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OPERATIONS

Groundhog Day: This Warm Winter is Killing Businesses
 

So Punxsutawney Phil says there will be six more weeks of winter. Who cares? This weather has really messed up businesses all around the country.

A temperate winter has resulted in a downturn in business for small auto shops and other businesses that offer services and goods dependent on colder, messier weather.

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Carstar is the largest group of auto-body repair facilities in North America, with over 400 stores in U.S. and Canada. Like any auto body shop, Carstar fixes dents and dings, which are often the result of slippery roads and inclement weather. So when good weather strikes, Carstar sees its sales suffer. 

"We never wish bad weather on anyone," says the company's CEO, David Byers. "But it is very clearly correlated to our sales cycles."

The company has even calculated the magnitude to which weather factors influence sales. Ice is No. 1. Rain is number two. Snow is three.

"All of those are at record lows," Byers says. "Our understanding was that 1920 was the last time we've had this little snow, ice, and rain."

It's been a mild winter season, to put it lightly. December temperatures in the Midwest were the warmest in five years, while Massachusetts had 12 days when the temperature soared to 10 degrees above normal. AccuWeather.com called it "The Year Without a Winter in the Midwest, East" and The Guardian has reported that "a range of flowers, insects, birds and animals" are "blooming, singing, nesting, and mating" prematurely. (As I write this—on February 1—the temperature outside in New York is a balmy 53 degrees. It's expected to get up to 61, and we haven't had a proper storm since Halloween.)

Clearly, weather matters for business. But to what extent, exactly?

Consider this data from Weather Trends International, a weather forecasting firm based in Bethlehem, Pennyslvania, that studies weather trends and retail purchases. Its "Power of 1°," a yearly study on weather patterns, has compiled some noteworthy, if not strange finds. For example, the sales of orange juice rise two percent with each degree colder it gets, while mousetraps sell 25 percent more with each one degree colder in temperature. Consumers also spend one percent more on bird seed for each degree colder it gets in the winter.

Sales of orange juice rise two percent with each degree colder it gets, while mousetraps sell 25 percent more with each one degree colder in temperature.

Michael Hodge has seen this this correlation between weather and sales firsthand in his business, Whooga ugg boots, an off-brand "ugg" boot label based in Smithfield, Austrlia.

Hodge, the company's technical director, says that for a very long time he couldn't figure out why company sales would fluctuate wildly—by up to 90 pairs per day.

"Our visitor stats remained fairly consistent," he says, noting the site gets about 10,000 to 20,000 visitors per day and made more than $5 million AUD this year. But "conversion would double one day, triple the next and then be a tenth of our baseline. It actually made testing factors which affect conversion incredibly difficult."

Recently, Hodge decided to plot the minimum daily temperature on a graph with the conversion numbers. The correlation, he found out, was nearly perfect.

"A single degree makes quite a difference," he says.

So, the company reacted. When the predicted temperature was much lower, the company used demographic targeting in contextual advertising networks (mainly Facebook) to target those people in those regions. The company also focused advertising on the colder states.

The takeway?

"Use the weather forecast as a sales tool," he says. And "know the temperature at which you need to hit the button. The upshot is that this knowledge has allowed us to refine our marketing and stop spending on regions which are a waste of clicks."

It's hard to deny that weather affects nearly every industry, especially when weather patterns are so unpredictable. It's downright simple to find examples of just how much the weather has screwed with businesses this year. And it's not all bad, to be fair. Plenty of firms see an upshot in business when weather is unseasonably warm. But for plenty of entrepreneurs, it's not necessarily the inclement weather that gets them down—it's the unpredictability.

Consider Duane Draughon, the president of PaverStone Design Group, a company that designs and build outdoor living spaces in Powell, Ohio. With this winter being so warm, Duane decided to keep two crews out all winter—but doing so takes a toll on the cash flow, because normally the shop would be shut down for winter months.

"A successful construction company survives on hard core cash," he says. "We have to sell and install in a timely manner to keep the lights on around here."

He says most clients in the Ohio market are not accustomed to signing contracts for outdoor living spaces in the winter, which is why they don't push the operation heavy in the winter.

"We are questioning every week in our meetings, because the money we are using to front materials and payroll could be going to the internal marketing efforts and operation during the off season," he said, adding: "We are doing a great effort to use this warmth to our advantage."

In the comments section below, let us know how weather has affected your business.

IMAGE: Getty
Last updated: Feb 2, 2012




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