Image Credit: Erika Wittlieb

Weather for Small Business

Nature is always a force to be reckoned with.

July 20, 2019

Weather. The ultimate conversation starter. So, how about the crazy heat we just saw in Europe? Temperatures were soaring to new all-time highs; even in places like Germany and Norway, which aren’t particularly known for smoldering summer heat. In the south of France though, they recorded a record-breaking 45.9°C (114.6°F). And, not far behind, in Catalonia, Spain, the heat grew so intense, it caused animal manure on pasturelands to self-ignite and spark massive wildfires. In parts of Europe, it was so hot, temperatures were on par with those in Arizona’s Death Valley. Now, the question is was this just a fluke or are we headed for a new normal?

Science seems to suggest that we are looking at the latter. Seven of the hottest years on record have occurred in the past decade. That’s seven out of ten. But how does weather impact our everyday lives beyond our daily choice of clothes, our diet, recreational activities, or travel plans? Weather is a huge economic factor. Estimates show that nearly 20% of the U.S. economy is directly affected by the weather1. Naturally, this includes its impact on the revenues and profitability of many industries; including agriculture, energy, travel, tourism, health, construction, and many more.

Maybe it’s time for businesses to become more innovative in including weather into their strategic and operational planning. With big data, AI, and more sophisticated weather-forecasting technologies being commonplace now, the ability to make timely weather-related decisions may well yield new market opportunities and afford some businesses a chance to reinvent themselves.

Out of a plethora of available weather Apps, Windy.com is a rather inspiring example of how life-weather information, along with up to 10-day forecasts can be displayed, delivered, and interpreted. Originally conceived as an App to forecast wind conditions for kite surfers, the site has now evolved into a professional-grade weather platform that’s also fun-to-use. Apparently, the Czech startup is still looking for ways to package their weather data as commercial products and services; so, maybe, the following will help them spark a few innovative ideas:

Weather for bakeries.

Would you be surprised to learn that there’s a direct link between the weather and the demand for baguettes, rolls, pumpernickel, and cakes? Because there is. On hot summer days, especially during vacation season, when people have ample time to enjoy their breakfast, baguettes and rolls fly-off the shelves, whereas pumpernickel and cakes tend to sell better when it rains. If you are a local artisan baker with just a single storefront, you probably developed a natural gut feeling for how many of your bestsellers you can sell on any given day; but what if your operation is a little larger and you have multiple retail locations in different areas or regions?

German startup Meteolytix GmbH has turned this question into an innovative business model. The company employs a self-learning algorithm to aggregate and analyze weather data, synchronize it with historic trends at a customer’s place of business and filters it through up to 400 additional factors to create individual weather-based sales forecasts. So, bakeries that are on Meteolytix’s client list aren’t only in the know about how many baguettes, rolls, pumpernickel, and cakes they will be able to sell on any given day, they also receive detailed insights into managing their supply chain and required staffing. Naturally, this yields many benefits. It reduces planning, costs for raw material and supplies, waste, and energy costs while optimizing operational effectiveness and profitability.

Weather for tourism.

Summer. Sun. Vacation. This concoction is the very definition of what most of us dream about. In reality, however, these key ingredients for a great time-off do not always coincide as expected. So, how do tourists in a hotel or vacation home in a small seaside town save the day, when weather threatens to spoil their plans or scheduled activities?

A new concept is showing promise in this field. It fuses advanced weather data with health-related advisories and local lifestyle information. This by itself isn’t new. Jordan-based Arabia Weather, for instance, has been providing value-added weather forecasts for the Arab world since 2006. This new concept, however, is taking it much further. Based on local, hour-by-hour weather information, users have access to a wide cross-section of recommended local activities and sports. Each proposed activity is linked to a corresponding provider, who has available slots and accepts reservations or sells tickets on the platform. Alternative programs are driven predominantly by the weather. For instance, rain in the forecast triggers proposed trips to museums, indoor activities, or ideas for in-town shopping; whereas, overcast skies and cooler temperatures seek to inspire guests to go hiking or visit nearby landmarks.

