French supermarket retailer Carrefour, who have more 4,500 retail outlets in the country, is turning to a weather risk management information provider to assist them in making better decisions on merchandising and product selection. Through the deal with weather forecaster and data provider Metnext, Carrefour will integrate weather data into their sales forecasting and understanding of consumer purchase behaviour to allow them to manage weather sensitive product lines better.
Weather conditions have an impact on choice of products, availability of products, quantities of products required and also on store traffic (how many consumers visit the stores) and so ultimately on Carrefours profits. By being better able to predict what stock they need and what customers will want to purchase Carrefour will be able to better predict cash flows and smooth their finances.
The project will begin by providing forecasts for the weather induced demand of food products before moving on in a second phase to look at non-food item demand. Carrefour are looking to integrate weather data and forecasting into their product range across all of their stores and will become one of the most advanced retailers in this respect.
The weather forecasts will also put Carrefour in a position where they could stimulate the creation of novel insurance or weather derivative tools to help them hedge demand financially. The weather risk management sector has long sought to help retailers effectively hedge the impacts of the weather on their sales but tools have been limited in many cases to weather guarantee’s backed by insurance. By integrating weather into the product forecasting process of a retailer it could open the way for weather hedging to be much more tightly integrated into a companies operations.