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Retail Think Tank

Extreme weather: Retailers need “better forecasting and risk models”

  • Best retailers “prepare for the unexpected”, says KPMG/Synovate Retail Think Tank

London, November 28, 2011

Some UK retailers blame poor or unexpected weather too often as a reason for poor performance figures, according to the latest White Paper from the KPMG/Synovate Retail Think Tank (‘RTT’).

The panel of industry commentators, who meet on a quarterly basis to provide an authoritative and independent view on issues affecting the retail sector, concluded in its latest session that better forecasting methods and risk management would enable retailers to limit the impact of extreme weather on performance.

The expert panel concluded that there are “some good reasons” why the weather can contribute to short term variations in individual retailers trading performances. However, its impact was sometimes “overplayed too heavily”, and rarely over the course of a year should it be considered anything other than a ‘business as usual’ factor. 

Helen Dickinson, Head of Retail at KPMG, comments:

There is no doubt that the weather does impact retail performance. We see this most starkly in periods of extreme or unexpected conditions, the country grinding to a halt in December last year due to adversely snowy conditions or the Indian summer of late September this year.

“Indeed there will be sales lost (or gained for that matter) as a result and once forgone, a significant proportion will not be regained given the discretionary, ‘of the moment’ nature of so much of our shopping activity.  However, year in, year out, there will always be anomalies and one-offs and therefore at a market level it has little overall effect on overall retail sales.

“The best retailers really are prepared for the unexpected.  They are getting the valuable insight from the mountains of data that they collect and interpreting it wisely.  Their suppliers, logistics arrangements and store staff are sufficiently flexible to respond to fast moving conditions in an efficient and reliable way.”

Key recommendations from the panel:

  • Better merchandising and buying strategy can beat short-lived weather blips
  • Better forward planning and risk analysis by retailers is needed to tackle weather extremities
  • Flexibility as well as autonomy at store level is necessary
  • Utilise the tools you have when extreme weather conditions hit – during these ‘blips’ online marketing and communication should be increased to shift seasonal stock
  • Shorter cycles and more flexibility is needed – don’t stick to rigid plans

There is also concern among the RTT members that referencing bad weather too often masks more concerning factors around how retailers are performing in an extremely volatile economy. Ignoring these issues will only prolong and most likely worsen them. The strongest retailers are able to forecast well and build flexibility into their offerings and supply chain. This enables them to respond quickly to changing conditions, reducing the impact that the weather has on them.

Neil Saunders, Conlumino, said: 

“The bottom line is that retailers have a responsibility to be honest about the weather, and that includes pointing out when it has helped drive a strong performance as well as a weak one. Retailers also have a responsibility to build tolerance into their merchandise, sales and margin plans to account for weather variability. Just as a wise person will carry an umbrella even on a clear day, a wise retailer will have a plan for the inevitable shifts and fluctuations in our weather.”

The panelists concluded that cash-strapped customers are the biggest problem for retailers right now.  The growing uncertainty in the European and global markets is expected to keep consumer confidence low.  However, the Chancellor’s forthcoming Autumn Statement is expected to shed some light on how the UK Government intends to boost growth in the UK economy and alleviate pressure on consumers.

Helen Dickinson said: “Looking ahead to Christmas, inflation may have come down by a smidgen, but the cost of petrol and household utilities will continue to be the biggest contributors to the squeeze on personal disposal incomes. As a result, this squeeze will continue to affect retail spending which has remained largely subdued. As we approach Christmas, the busiest trading period of the year, retailers are bracing themselves for the worst.”

Date Published: 11/1/2011 4:35 PM

Note to Editors:

The RTT panellists rely on their depth of personal experience, sector knowledge and review an exhaustive bank of industry and government datasets including the following:

Members of the RTT are:

  • Nick Bubb – Independent Retail Analyst
  • Dr. Tim Denison – Ipsos Retail Performance
  • Jonathan De Mello – Harper Dennis Hobbs
  • Martin Hayward – Hayward Strategy and Futures
  • Maureen Hinton – Conlumino
  • James Knightley – ING
  • Richard Lowe – Barclays Retail & Wholesale Sectors
  • David McCorquodale – KPMG
  • Martin Newman – Practicology
  • Mike Watkins – Nielsen

The intellectual property within the RTT is jointly owned by KPMG ( and Ipsos Retail Performance (

First mentions of the Retail Think Tank should be as follows: the KPMG/Ipsos Retail Think Tank. The abbreviations Retail Think Tank and RTT are acceptable thereafter.

The RTT was founded in February 2006. It now meets quarterly to provide authoritative ‘thought leadership’ on matters affecting the retail industry. All outputs are consensual and arrived at by simple majority vote and moderated discussion. Quotes are individually credited. The Retail Think Tank has been created because it is widely accepted that there are so many mixed messages from different data sources that it is difficult to establish with any certainty the true health and status of the sector. The aim of the RTT is to provide the authoritative, credible and most trusted window on what is really happening in retail and to develop thought leadership on the key areas influencing the future of retailing in the UK. Its executive members have been rigorously selected from non-aligned disciplines to highlight issues, propose solutions, learn from the past, signpost the road ahead and put retail into its rightful context within the British social/economic matrix.

Definitions:  The RTT assesses the state of health of the UK retail sector by considering the factors which influence its three key drivers.

1.  Demand – Demand for retail goods and services.  From a retro-perspective, retail sales, volumes and prices are the primary indicators.  When considering future prospects, economic factors such as interest rates, employment levels and house prices as well as others such as consumer confidence, footfall and preferences are used

2.  Margin (Gross) – Sales less cost of sales; the buying margin less markdowns and shrinkage.  Cost of sales include product purchase costs, associated costs of indirect taxes and duty and discounts

3.  Costs – All other costs associated with the retail operations, including freight and logistics, marketing, property and people

The Retail Health Index – how is it assessed?

Every quarter each member of the RTT makes quantitative assessments of the impact on retail health of demand, margins and costs for the quarter just completed and a forecast of the quarter ahead.   These scores are submitted individually, collated and aggregated in time for the RTT’s quarterly meeting.  The individual judgements on what to score are ultimately a combination of objective and subjective ones, drawing upon a wide range of hard datasets and softer qualitative material available to each member. The framework follows the example of The Bank of England Agents’ scoring system on economic intelligence provided to the Monetary Policy Committee.

The aggregate scores are combined to form the Retail Health Index (‘RHI’) which is reviewed at that meeting and occasionally revised after debate if members feel it appropriate.  The RHI tracks quarter on quarter changes in the health of the UK retail sector and as such provides a useful and unique measured indicator of retail health.  The index ‘base’ of 100 was set on 1 April 2006.  Each quarter, it assesses whether the state of health has improved or deteriorated since the previous quarter.  An improvement will lead to a higher RHI score than that recorded in the previous quarter, and with a deterioration leading to a lower score.   The larger the index movement, the more marked the shift in the state of health.

The RHI has two main benefits.  Firstly, it aims to quantify the knowledge of the RTT members in a systematic way.  Secondly, it assesses the overall state of health of the UK retail sector for which there is no official data.

For media enquiries please contact:

Max Bevis, Tank PR

Tel: +44 (0)1159 589 840


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