The Cold Weather Effect: Raising Profits When Temperatures Drop

What is the cold weather effect?

Winter weather has some surprising effects on consumer behavior. Collectively, these effects are known as the “cold weather effect.” 

“The cold weather effect is the phenomenon by which businesses see an increase in profits during periods of cold weather,” said Max Benz, founder and CEO of BankingGeek. “While the exact cause of this boost is not fully understood, there are a number of theories that have been put forward to explain it.”

Here are some of the theories that attempt to explain the cold weather effect: 

• More time indoors prompts spending. One theory says consumers spend more time inside when it’s cold but may dine out more, spend money on entertainment, and shop online, boosting e-commerce sales. 
• Low supply triggers higher prices. Another theory says wintry weather prompts decreased levels of goods and services, disrupting supply chain distribution. As a result, prices are higher and businesses see bigger profits.
• People can get used to cold weather. A 2022 study by the Federal Reserve Bank of San Francisco found that the “sensitivity of retail sales to precipitation, snow, and cold weather declines with historical experience.” This means shopping and spending can increase during cold weather events as shoppers become more accustomed to wintry weather. Tan’s research found that areas with historically consistent cold weather at specific times of the year are likelier to see increased sales during that time. In contrast, unusually cold weather in areas where cold weather events are more uncommon might make people stay indoors, resulting in lower sales.
• Online shopping is always open. While cold weather events such as snow, sleet and ice can make it difficult to travel to shopping areas, online shopping has no such barriers. In cold weather, people can shop from the comfort of their own homes.

How does cold weather affect consumer behavior?

Here’s a look at what we know about cold weather’s impact on purchasing behavior: 

1. Cold weather makes people want to stay indoors and shop online.

Cold, dreary, gray weather tends to keep people indoors. However, this doesn’t mean they’re not spending money. Being stuck indoors can be prime time for online shopping. Consumers have access to their mobile devices and computers when they’re stuck inside, and online shopping during these periods tends to spike. 

Here are some explanations for this behavior: 

• Consumers have time to shop online. When shoppers are forced to stay indoors, they have the time to explore online purchases of items they may have been considering for a while.
• Online shopping is a cure for boredom. Bored consumers may seek out a little retail therapy online. “When the weather is bad, people tend to stay indoors and get bored,” said Harry Turner, founder of The Sovereign Investor. “Boredom is a major trigger for online shopping, so bad weather can actually lead to an increase in online buying behavior.” 

2. Consumers may stock up on specific items for the winter.

An early winter event, such as a snowstorm in October, immediately affects consumers, causing them to think about the holiday shopping season. 

Additionally, cold weather prompts purchases of specific necessities. “[Consumers] buy warmer clothes, heat their homes and businesses, and purchase items that make them feel comfortable in the colder temperatures,” Turner explained.

Unusually cold weather also may prompt consumer panic, causing people to spend more money earlier than they typically would.

How can weather forecasting help retailers adjust? 

Informing retailers of short-term cold weather events has become a big business. For example, many retailers subscribe to the Weather Channel to receive custom alerts. The Weather Channel’s iOS and Android mobile apps inform retailers of upcoming weather events in real time. Getting a heads-up on weather changes can help retailers plan their short-term marketing and advertising campaigns.

Here are a few ways retailers can take advantage of forecasting platforms:

• Send targeted “cold weather” marketing emails. If a retailer is privy to wintry weather conditions in specific locales, they can send out email marketing campaigns to their targeted audience in those areas to promote online specials and discounts and thus entice them to shop online.
• Stock up when winter is imminent. Retailers that know an early winter is imminent can prepare by stocking their shelves and online inventories with popular holiday gifts and cold weather necessities.
• Advertise on forecasting platforms. Some weather forecasting services can even help retailers with targeted advertising. If weather conditions are pertinent to a business’s products or services, they can place targeted ads on a weather forecasting platform. For example, if the weather forecast includes high humidity, the platform can run a prepaid ad for a business’s high-humidity hair products. 

While The Weather Channel was the first to move into this market, hundreds of other companies are now in the business. Some of the most popular services and apps include Carrot Weather, Emergency: Alerts, NOAA Weather Radar Live, and 1Weather.

How does weather in general affect purchasing behavior?

All weather conditions affect consumer purchasing behavior to some extent, but it varies according to the industry and circumstances.

Some industries thrive in warm weather, including theme parks, festivals, ice cream shops, outdoor malls, and many restaurants and bars. When it’s warm, people want to be outside to experience the good weather and seek out places that accommodate outdoor fun. These businesses see a decline in sales, or even shut down, once the weather starts to change.

Similarly, ski resorts and cold weather retailers thrive in the winter and may shut down or scale back drastically in warmer weather. 

Weather’s impact on consumer behavior also may have emotional connotations. For example, a cloudy, dreary week may prompt some consumers to make purchases to brighten their moods, or a sunny, warm stretch of weather may put consumers in the mood to go shopping at brick-and-mortar shops.

5 tips for making your business weatherproof

Most businesses want to thrive amid all weather conditions and seasons. Here are some tips for making your business weatherproof: 

• Cut down on expenses. Cutting business expenses and planning your budget help you create a nest egg to get through the year. “Every dollar that leaves your account is money that can be used to help you get through the off-season,” said Joshua Rich, CEO and founder of Bullseye Locations. “Try to cut down on necessary expenses while removing unnecessary ones.” Rich also advised creating – and sticking to – a budget.
• Understand buying behavior. Customer analytics can inform your purchasing and inventory decisions. “One way that businesses can make their profits more stable all year long, regardless of the weather, is by using data analytics to understand their customers’ buying behavior,” said Laura Helke, founder of WREI. “This can help businesses to better forecast demand for their products and services, and to make changes to their inventory or marketing strategies accordingly.”
• Offer timeless products. Some products and services are necessary throughout the year. “Focus on selling products that people need regardless of the weather,” said Linda Shaffer, chief people operations officer at Checkr. “For example, food and health care products are always in demand.” Shaffer also advised selling timeless products that never go out of style, including classic books and well-made furniture.”
• Implement weather-based marketing. Use weather forecasting services to optimize your marketing and advertising. “Companies should make sure they’re using weather-based targeting when advertising online or through other channels,” said Kate Zhang, founder of Kate Backdrop. “By doing this, companies can ensure they’re reaching their target audience with the right message, regardless of the weather.”
• Have a strong online presence. E-commerce stores are open 24/7, regardless of the weather. “Many consumers now do most of their shopping online, so even if bad weather keeps people from going outside, they may still purchase items from companies online,” Turner said.

Julie Ellis contributed to the writing and reporting in this article.