If you own your own shop, you may have heard whispers of a 4-5-4 retail calendar being the best way to manage your books. Unfortunately, these calendars can also be a bit intimidating and hard to understand at first.
In this article, we’ll be breaking down exactly what a 4-5-4 (and 4-4-5), retail calendar is, how it’s different from a regular calendar, how to use it, and whether or not it’s right for your store. To help us, let’s imagine a conversation between a Store Owner and a Retail Expert.
Store Owner: So, what exactly is a retail calendar?
Retail Expert: A retail calendar is a type of calendar that lots of shops use to measure their sales because it has some advantages over the normal 12 month calendar.
SO: Oooh, what are those sweet advantages?
RE: The biggest advantage is that a retail calendar is set up in a way that lets you easily and accurately compare your sales year to year.
SO: I already compare my sales year to year. For example, I’ll look at what I sold in March 2017, 2018, and 2019. That way I know how much I’m growing.
RE: You can compare that way, and your numbers will be ok, but they won’t be as accurate as a retail calendar.
SO: Why not?
RE: Because as you probably already know, retail sales are heavily dependent on weekend days. And the amount of weekend days a specific month has changes year to year. For instance, March 2017 had 8 weekend days, March 2018 had 9 weekend days, and March 2019 had 10 weekend days. If you compare your sales data that way, March 2019 will seem up to 25% more successful than it actually was.
SO: Ok. So if I want to avoid that problem, I have to use a retail calendar?
RE: Yes. And it’s worth noting that almost all major retailers and a good percent of small businesses think this advantage is important enough to justify using a retail calendar.
SO: How is a retail calendar different than a regular 12 month calendar?
RE: A retail calendar separates the year into 4 and 5 week chunks that have the same number of weekend days in them.
SO: Ok. Can you show me an example?
RE: Of course! Let’s look at one of the most popular retail calendars out there, the National Retail Foundation 4-5-4 merchandising calendar for 2019, 2020, and 2021.
SO: Wow, that looks confusing. What’s up with the 4-5-4?
RE: That means this calendar starts with a 4-week chunk, then there’s a 5-week chunk, then back to a 4-week chunk.
SO: Are all retail calendars also 4-5-4 calendars?
RE: Not all, but around half. The other type of retail calendar is a 4-4-5 calendar, and it’s exactly the same as 4-5-4, except the initial pattern is different. Either way, the pattern repeats four times throughout the year.
SO: So the entire year’s worth of weeks for a 4-5-4 calendar is sectioned off like this? 4-5-4, 4-5-4, 4-5-4, 4-5-4.
RE: Yes, exactly! You’re getting the hang of it.
SO: Huh. It looks a little weird, but I can see that this way all the weeks are complete. Every week starts on a Sunday and ends on a Saturday.
RE: Exactly. Every section contains complete weeks only, no starting or stopping a section on a random day like a regular calendar. What else do you notice?
SO: That the years line up perfectly. It’s easy to compare the same segment of time across 2019, 2020, and 2021.
RE: Correct again. Remember, this is the whole reason retail calendars exist. To be able to easily and accurately compare your sales year to year.
SO: You already said that.
RE: Yes, but a key component of learning is repetition.
SO: Ok, I’m seeing something that confuses me. Why do the years start on different days? In 2019 the calendar starts on Feb. 2, in 2020 it starts on Feb. 2, and on 2021 it starts on Jan. 31.
RE: You’re right. That’s a bit annoying, but it’s the math that the calendar makers had to do to make sure the years could be cut into equal chunks.
SO: I guess that’s fair. Next question: why do the years start so late? Couldn’t they start on Jan. 2 and 3, and Dec. 31?
RE: Ah, now we’ve come across another retail trend: holiday shopping.
SO: But holiday shopping would be over by the beginning of January. I don’t see why the calendar couldn’t start when a normal calendar does.
RE: Yes, the shopping is done by the beginning of January, but the returns aren’t done. And because the biggest shopping time of the year is in November/ December, the biggest time for returns is in January.
By starting the retail calendar in early February or late January, it lets retailers account for all the holiday returns they’ll be getting, and not start their year out in a month where they’ll constantly have to be accepting merchandise back.
SO: Ok. That makes sense. So should my store be using a retail calendar instead of a normal one?
RE: That depends. The retail calendar does have some cons.
SO: Really? Like what?
RE: Well first, you’ll have to transition all your current monthly systems to a 4-5-4 calendar. This may include your invoicing, banking, and even how you fill out taxes, although retail calendars are already approved and understood by the IRS.
SO: Those things do seem a little inconvenient, are there any more cons?
RE: There is another odd thing. Retail calendars only have 364 days a year, (7×52=364). So every 5 to 6 years, an extra week is added to account for this.
SO: So let me see if I’ve got it. Retail calendars are the standard system retail companies use so that they can accurately measure their year to year sales.
RE: Exactly. Even Coca-Cola uses a retail calendar!
SO: The downside is that they look a bit funky, you have to adjust all your other monthly operations to fit the retail calendar, and that it only has 364 days in a year.
SO: Is there anything else I should know about the retail calendar?
RE: Not really, but here’s a fun fact! The retail calendar was invented in the 1930s, and became popular in the 1940s. If you’re doubting whether or not to switch, it can be helpful to remember that it’s existed successfully for almost 100 years.
So: Do you think I should switch?
RE: That’s really up to you and what’s best for your business. But you should at least understand what a retail calendar is, how it can help your business, and make an educated decision based off that information.
SO: Great! I’ll definitely think about it.
RE: Then my work here is done!