Atmospheric Influences on Shopper Behaviour. How atmospheric conditions influence consumer behaviour across the globe

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1 Atmospheric Influences on Shopper Behaviour How atmospheric conditions influence consumer behaviour across the globe

Atmospheric events such as heatwaves, excessive cold spells and floods can affect a consumer s emotional state, purchasing decisions and willingness to spend but in different ways.

2 Atmospheric events such as heatwaves, excessive cold spells and floods can affect a consumer s emotional state, purchasing decisions and willingness to spend but in different ways. Unlike seasonal events that fall on the same date, weather patterns are difficult to predict; there s just a 15% chance* that atmospheric trends will impact businesses in the same way from year to year. To manage the substantial revenue swings caused by fluctuating conditions, retail organisations must understand the relationship between major weather events and consumer activity. This report will investigate the impact of weather patterns on retail traffic across international markets. *Source: Planalytics Page 41

3 HOW DOES TEMPERATURE IMPACT RETAIL TRAFFIC? One of the greatest atmospheric influences on consumer footfall is temperature; both heatwaves and cold snaps can impact whether shoppers choose to venture out, and the location and stores they visit are also affected. However, there is not necessarily a common pattern across the board. Temperature will drive retail activity differently between different regions across the globe, depending on the type of climate they are accustomed to. In this section of the report, we will delve into the relationship between temperature and footfall, comparing its influence globally. We will also look specifically at the impact of temperature on the UK - and whether other factors such as the number of sunshine hours also affect footfall. Page 42

4 CORRELATIONS DEVIATIONS GLOBAL UK RETAIL TEMPERATURE vs. FOOTFALL Correlation between footfall and average temperature 0 0 To understand the relationship between heat, cold and consumer activity, we plotted average temperatures against footfall patterns throughout Results show a positive relationship between temperature and footfall in Austria, Australia and Portugal. Weak negative correlation Italy India Ireland Spain UK China France Poland Germany Portugal Australia Austria Weak positive correlation Moderate negative correlation Moderate positive correlation An increase in the temperature sees retail traffic rise, whilst a drop in temperature sees retail traffic fall, perhaps because these areas are used to hot spells, particularly Australia. The strongest positive relationship is seen in Austria, which has a correlation value of Strong negative correlation Strong positive correlation In contrast, there is an inverse relationship between temperature and footfall in Italy, India, Ireland, Spain, UK, China, France, Poland and Germany. WHAT IS A CORRELATION? FIND OUT HERE An increase in temperature sees retail traffic decrease, whilst a drop in temperature sees retail traffic rise. This can be due to a sudden heatwave causing consumers to take last minute holiday or flexi-time, to enjoy outdoor activities rather than going shopping. The strongest negative relationship is seen for Germany, which has a correlation of Page 43

5 CORRELATIONS DEVIATIONS GLOBAL UK RETAIL TEMPERATURE vs. UK RETAIL FOOTFALL How does temperature affect UK retail footfall patterns? During high temperatures, people choose to move away from shopping centres and pursue other activities. Sports & outdoor retailers see their footfall increase, with people purchasing consumables to enjoy during the warmer temperatures. RETAIL PARKS OUT-OF-TOWN NATIONAL TOWN CENTRE HOME & GENERAL FASHION SPORTS & OUTDOOR As outlined on the previous page, there is an inverse relationship between temperature and shopping centre footfall; as the mercury rises, retail activity drops, picking up again when temperatures fall back down. However, certain geographies and sectors behave differently. For example, town centres see consumer activity increase with higher temperatures, while hot spells improve footfall among sports & outdoor, fashion and home & general stores. Source: UK National Index- Retail Sector Benchmarks Download Now Page 4

CORRELATIONS DEVIATIONS TEMPERATURE SUNSHINE HOURS UK TEMPERATURE DEVIATIONS How does footfall respond to unexpected changes in temperature?

