Rite Aid Exec Talks About the Weather
With three consecutive quarters of same store sales and adjusted EBITDA growth, could weather be a contributing factor in Rite Aid’s success? On Tuesday at the annual Category Management Conference in Atlanta, Rob George, director of market research for Rite Aid, talked about how better use of business weather intelligence is helping in the revitalization of the company.
Using raw weather data alone is too unreliable, according to Mr. George, because it relies on subjective, individual interpretation of the situation, which is inefficient as too many people try to solve the same problem. So Rite Aid works with Planalytics to try to get to a "single version of the truth." Since weather is highly variable and is only similar to the previous year 20 percent of the time, Mr. George said Rite Aid aims to do two things: 1) ‘Deweatherization’ — removing weather-driven volatility from historical results so they can plan and allocate from weather-neutral positions; and 2) ‘Weatherize’ its sales plan — adjusting in-season weather impact on business by accounting for weather events.
Weather driven demand (WDD) is the measurement of how much lift or drag weather provides and does not include any factors other than weather. Rite Aid looks at this information on a weekly basis, down to the store level. Looking at WDD allows Rite Aid to change assortment and stock levels accordingly, heavying up on rain gear for one part of the country and ordering less for another, for example.
The company is able to see long-term forecasts up to 11 months out, and the forecast gets a major fine-tuning two weeks out, enabling last-minute adjustments. Rite Aid plans stock, promotions, displays, ads, and even markdowns according to weather forecasts. And they can manage their facilities better, knowing when to start seasonal landscaping work, when to plan for snow removal, and even when to verify snow removal bills.
Additional benefits of weather forecasting at retail might include social media — offering coupons or special deals to shoppers on Facebook or Twitter based on local conditions and/or long and short term forecasts.
Discussion Questions: How useful do you think long term weather forecasting is, or should be, to retailers? How should it be properly factored into other decisions related to advertising, promotion and merchandising?