – because people chose to eat, drink and spend time outside rather than shop.  

So, how can you protect your retail business from the impact of extreme weather?

By understanding weather trends

The Met Office now offers a commercial retail weather service, including weather analytics and consultancy to help retail businesses prepare for weather variations. Other private businesses offer similar data-related models.

By having the right insurances in place

Insuring against weather-related risk is vital, not just for damage to property but also business interruption. 

Insurance can cover income stabilisation, cost containment and extra expenses incurred. In the case of Superdry, for instance, the loss of revenue could have been protected using a weather product linked to a temperature trigger.

In 2012, too, the leisure industry in the UK was hit hard due to record rainfall which hit numbers for outdoor activities from golf to theme parks. Those businesses could have protected themselves against the impact of unseasonal or record adverse weather utilising a weather insurance product.