A Profitable Holiday Paradox: The Fifth Quarter - Markacy

A Profitable Holiday Paradox: The Fifth Quarter

By the time December rolls around each year, most retailers have exhausted their promotional playbooks, having focused a significant share of their year-end resources on Black Friday sales. This is especially true in the age of COVID, with rumors of recession echoing the hall, many believe that BFCM may be the last shot at real volume. We advise our clients otherwise.

The Lesser Known “Fifth Quarter”

In the aftermath of Black Friday, while many retailers are busy counting profits and preparing for post-holiday returns, the marketplace tends to go a little quiet. This period, dubbed “Q5” by marketers, is an oft-overlooked opportunity for holiday gains. In technical terms, the Fifth Quarter (Q5), occupies the period after the Christmas shipping cut-off through the end of January when retail executives are still recovering from holiday break. During this time it is typical to see ad costs decline substantially while consumers’ purchase intent remains “holiday-high” with extra cash in-hand from returned items and gift cards. 

How to Plan for an Extended Holiday 

Planning for a successful holiday season starts on January 1. Plan to kick off the New Year with fresh ideas for incremental growth. Testing, channel expansion and segmentation in the first 10 months will prepare you for success when it matters most. Use the following as a guideline for mapping your media strategy:

1st & 2nd Quarters

Leverage holidays in the first half of the year as an opportunity to test
growth tactics. These early learnings will pay dividends in Q3 & Q4 as
competition increases.

3rd Quarter

The holiday season comes and goes like a tempest, so preparation is key while morale is high. Refine top-of-funnel acquisition techniques through the summer and lock-in your holiday plans early so you can focus on building remarketing pools in September. At this point in the game, Facebook, Google, and programmatic pixels need to be setting new cookies and your email lists should be growing aggressively.

4th Quarter

As holiday demand rises, ad costs will follow. To remain competitive,
you’ll need to shift budget into the remarketing channel. At the peak
of the holiday season, your potential consumers will be inundated to
the point of fatigue. Take note, as ROI declines, pull back spending
and wait patiently… for Q5.

Cyber Week extends its reach every year. In 2019, many retailers promoted sales starting the Monday before Thanksgiving. Consequently, in 2020, some retailers mitigated costs by launching BFCM sales an entire week before Thanksgiving.


The 5th Quarter

Our best estimation is that the fifth quarter will begin around Dec 15th
and last through early January. This will be your opportunity to earn a
share of consumers’ unspent holiday dollars at more reasonable costs.
Aggressively pursue last-minute purchases and post-holiday deal

How has COVID impacted holiday planning?

While the long-term outlook for the economy may be grim, the 2020 holiday season is showing some promising resilience. As a leading indicator, the National Retail Federation reports average gift spending only dropped 14% over the Thanksgiving weekend, returning to levels comparable to 2018. Smart retailers can curtail the impact of the economic downturn by appealing to consumers’ adjusted expectations during the Q5 window.

The Last Day of Shipping is normally complemented by a last-minute rush to brick and mortar retail. Given this isn’t an option in the pandemic, holiday procrastinators will be a ripe audience for Q5 promotions.

Delayed shipping and alternative gatherings will undoubtedly change holiday traditions. Flexible consumers and retailers with padded expectations could pad their wallets with Q5 deals.

The Day After Christmas was an opportunity for retailers to process exchanges, fulfill gift cards and liquidate holiday stock. Given the restrictions, analysts believe that much of this activity will shift online.

In Conclusion…

In prior years, Q5 strategy may have padded the latter pages of pitch decks, but as the economy pulls back and consumers change their buying behavior, we believe these strategies will make headlines in 2020. This is especially true given that we cannot predict the total impact of COVID on holiday shopping. It is likely that retailers in the know will have a little extra to celebrate in holidays to come.