Retail

The Strange World Of Summer Retail

Today, summer is officially on. Well, OK, not “officially” in a literal sense, since the sun’s annual trip to the Tropic of Cancer isn’t officially on the calendar for a few more weeks.

However, across the U.S. this weekend for the bathing suited and flip flop clad, “close enough” is the rule of the day, and it is certainly summer enough to run through the sprinkler, toss something on the BBQ and decamp to the beach to read.

But for all the glories of summer — long days, vacations and a built-in excuse to substitute ice cream for any actual meal — summer does have one asterisk for retailers in the U.S. It is an extremely strange time of year, economically speaking.

Strange, but not necessarily bad.

Summer is not a time of year when consumers stop shopping — quite the opposite actually (more on that in a second) — it’s just that what they buy, when they buy and how they buy looks a bit unusual when taken in the context of the rest of the year.

And that’s just regular summer background radiation. 2016 likely has a few custom curveballs to throw.

So what fun in the sun can the nation’s retailers expect this year?

The Good …

The really good news about summer for retailers is that the temperature is their ally — well, at least for those retailers in the Northeast, assuming that it warms back up again in Boston (from 92 to 62 in 24 hours is a bit much …).

Warm weather literally makes people shop more more, and be willing to spend more while they shop. You have probably noticed this yourself anecdotally in your own life, possibly while standing in an amusement park paying $15 for a soda in a “commemorative” plastic cup (the event you are commemorating of course being the exact moment you realized why Walt Disney was history’s greatest genius).

But science has also gone the extra mile to prove it. Raising temperature in small amounts changes how consumer feel about shopping. When it’s over 70 outside, people actually look forward to a trip into the world to buy things. They like it even better if they can buy things for other people. And, perhaps most amazingly, a warm consumer is a spendier consumer. Over 80 percent of consumers were willing to pay more for goods and services because they were standing in a comfortably warm room while they were asked.

Throw into that the additional studies by MasterCard that indicates people on vacation are more likely to go shopping (and in fact view going shopping as a critical part of being on vacation), and the fact that the vast majority of Americans and others in the Northern Hemisphere vacation between June and September. Also, summer is the best time to meet and greet international travelers and introduce them to your brand, because about a quarter of the tourists traveling in the United States this summer will be from abroad.

Physical retailers also get a special boost that their online counterparts don’t, as travel-based purchases are almost exclusively bought in physical stores.

The Bad …

Warm weather is in general a retailer’s friend, but bad weather is always a retailer’s enemy, and summer offers many options.

So does winter of course, and retail-related disruptions abound particularly when it is extremely cold (and shoppers won’t go outside) or snow/ice shuts down roadways.

But winter is pretty much a one-trick pony when it comes to weather disasters. It’s always cold + snow/ice. Summer is much more a game of natural disaster roulette where tornados, hurricanes, droughts and heat waves are just a quick sampling of the places on the wheel that the Mother Nature induced spin of the wheel might stop. Depending on the severity of the disaster and where and when it hits, one bad summer weather event can be economic Armageddon for a region for a while.

But the difficult issue in summer retail, as noted by Bloomberg, is that though there is a lot of money to be made, the profitability is very lopsided and spending can be very unpredictable. Labor forces (particularly among construction workers, teachers and auto-workers) become highly fluid in July, and the outcomes of annual contract negotiations or the business of the building market make a big difference to the shape of the season. Also, energy consumption spikes, but often in hard to predict ways.  

The upshot is that summer is — in the background of all those BBQs and days at the beach — usually marked by a lot of background uncertainty in the economy, which means retail gets unpredictable and somewhat fragile. In an average year, the trends are on a merchant’s side. But a little push from the wrong direction, and those trends shift into headwinds that can make summer a long, hard slog.

Lurking In The Wings …

Obviously we can’t account for unknowns or predict the future. But we can at least look out to the known unknowns as worth watching this year.

The first is the Olympics, which are going off in Brazil in a little over two months. Olympics — particularly ones where Americans do well — drive a spending and buying spree among consumers. How big of a pop that adds to 2016 will be worth cataloging.

And, of course, there is the second annual Prime Day, Amazon’s attempt to build its own summertime version of Black Friday. Prime Day was a big hit for Amazon, which shattered a variety of records and saw its sales spike 80 percent.

Prime Day will be back this year and Amazon vows it will be bigger than ever. If last year was any indication, the Prime Day bandwagon will likely include a lot of big players and a lot of people will spend July 15 quietly shopping at their desks at work.

Or on the beach, or on the deck of a cruise ship.

And then there are gas prices, which here in the U.S. are low, low, low. Consumers flush with those savings seem to be eager to plow them into other retail purchases.

So, there’s a lot for retail to look forward to this summer, though how and if it pans out remains to be seen.

Check back in with us on Labor Day, when we’ll run all the vital stats for you.

Oh, and do your bit for retail and go shopping today! We will be.

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