6 CORRELATIONS DEVIATIONS TEMPERATURE SUNSHINE HOURS UK TEMPERATURE DEVIATIONS How does footfall respond to unexpected changes in temperature? Increased temperature volatility causes unstable consumer activity. It seems extreme weather patterns don t appeal to UK consumers; just as footfall declines as temperature rises above average, it also drops off when they fall below average. Cold weather: December 2010 Widespread snow and extremely low temperatures swept the UK at the end of The temperature deviated 5.6 degrees from the average, which led the Office for National Statistics classifying the event as being numerically significant. Footfall numbers fell -3% Year-on-Year for shopping centres and -4% for retail parks during this period. Travel can often be disrupted during cold weather too, which is a contributing factor to footfall decline. Hot weather: April 2011 Year-on-Year -2.0%* -3.0%** Year-on-Year shopping centre retail parks footfall footfall Temperatures recorded 3.7 degrees above average in Spring which is the greatest deviation since During this time, many consumers took advantage of the good weather to enjoy outdoor activities, forgoing shopping in the process. Year-on-Year shopping centre footfall -3.0%* -4.0%** Year-on-Year retail parks footfall At this point, shopping centre footfall fell -1% Month-on-Month and -2% Year-on- Year, whilst retail park monthly footfall decreased -2% and -3% annually. *Source: UK National ShopperTrak Index **Source: UK Retail Park ShopperTrak Index Page 45

7 CORRELATIONS DEVIATIONS TEMPERATURE SUNSHINE HOURS UK SUNSHINE HOURS DEVIATIONS How is footfall influenced by hours of sunlight? Overall, when the sun comes out, people feel encouraged to visit shopping centres and retail parks. Sunnier than average for the time of year: July 2006 In July 2006, the UK experienced 3.1 more hours of sunshine than the long-term average for that time of year. This led to shopping centre footfall increasing +5% Month-on-Month and +2% Year-on-Year, whilst retail parks saw footfall rise +3%, both monthly and annually. Jul % Year-on-Year shopping centre footfall Less sun than average for the time of year: June 2012 Conversely, in June 2012 the UK experienced 2.5 fewer hours of sunshine than the long-term average for the time of year. As a result, shopping centre retail traffic declined -2% Year-on-Year however, retail park Year-on-Year footfall actually increased by +4%. Jun % Year-on-Year shopping centre footfall *Source: UK National ShopperTrak Index Page 46

HOW DOES PRECIPITATION IMPACT RETAIL FOOTFALL? Temperature is not the only influence on retail traffic; precipitation also plays an important role.

8 HOW DOES PRECIPITATION IMPACT RETAIL FOOTFALL? Temperature is not the only influence on retail traffic; precipitation also plays an important role. Once again, the exact conditions determine the level of impact - for example, heavy rainfall or snow can result in a greater footfall decline - and this varies from region to region. In this section, we will compare global precipitation trends with an in-depth look at the UK. We will also focus on how extreme weather conditions, such as flooding, impact retail footfall. Page 47

9 CORRELATIONS GLOBAL DEVIATIONS UK RETAIL Correlation between footfall and average precipitation PRECIPITATION vs. FOOTFALL 0 0 We also looked at the correlation between shopping and wet weather, analysing 2014 footfall patterns against average precipitation. There is a positive relationship between precipitation levels and footfall in France, Ireland, Austria, UK, India, Spain, Australia and Italy. Weak negative correlation Moderate negative correlation France Ireland Austria UK India Spain Australia Italy Portugal China Germany Poland Weak positive correlation Moderate positive correlation An increase in precipitation sees retail traffic go up, whilst a decrease leads to retail traffic falling. These are all regions that regularly see periods of rainfall, so consumers are more likely to divert their retail plans to an undercover shopping venue, rather than decide to stay -0.8 Strong negative correlation 0.8 Strong positive correlation indoors instead The strongest positive relationship is seen in France, which has a value of 0.7. There is a negative relationship between changes in precipitation levels and footfall in China, Germany and Poland. WHAT IS A CORRELATION? FIND OUT HERE As the rain in these regions comes down, so does the number of shoppers, picking up again when precipitation levels decline. The strongest negative relationship is seen for Poland, which has a correlation of The region s shopping centre culture is declining in favour of convenience shopping, so perhaps even inclement weather is not enough to tempt them to their local mall. Page 48

