As climate change bites, the high street needs to wise up or risk losing out
It’s official - 2006 was the hottest year on record in the UK. And retailers need little reminding of how an unseasonally warm November and December affected sales of key pieces in their autumn collections.
However, the warm, late winter should have come as little surprise to anyone with good weather forecasting tools in the run-up to Christmas. So is it time for retailers to face up to what is no longer freakish, unseasonal weather and instead start planning for the new, warmer weather patterns?
“A big thing in 2007 is how we are all going to have to start realigning our seasons,” says Moss Bros chief executive Philip Mountford. “The weather forecasters are predicting an unbelievably cold February and March this year. We haven’t really reacted to such forecast in the past, but we need to now. It means we won’t be trying to sell overcoats in August, or have swimming trunks being delivered in March when it’s still freezing.”
Mountford’s reasoning is logical. In any other sector, a sound business model would dictate that product is available when people want to buy it, and is then marked down once the end of its life cycle nears.
In a letter written to Drapers last year (Drapers, December 16), Fisser BV UK sales manager David Lapedus said: “I believe we are destroying our own businesses by so avidly sticking to this dubious delivery schedule.”
Lapedus’s proposal is that rather than opting for the current free-for-all in terms of when shops go on Sale, retailers should push to restrict Sales to the end of summer, in August or September, and the end of winter, in February or March. This, he argues, would put the industry back in sync with today’s emerging weather patterns, “giving the industry a chance.”
However, while restrictions such as this could create a more transparent market for retailers, Tony Stockil, chief executive of retail consultancy Javelin Group, points out that it is illegal in the UK for retailers to discuss with each other when to go on Sale or when to discount.
Stockil says that while retailers are pondering this dilemma, there is plenty of action they can take. One stop-gap measure could be to look at improving merchandise management. This would mean holding more product back in the stock room, only moving it out once the timing is right, to avoid slow-shifting stock filling the store at the wrong time. “This is the sort of basic flexible merchandising used by the little souvenir shops on Oxford Street, when they put umbrellas at front of store when it’s raining.
“It makes sense for retailers to bring clothing forward to suit the weather,” he says. “Retailers must now, more than ever, buy into forecasting. If it’s too warm they should be pulling the right clothing out of their DCs to go into stores.”
Stockil says the ideal situation would be to move even further towards short-order, having a third of product forward-ordered, with the rest re-ordered to meet demand. “Weather is no doubt causing retailers much pain. They must get smarter about how they manage the supply chain, allocating the right stock to the right stores at the right time.”
Stockil believes that companies should look to Zara’s model, which he describes as an “icon of rapid response” because it has a lot of short lead time sourcing. “This means it is able to fine-tune its quantities, bringing in new stuff when needed and as temperatures change.
“It has relatively high costs compared with retailers that are sourcing from further afield. But it doesn’t mark down much, instead maintaining full prices, which evens out the higher costs. It’s all about having the right balance of off shore and near shore,” he adds.
George Global managing director Angela Spindler is also addressing how to balance direct sourcing from near and far in order to adapt to a changing climate. “It is certainly something that we are conscious of,” she says. “Flexibility is the key to climate change. Although at the moment we have no plans to alter when core spring 07 or autumn 07 collections will go in, the ability to adapt quickly will be the key to success for any retailer. Perhaps sourcing more closer to home, such as Turkey or the UK, will mean that the clever retailer will be able to flex product to meet sustained and unexpected hot or cold spells.”
At the moment, Asda uses long-range weather forecasting to ensure that the right products are on the shelves at the right time of year. “It’s a trick that many clothing retailers may have to adopt,” adds Spindler.
However, Russell Hardy, chief executive of Blacks Leisure Group, which operates the Blacks, Millets and Free Spirit chains, adds a word of caution to those planning to alter trading patterns.
“There is a debate as to whether global warming is happening or whether we have just been living through two strange years,” he says. “It’s not clear what the weather pattern will be in the future; we may have very mild winters or they may just start later.”