Again, potential benefits are obvious. Hotels and guesthouses are in a position to propose a Plan-B, in case the weather isn’t cooperating with their guests’ primary focus or scheduled activities. Local businesses and service providers, along with towns and communities, benefit from additional exposure and are able to generate additional revenues. So, even though this platform is still in a conceptual stage, potential early adopters include a major travel portal, a short-term lodging platform, a chain of boutique hotels, and various communities.

Weather for insurance.

Linking weather to insurance won’t be difficult. Catastrophic weather events cause billions of dollars worth of damages every year. Extreme and severe weather causes commercial flights and trains to be delayed or canceled; unseasonably-dry or wet weather inflicts dramatic consequences on agriculture and tourism, and even just a few degrees above or below established medians, stretched over a few weeks, can strain electric grids and lead to costly predicaments for power companies. But even on a lesser scale, for instance, when organizers of an open-air festival seek to curb potential financial losses as a result of bad weather, weather is just business as usual for insurance.

Given the scale and breadth of how weather impacts our economy, it’s not a surprise that insurance has long honed weather into a sophisticated business model based on which businesses, state and local governments, even entire nations, can obtain tailor-made coverage against weather that’s acting out.

When I’m in Europe, I live in a small picturesque town in the French countryside across a beautiful park with a small creek. This creek, which is hugged by winding trails was one of the reasons, why I chose this small home away from home. Another one was that it came with a garage in which I could safely tuck away my motorcycle. So, imagine my surprise, when after weeks of torrential rain and the creek swelling to a stream, I started receiving color-coded text messages from my insurer warning me of potential flooding. Until that day, I never even noticed the wooden marker indicating that this little creek crested at 2m above normal, about twenty years ago.

Images: Karl A. Mohr

Yet another idea for applying life-weather data in every-day insurance may be a weather recorder that would enable insurers to link a snapshot of life-weather conditions to a claim filed by a customer and save it for future reference. So, for example, if a customer claims that his car was damaged by hail, the customer service rep can simply link a snapshot of current weather conditions to the case file, so, when the claims adjuster reviews the case, he can verify that the damage could have been caused by hail.

Weather in advertising.

I think there can’t be any doubt that weather has a fundamental impact on how we dress, what we eat, how we get from point A to B, and what past time activities we engage in. Naturally, this is mirrored in consumer behavior. Malls being jam-packed on rainy Saturdays, while literally being void of people on weekends with back-to-back sunshine, suggests that this is a valid assumption. But let me try to make this even clearer. Surely, you must have noticed that sizzling temperatures in the forecast always perfectly coincide with great deals on ceiling fans and mobile air conditioning in big box home improvement stores, hardware stores, and supermarkets. You may think now that this is just the result of opportunistic marketing of seasonal merchandise. And you may be right.

But how about it, if some of the smaller units come with a “Sizzle or Free” type of guarantee, according to which you would be entitled to full refund of the purchase price, and get to keep the merchandise, if temperatures would stay below 30°C (86°F) over the weekend? That could indicate one of two things. Either the local sales manager is a gambling man or the store employs weather targeting.

Weather targeting is everything but new. At least this applies to online advertising. Companies like WeatherAds.io, GroundTruth.com, or Google have long identified weather-related advertising as a lucrative market opportunity. Let me give you a real-world example. Warmer-than-usual winters often turn snow into a scarce commodity. Naturally, many resort towns in the European Alps are looking at weather forecasts with abundant snowfall as an opportunity to save the season. Weather targeting would enable them to compare local weather conditions and forecasts with those of rival ski resorts and get sales pitches like “Hiking in Mayrhofen or powder skiing in Kitzbühel?” out to prospective guests.

© 2019 Karl Mohr. All rights reserved.