Service and Operations Management

Here Comes the Sun: Fashion Goods Retailing under Weather Shocks

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The weather has been identified as an important driver of demand and constitutes a major risk for retailers, especially in goods for which usage is affected by weather conditions, such as soft drinks or fashion apparel. We empirically study the impact of weather variables on the operations of a large fashion apparel retailer. We develop two models: one for store footfall and another for conversion of visits into product category sales. We find that rain has a very large effect on footfall, increasing it in shopping mall stores and decreasing it in street stores. Temperature has a milder effect on footfall but is the main driver of conversion, increasing sales of the "appropriate" categories: summer items are sold more under positive temperature shocks and winter items less. Furthermore, the weather has a moderating effect on price sensitivity, and specifically rain makes customers less price-sensitive. This finding allows us to exploit weather variations to improve profits: we demonstrate that weather-contingent pricing can increase revenues by up to 2% during rainy days.
Bibliographic citation: Belkaid, Abdel; Martínez de Albéniz, Víctor, "Here Comes the Sun: Fashion Goods Retailing under Weather Shocks", 02/2017
Date: 16/02/2017
Author(s): Belkaid, Abdel; Martínez de Albéniz, Víctor
Document type: Working Paper
Languages: English