Some fashion teams live by it, and for others, it's a mystery. However, since the 1930s, retailers have used the 4-5-4 calendar to streamline the fiscal calendar to improve sales accounting, forecasting and even payroll timing. For a planning method devised during the Great Depression, there’s a lot to be said about its use for modern retailers and DTC businesses.
At the core of the calendar’s concept is ending the year on the same weekday. This ultimately simplifies comparisons and encourages strategic decision-making across particular periods. So, how exactly does it work? Read on to discover why the 4-5-4 can be used by every department in your fashion business.
What is the 4-5-4 calendar?
The best way to understand the 4-5-4 calendar is to start with its contextual difference to the Gregorian calendar. The Gregorian calendar is the one you see on your iCal; it begins on January 1st and ends on December 31st, and is the international standard in government and business.
The problem with the Gregorian calendar for retailers are the sales, payment and accounting inconsistencies when comparing year-for-year, week-for-week and day-for-day data. The standard calendar has years and months that start on different days, some are leap years, and holidays fall differently; all elements that can lead to miscalculations and incorrect data comparisons.
The 4-5-4 calendar, however, works as a scheduling framework that allows accurate comparability between years. It does this by dividing the year into months based on a 4 weeks – 5 weeks – 4 weeks format. This calendar was established as an easier way to organize accounting periods, as it splits the year into four quarters, each with 13 weeks. Each quarter has two 4-week months and one 5-week month. The 5-week "month" can be the first, second, or third "month" in the quarter, e.g. 5-4-4, 4-5-4 or 4-4-5.
Why was the 4-5-4 calendar created for retailers?
In the 1930s, it became clear the prime shopping days of each week were Saturday and Sunday; a trend that has largely continued to this day. Using the Gregorian calendar for accounting and forecasting started to become a problem as merchants could not provide accurate reports with each quarter having a different number of weekends. With quarterly average sales used to forecast for the next, there was a need for much more accurate calculations.
So, retailers split the year into 52 weeks that always begin on a certain day. The structure of the 4-5-4 calendar ensures the layout lines up holidays and has the same number of Saturdays and Sundays in comparable months. They also decided to include the end-of-year holiday shopping season in Q4 by extending it to the end of January of the next year, so the retail calendar always begins on the first Sunday of February. This structure is still the National Retail Federation standard.
One flaw of the calendar is that one month is 25% longer than the other two, making month-to-month comparisons more accurate by the Gregorian calendar. Also, the 4–4–5 calendar has only 364 days (7 days x 52 weeks), meaning a 53rd week must be added every five or six years.
Why should retailers use a 4-5-4 calendar?
The major advantage of this calendar is that each period is the same length and ends on the same day of the week. This makes it much more beneficial to align data, planning and merchandising for retailers, as they can compare like-for-like days, weeks and years.
- Data analysis
For today’s e-commerce and retail teams, the 4-5-4 calendar offers an ideal standardization for analyzing data. It simplifies conducting quarter-over-quarter and year-over-year analyses, as merchants can compare performance metrics such as sales, website traffic, and inventory turnover without the shifting number of shopping days.
- Planning and promotions
The 4-5-4 calendar is extremely useful for planning sales promotions or marketing campaigns, given you can compare like days (Mondays with Mondays, for instance). You can understand which day of the week performs best for particular promotions and plan accordingly.
The calendar will give you a better understanding of your consumers’ shopping habits. You can use it to optimize merchandising for high-traffic windows, such as major holidays and seasonal shifts, and you’ll know when to schedule promotions to boost sales during historically slower times.
For example, on the Gregorian calendar, Black Friday shifts between November 23 and 29, depending on the year. With the 4-5-4 setup, Black Friday falls in the last week of November with exactly one shopping day afterward. So, you can accurately measure the impact of Black Friday promotions and the subsequent shopping days until the end of November, YoY, without the floating Thanksgiving date. A rule you can also apply to promotions around the Easter holidays.
- Inventory management
For buyers and merchandise planners, the 4-5-4 calendar acts as a roadmap through the peaks and troughs of the retail year, which means it can help optimize your merchandising strategy and open-to-buy planning.
The key benefit of the predictable structure for assessing and responding to buying patterns means buyers and merchandisers can better predict when customers are most likely to make purchases. Therefore, allowing you to strategically adjust your inventory levels to meet seasonal demand. On top of that, the 4-5-4 calendar allows you to measure better and gain more insights into the performance of specific products or categories over time. This can help you understand the best times for introducing new products, at what point in the season products lose or gain sales velocity, and observe when to begin phasing out aged stock.
For a retail calendar nearly 100 years old, there are so many benefits for today’s fashion and apparel teams to stick to a 4-5-4 calendar. Whether it's forecasting demand, planning inventory, or setting marketing strategies around the biggest shopping days of the year, the 4-5-4 calendar will help ensure your predictions and calculations are as precise as possible.
Image Credit: Cereal
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