10 CORRELATIONS DEVIATIONS GLOBAL UK RETAIL PRECIPITATION vs. UK RETAIL FOOTFALL How does the level of precipitation affect UK retail footfall patterns? Bad weather affects retail locations and store sectors in different ways, as can be seen in the correlations below. HOME & GENERAL OUT-OF-TOWN SPORTS & OUTDOOR RETAIL PARKS FASHION NATIONAL TOWN CENTRE Whereas in sunny weather people flock to convenient locations for their shopping needs such as out-of-town venues and retail parks that contain many of the key stores they want to visit during times of precipitation, they want to shop under cover. This favours shopping centres, and town centres with good parking facilities close to stores. The type of shopping people undertake also changes, which creates an inverse relationship between precipitation for sportswear, homeware and DIY stores; nobody wants to do up their garden on a rainy day! Instead consumers gravitate towards fashion purchases, boosted by the sale of wet weather accessories such as coats and umbrellas. Increased rainfall will mean less people undertake DIY projects and outdoor activities. Page 49 Source: UK National ShopperTrak Index- Retail Sector Benchmarks Available Now

11 CORRELATIONS DEVIATIONS UK UK DEVIATIONS How is footfall influenced by rainfall? Generally, increased rainfall encourages people to visit shopping centres - at least as an alternative to other outdoor activities. National rainfall and flooding: June-July 2007 Precipitation was close to double the long-term average for this time of the year in 2007, and tens of thousands of homes and businesses flooded towards the end of July as a result. Shopping centre footfall increased +1% Month-on-Month and +3% Yearon-Year in June, rising to +4% monthly and +2% annually in July. Regional rainfall and flooding: November 2012 Year-on-Year -2.0% shopping centre footfall However, the weather negatively impacted retail parks, which saw footfall decline -4% Month-on-Month in June, although activity picked up by +2% Month-on-Month in July, remaining level Year-on-Year. Month-on-Month shopping centre footfall Jun % Jun % Month-on-Month retail parks footfall A prolonged period of heavy rain led to widespread flooding in late 2012, particularly in Southern and Western regions. National shopping centres saw footfall decrease during this period by -2% Year-on-Year, whilst the South West saw an even more pronounced annual decrease of -4%. Page 10 4 Source: UK National ShopperTrak index

12 EXTREME WEATHER EVENTS In addition to observing atmospheric trends across several international regions, we also investigated the impact of extreme weather events on retail activity. Ash Cloud Heatwaves Europe The effect of extreme weather varies dramatically from country to country, and therefore requires close analysis if retailers are to plan appropriately; countries used to such conditions are less likely to vary their shopping habits than those for whom any significant falls or rises in temperature or precipitation can cause major behavioural shifts. UK Somerset Floods Heatwaves Asia Typhoon Soudelor Italian Floods China Air Quality Dust Storm Australia Page 11 4

FLOODS AIR QUALITY HEATWAVES ITALIAN FLOODS 13th-15th November 2014 Footfall declined between -4% and -8% when nearly 183mm of rainfall fell over a two day period.

13 FLOODS AIR QUALITY HEATWAVES ITALIAN FLOODS 13th-15th November 2014 Footfall declined between -4% and -8% when nearly 183mm of rainfall fell over a two day period. Plenty of warnings about the severe weather allowed shoppers to bring forward their purchases, which resulted in footfall increasing +4.6% before the floods. Subsequent days, when the flooding was at its worst, saw footfall fall between -4% and -8%. Year-on-Year footfall, th Nov +4.6% 14th Nov -7.6% 15th Nov -4.7% between -4% and -8% footfall decline in Italy - Page 12 4 Source: Italian National ShopperTrak Index

The south west was particularly badly affected, and this was reflected in retail traffic; footfall slipped between -1.