Nonetheless, Hardy believes global warming will be one of the biggest challenges facing clothing retailers in the future. He says the crucial questions are: Do clothing retailers have a sufficiently flexible supply chain to cope? And what type of clothing will be needed longer term in a world of global warming? Hardy is in talks with suppliers and logistics companies, which he says are recognising the changing needs of retailers.
“We’re ensuring that our supply chain is more flexible. For non-fashion clothing, if the suppliers are sourcing from the Far East and are less flexible, they will have to hold more stock and distribute as and when the weather is right. For fashion retailers it’s a much greater problem.
“The suppliers that will come off best will be those that are able to produce high-end fabrication, respond quickly to our desire for extra orders and can hold stock for when it matches the weather. Fabrication has to be more breathable, more lightweight and capable of layering,” says Hardy.
Berghaus head of marketing Sarah Wilson says fabric is already changing in response to the threat of global warming. “There’s been a decrease in heavily insulated product, and big down-filled jackets aren’t as popular as they were.
“We’ve noticed a shift in consumers’ and buyers’ requirement for products. There’s more focus on multi-function clothing with more layering products and three-in-one pieces, because people want to be able to better regulate body temperature.”
The one certainty is that those retailers that are not putting weather at the top of their agenda will be left with surplus, tired-looking stock - as happened with winter-wear in the run-up to Christmas.
“Retailers need to understand precisely what weather does to their business, as opposed to second guessing,” warns Tim Morris, client services director at weather forecasting firm Planalytics. “Many of them don’t really know what effect a four-degree change in the weather will have on their business, yet they all know exactly what a 4% rise in interest rates will do.”
WHAT THE MET OFFICE SAYS
“The ability to predict seasonal variations one or two years in advance will be key to enable retailers to capture the maximum value from the market.
“In the coming years we are likely to see more extreme events. This is because the warmer the atmosphere, the more moisture there is in the air and the increased potential for greater energy, therefore the greater the intensity of weather events.
“Winter temperatures will get ever warmer and we are already globally committed to temperature rises of about 1.5 degrees over the next 20 to 30 years. But we will still see a range of temperatures and should expect to see freezing temperatures as part of our winter picture.
“As with any temperature change, acclimatisation occurs and we will become acclimatised to our new environment - ‘the new norm’.
“Climate change increasingly blurs the lines between the seasons - hence bumblebees in October. We would expect this trend to continue and for the seasons to take a new shape over the coming years through climate change.”
WHAT DO THE RETAILERS THINK?
Adrian Wright, chief executive, SRG
“The past year has taught retailers they will have to invest in good forecasting. We have to think about contingency plans for when it’s warmer or colder than expected. We knew that November would be warmer, but didn’t know it would extend into December. We could have put coat deliveries back or cancelled orders.”
Clive Pettigrew, founder and chairman, East
“The late hot spell caused havoc with our knitwear predictions. Everyone will have to adjust - looking at last year’s process and tweaking it. We’re now looking at throwing out the old timings and starting afresh. But retailers are terribly stuck in the mud.”
Mitchell Hughes, menswear buyer, Matalan
“We’re aiming to build more transitional ranges and buy more regularly to adapt to weather patterns. One example is within shirts. By working with the factories and fabric mills, we can change sleeve lengths to adapt to fashion and weather.”
Oliver Spark, chief executive, Elvi
“We all turned up our coats in September, but in December we were still wearing jackets. It’s been a tough season. Transition will be much bigger this year: are we delivering what customers want, when they want to buy it? We’re putting coats in store in August, but we must ask if that works any more.”
Jane McNally, buying and merchandising director, Peacocks
“Transitional ranges will be a big part of retailers’ strategies this year. Buying patterns will continue to change. Retailers will need to buy further in advance because of price pressures, but also have to beat the seasons. It’s all about marrying this up, which comes down to good sourcing.”
Angela Spindler, managing director, George Global
“The warmest year on record certainly had an impact on clothing retailers in the UK. I remember seeing winter coats in all the stores on London’s Oxford Street in August, which looked totally out of place.”