U.S. Markets closed

How IBM helps retailers thrive when the weather changes

IBM’s new decision software tool promises to save and make money for all kinds of businesses, big and small. The tool is called Weather Signals and Big Blue’s subsidiary The Weather Company, known as The Weather Channel app, said it can add 12% to 20% back to a company’s bottom line.

Company executives love to blame the bad weather for their poor performance, Weather Company CEO Cameron Clayton told Yahoo Finance On the Move. “That excuse, we are turning it into an opportunity especially for retailers to be able to change the answer going forward to make much better predictions about what kind of stock they need, what kind of staffing levels they should apply and what future trends should be,” he said.

How Weather Signals works

Businesses that sign up for Weather Signals submit shipping, stocking and sales data to The Weather Company. That information is merged with billions of data points IBM’s supercomputer system Watson has collected regarding the weather worldwide. Weather Signals then creates a model unique to each individual business that shows how fluctuations in temperature and even really big storms can affect a business. That kind of information can help a business make more money.

Weather forecasts used to be about 55% accurate but today they are 86% accurate, according to Clayton. “And so basically what I tell people is I will pay you $5 every time we are wrong if you pay me $5 every time we are right,” he said. Cameron adds that helping retailers make better decisions about supply chain can save them millions of dollars.

Beer on sunny days, chocolate when its cloudy

For instance, Weather Signals shows that sunny weather actually increases sales of beer and soda. But how much of a boost in sales depends on where you live. In New York, beer and soda sales increase 16%, but in Vermont it’s up 9%. So, a retailer using Weather Signals can adjust their stock accordingly.

(Photo by Burhaan Kinu/Hindustan Times via Getty Images)

Meanwhile, cloudy weather boosts sales of chocolate, according to Weather Signals. Rhode island leads the way with a 37% increase in chocolate sales when it’s cloudy out. Frozen dinners are a big hit during polar vortexes like those that chilled the United States last winter. People stock up on frozen dinners, especially frozen pizza, when the temperature falls. Consumers in Massachusetts lead the way in terms of frozen food purchases.

IBM Watson is ‘the magic’

IBM’s Watson is “the magic” that powers Weather Signals, according to Clayton. “This is a flagship example of the scale of data that is not possible without AI,” he said. Clayton points out the same software is also being used to help farmers more accurately predict the weather. That information can help them increase crop yields at harvest.

A large farm was losing 30% of its crop due to poor irrigation, Clayton said. When the farm used the Watson-powered Decision for Agriculture platform, it learned it was using 20% more water than it needed. Some farmers have too little water but that wasn’t the problem in this case.

“That’s where the magic of the scale of IBM AI and weather data comes together,” said Clayton, who predicts that Weather Signals is going be the tool that brings AI and the huge quantity of data it can process to help farmers, retailers and supply chains make better decisions.

Adam Shapiro is co-anchor of Yahoo Finance On the Move.

Read the latest financial and business news from Yahoo Finance