14 FLOODS AIR QUALITY HEATWAVES UK SOMERSET FLOODS January / February 2014 In early 2014, the UK was hit with some of the worst flooding in its history. The south west was particularly badly affected, and this was reflected in retail traffic; footfall slipped between -1.1% and -6.4% compared to the region s Year-on-Year change. Year-on-Year footfall + between -1.1% and -6.4% footfall decline in UK Jan % Feb % - Source: UK Regional ShopperTrak Index Page 13 4

FLOODS AIR QUALITY HEATWAVES TYPHOON SOUDELOR 8th August 2015 Even extreme weather events such as typhoons can have mixed effects on retail footfall.

Although rail services and flights were cancelled and schools and offices were closed, urban areas of China were resilient - in fact, retailers saw footfall increase over

15 FLOODS AIR QUALITY HEATWAVES TYPHOON SOUDELOR 8th August 2015 Even extreme weather events such as typhoons can have mixed effects on retail footfall. Thousands were evacuated and large areas left without power as Typhoon Soudelor barrelled through South-East China on the weekend of August 8th. Although rail services and flights were cancelled and schools and offices were closed, urban areas of China were resilient - in fact, retailers saw footfall increase over the weekend. Year-on-Year footfall, South China 8th Aug +5.5% 9th Aug +7.5% 8th Aug +0.2% East China +5.5% South China s footfall increase on August 8th 9th Aug -5.5% - Source: China regional Indices Page 14 4

FLOODS AIR QUALITY HEATWAVES ASH CLOUD 16th-29th May 2011 An ash cloud is created when volcanic ash is propelled into the atmosphere during a volcanic eruption.

16 FLOODS AIR QUALITY HEATWAVES ASH CLOUD 16th-29th May 2011 An ash cloud is created when volcanic ash is propelled into the atmosphere during a volcanic eruption. The 2011 eruption of Grímsvötn, Iceland s most active volcano, caused a great deal of disruption in North Western Europe from 16th 29th May The second week saw flights being cancelled. The UK was now feeling the impact, with consumer traffic decreasing -4% Year-on-Year. French footfall declined further to -6% Year-on-Year, but Germany s footfall actually increased +9% - perhaps due to flight cancellations driving people towards other leisure activities, such as shopping. DISRUPTION CONTINUES 23rd May 2011 DISRUPTION BEGINS 16th May th May 2011 DISRUPTION ENDS The first week saw France and Germany most affected. French retail footfall fell -5% Week-on-Week and -3% Year-on-Year, while Germany s weekly footfall declined -3% weekly, annually no change was reported. At the weekend, things return to normal. Although France, Germany and the UK saw a -1% Year-on- Year decline, weekly footfall improved +4%, +16% and +4% respectively. Source: UK National ShopperTrak Index, German National Page 15 4 ShopperTrak Index and French National ShopperTrak Index

FLOODS AIR QUALITY HEATWAVES DUST STORM: QUEENSLAND AUSTRALIA 4th-5th December 2014 A dust storm or sand storm is a meteorological phenomenon common in arid and semi-arid regions.

17 FLOODS AIR QUALITY HEATWAVES DUST STORM: QUEENSLAND AUSTRALIA 4th-5th December 2014 A dust storm or sand storm is a meteorological phenomenon common in arid and semi-arid regions. Dust storms arise when a gust front or other strong wind blows loose sand and dirt from a dry surface. Particles are transported by saltation and suspension, a process that moves soil from one place and deposits it in another. When Queensland, Australia was hit by a dust storm in late 2014, footfall fell -4.3% Year-on-Year and -8.8% daily. + Year-on-Year footfall, th Dec -4.3% Day-on-Day footfall, th Dec -8.8% between -4.3% and -8.8% footfall decline in Australia - Source: Australian regional Indices Page 16 4

