Faced with extreme weather, should fashion rethink its store network?

By Bella Webb  

From the catastrophic wildfires in Los Angeles to large-scale flooding across Europe, extreme weather events are becoming more frequent, with implications for all.

The past year has seen some of the most destructive climate catastrophes on record. Wildfires, hurricanes and floods are happening at an alarming frequency, with a huge impact on human lives and a significant financial cost. . . .

Many fashion retailers justify their continued presence in volatile or risk-prone climates on the basis that store damages and losses are absorbed relatively easily, climate risks materialise infrequently and the insurance machine is well oiled enough to allow for quick payouts and recovery efforts. But as climate events become increasingly frequent, a cottage industry is emerging of so-called weather risk analysts. Their aim is to help retailers map their climate risks and adapt their retail strategies accordingly, both to minimise physical exposure to risks and to maximise sales throughout extreme weather events and slower climate changes.

“Weather volatility is the least understood, measured and acted upon external factor for retail businesses today,” says Evan Gold, executive VP of global partnerships and alliances at one such weather analytics consultancy Planalytics, which co-authored a report on climate-proofing retail with US trade body National Retail Federation (NRF) in June. Per the report, the weather — either extreme events, slower shifts in climate or increased volatility — directly influences $1 trillion in retail sales annually across sectors (meaning sales are delayed, diverted or altogether lost).

Whether these risks will redraw the retail map is a “board-level decision”, says Gold. But executives may not be able to ignore the risks for much longer, as extreme weather becomes more frequent and intense. And the LA wildfires show that insurance is not the surefire safety net it once was.

Rising up the priority list

Damage to retail stores has been relatively minimal in comparison to the impact of extreme weather events on supply chains, so for now the latter is where most retailers remain focused.

However, experts say the focus could shift in the future if reporting on climate risks to physical retail becomes mandatory in more countries.   . . .