What is Open to Buy?

What Is Open-to-Buy?

 Open-to-Buy (OTB) is an in‑season financial control that helps retailers manage their inventory investment as the season unfolds.

Once a season begins, actual sales, receipts, markdowns, and inventory replace portions of the preseason plan. The result is a blended merchandise plan that combines real performance with forward‑looking expectations. Open to Buy governs how buying decisions should adjust within that reality.

OTB is measured against the current approved in‑season plan and informs buying teams whether inventory dollars are available or constrained. It informs decisions such as:

• Pulling future orders forward
•  Pushing orders out to later periods
• Placing additional buys to chase demand

The Two Phases of Merchandise Financial Planning

 To understand Open to Buy, it’s critical to separate the two phases of merchandise planning.

 1. Pre‑Season Planning

Pre‑season planning defines the retailer’s strategic intent before the fiscal year or season begins. During this phase, planners determine:

• Total inventory investment
• Sales, markdown, and margin targets
•  Receipt flow by category, channel, and time period

Budgets are allocated based on anticipated demand, margin goals, and inventory productivity. Historical years are often used as benchmarks.

 Once reviewed and approved, this becomes the Original Plan and the baseline for all future revisions.  Quite often, this plan will also be approved for another version, the Revised Plan, which begins as a baseline; however, it becomes integral as teams plan in-season.

At this stage, there is no Open-to-Buy—only a definition of what success should look like.

2. In‑Season Planning (Where OTB Lives)

Open to Buy becomes active once the season starts.

Actual sales, receipts, markdowns, and inventory levels continuously replace planned values. The merchandise plan becomes a blend of actuals and remaining forecast; this is where Open-to-Buy becomes critical, ensuring that buyers’ decisions remain aligned with financial goals.

Open to Buy answers one core question for buyers:

 Based on the current performance, how much inventory can we still commit without jeopardizing financial goals and creating risk?

 As performance improves or declines:

•  Strong performance can open OTB, enabling demand chasing, pulling forward future orders
•  Slower sales or inventory build can tighten or close OTB, forcing orders to be pushed out to later dates or cancelled.

As planning teams update their in-season merchandise plans, these updated plans must be formally approved before becoming the version against which OTB is measured—preserving discipline while enabling agility.

See also: daVinci Videos: the Fundamentals of Merchandise Planning

What Open-to-Buy Really Represents

 Open-to-Buy is not simply unspent budget. It is a forward‑looking financial control that ensures future inventory commitments remain aligned with the approved plan.

OTB considers multiple components, including:

• Beginning inventory
• Planned sales
• Planned markdowns
• Inventory already on order
• Planned ending inventory

 In simple terms, OTB ensures future purchases support sales targets without creating excess inventory risk.

• Positive OTB = opportunity to buy
• Negative OTB = risk; commitments exceed plan

Check out: Improve your profit margin

 Why Open-to-Buy Is So Important

 Inventory is a retailer’s largest single investment.

Open to Buy exists to ensure that investment is:

·        Productive

·         Timely

·         and Profitable

The goal is not simply to spend money—it’s to:

• Have the right inventory
• In the right place
• At the right time
• In alignment with financial goals.

Too little inventory leads to lost sales and dissatisfied customers. Too much inventory leads to excess stock, markdowns, and margin erosion. OTB provides the financial guardrails that help buying teams balance opportunity and risk.

 The Reality of in‑Season Open-to-Buy Planning

 Effective Open-to-Buy planning depends on speed, accuracy, and visibility.

 When data is fragmented across systems or managed in spreadsheets, teams spend more time managing data than managing the business. Manual processes:

•  Slow reaction time
• Obscure financial risk
• Increase error rates

Retailers make million‑dollar inventory decisions every day. Errors caused by disconnected data or relying on manual spreadsheets; copy‑and‑paste introduces unnecessary risk into one of the largest investments a retailer makes.

 Organizational visibility is equally critical. When plans live on personal desktops, there is no shared understanding of:

• Where inventory dollars are currently committed
• What are the Emerging risks
• Where opportunity exists to chase demand

Open-to-Buy decisions must be collaborative and near real-time. In retail, time truly is money.