FLOODS AIR QUALITY HEATWAVES CHINA AIR QUALITY January-February 2014 An air quality index (AQI) is a number used by government agencies to communicate to the public how polluted the air currently is

18 FLOODS AIR QUALITY HEATWAVES CHINA AIR QUALITY January-February 2014 An air quality index (AQI) is a number used by government agencies to communicate to the public how polluted the air currently is or how polluted it is forecast to become. As the AQI increases, an increasingly large percentage of the population is likely to experience progressively severe adverse health effects. 28th March 2015 saw air pollution in Beijing hit outrageously high levels, with the city s air quality index reaching 895 due to a sandstorm enveloping Beijing. As a result footfall declined -4.5% Year-on-Year. Furthermore, 6th December 2014 saw pollution average 383 which according to the AQI Index categorisation puts the day as severely polluted. On this day, footfall decreased -7% Year-on-Year. + 28th Mar % Year-on-Year footfall 6th Dec % One significant factor affecting footfall figures during this time is the popularity of online shopping. In 2014, China became the world s largest ecommerce market, so many consumers decided to shop from home when pollution levels remained high. - Source: China National Indices Page 17 4

FLOODS AIR QUALITY HEATWAVES HEATWAVES - APAC January / February / July 2014 At what point do high temperatures cause consumers to change activities from being retail orientated to leisure instead?

19 FLOODS AIR QUALITY HEATWAVES HEATWAVES - APAC January / February / July 2014 At what point do high temperatures cause consumers to change activities from being retail orientated to leisure instead? INDIA At the start of 2014, temperatures in India soared close to 50 degrees. As most houses don t have air conditioning, a much higher volume of people visited shopping centres to escape the heat, leading to +10% Year-on-Year footfall increase. CHINA In July 2014, temperatures in China hit 35 degrees for 24 days, with Shanghai recording its highest temperature in 140 years. Like India, this pushed people towards air conditioned shopping centres, resulting in a +4% uplift in footfall Month-on-Month. Year-on-Year footfall Month-on-Month footfall +10% +4% Source: Indian National ShopperTrak Index Source: China National ShopperTrak Index Page 18 4

FLOODS AIR QUALITY HEATWAVES HEATWAVES - EUROPE July-August 2015 Regions where heatwaves are rare, such as the UK, see a drop in shopping centre traffic as people choose to enjoy outdoor activities

20 FLOODS AIR QUALITY HEATWAVES HEATWAVES - EUROPE July-August 2015 Regions where heatwaves are rare, such as the UK, see a drop in shopping centre traffic as people choose to enjoy outdoor activities instead. EASTERN EUROPE Summer 2015 has seen temperatures surpass the average for the time of year across much of Eastern Europe: POLAND Poland saw some of the highest temperatures during the week commencing 10th August Overall, footfall fell -8% with temperatures peaking at 38.9 degrees on Saturday, August 8th. As a result, footfall fell -7% Year-on-Year. GERMANY -7% YoY -5% YoY Germany also saw heat records being broken, with Kitzingen reaching up to 40.3 degrees Celsius (104.5 degrees Fahrenheit) this summer, tying the national record set on July 5th. In Berlin, temperatures rocketed on 4th and 5th of July and, as a result, footfall fell -18% on Saturday and -5% on Sunday (Year-on-Year). UK UK Heat Wave 1st July 2015 max temp 36.5 Year-on-Year national shopping Year-on-Year retail parks centre footfall footfall -4.7% +7.4% India and China s trends contrast with regions like the UK, which have few scorching days, leading to a drop in shopping centre traffic as people choose to enjoy outdoor activities instead. Source: UK National ShopperTrak Index, German National ShopperTrakIndex, Polish National ShopperTrak Index Page 19 4 Heatwaves - different classifications across different regions: UK - when the daily maximum temperature of more than five consecutive days exceeds the average maximum temperature by 5 C, the normal period being = Conflicting actions of consumers.

21 APPENDIX 1: CORRELATION The correlation analysis used in this document is based on Spearman s rank correlation coefficient. In simple terms, this tests the probability that two measures relate to each other, either positively, negatively or not at all. The scaling suggests there is either perfect, strong, moderate, weak or no correlation between the variables. The following chart illustrates what the numbers mean: Positive correlation An increase in one variable sees the other also rise. WEAK 0.3 MODERATE 0.5 STRONG 0.8 PERFECT 1 PERFECT -1 STRONG -0.8 MODERATE -0.5 WEAK -0.3 Negative correlation An increase in one variable sees the other decrease. Page 20 4

Switzerland -1.8% -0.9% OVERVIEW TEMPERATURE ADDITIONAL RESOURCES GLOBAL FASHION CONVERSION REPORT GLOBAL SHOPPER TRENDS REPORT ACTING ON INSIGHT SERIES it.shoppertrak.com +1.8% -4.5% +1.1% -3.

2% Republic of Ireland France -1.9% United Kingdom Germany -2.2% China -6.2% +5.

How are people shopping across the world and how does it vary from region to region? Uncover the secret to greater profitability with our Acting on Insight series.

22 Switzerland -1.8% -0.9% OVERVIEW TEMPERATURE ADDITIONAL RESOURCES GLOBAL FASHION CONVERSION REPORT GLOBAL SHOPPER TRENDS REPORT ACTING ON INSIGHT SERIES it.shoppertrak.com +1.8% -4.5% +1.1% -3.6% APAC Australia +0.2% Spain India Poland Japan 0.0% Austria Hong Kong FASHION CONVERSION BENCHMARKING REPORT: 2015 GLOBAL SHOPPER TRENDS REPORT EUROPE -0.3% -0.5% Italy Portugal -1.2% Republic of Ireland France -1.9% United Kingdom Germany -2.2% China -6.2% +5.1% Q Bringing you the latest consumer behaviour trends from across the globe We ve pulled together data from 21 different countries to give you a sneak peak into the fashion industry. How are people shopping across the world and how does it vary from region to region? Uncover the secret to greater profitability with our Acting on Insight series. Discover how fashion retailers are performing regionally, and how behaviour varies between industry sectors. We explore global shopper trends in our quarterly report. Download our guides for practical tips on uncovering new opportunities among your customer base, and turning an overwhelming stream of data into actionable business intelligence. Page 21 4

ShopperTrak: Retail Profitability, Improved About ShopperTrak ShopperTrak is the leading global provider of location-based analytics, offering insights into consumer behavior to improve profitability

23 ShopperTrak: Retail Profitability, Improved About ShopperTrak ShopperTrak is the leading global provider of location-based analytics, offering insights into consumer behavior to improve profitability and effectiveness. Through the use of analytics, ShopperTrak enables clients to better understand their customers, enhance the shopping experience, and ultimately increase traffic, conversion and transaction size. ShopperTrak is now part of Tyco Retail Solutions, the leader in retail performance and security solutions. Find out more at Tyco Retail Solutions All rights reserved. TYCO and the product names listed in this document are marks and/or registered marks. Unauthorized use is strictly prohibited. Source: Weatherbase ShopperTrak Yorke House, Arleston Way, Solihull. B90 4LH +44 (0) (0)

To find out how ShopperTrak can improve your profits visit www.shoppertrak.

Buckinghamshire, HP11 1JX www.shoppertrak.

is based upon data which is provided by third parties, the accuracy and/or completeness of which it would not be possible and/or

24 To find out how ShopperTrak can improve your profits visit or contact our team in your region on + 44 (0) ShopperTrak Head Office St John s Court, Easton Street, High Wycombe, Buckinghamshire, HP11 1JX The information contained within this report is not intended to be used as the basis for any business decision, and is based upon data which is provided by third parties, the accuracy and/or completeness of which it would not be possible and/or economically viable for ShopperTrak to guarantee. This report is prepared using models and techniques based on statistical analysis, probability and predictive behaviour and, accordingly, ShopperTrak is not able to accept any liability for any inaccuracy, incompleteness or other error in it.

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