Unlocking the Power of Open to Buy: Understanding Its Importance for Retailers

Open to buy (OTB) is a retail management term that refers to the amount of money that a retailer has available to purchase inventory. It is calculated by taking the amount of sales that are projected for a given period and subtracting the amount of inventory that is currently on hand and on order. The resulting amount is the amount that a retailer has available to buy new inventory.

OTB is important for retailers because it helps them manage their inventory levels and avoid overstocking or stockouts. By keeping track of their OTB, retailers can ensure that they have the right amount of inventory on hand to meet customer demand, while also minimizing the amount of money tied up in unsold merchandise. Additionally, using OTB can help retailers identify opportunities to take advantage of promotional sales or discounts, which can lead to increased sales and profits.

Here are 5 tips to improve your Open to buy process:

1. Plan ahead: To effectively manage your open to buy, it’s important to plan ahead and have a clear idea of your sales projections and inventory needs. This will help you make informed decisions about how much inventory to purchase, and when.
2. Monitor sales trends: Keep an eye on your sales data, including what products are selling well, and which ones aren’t. This will help you make better decisions about what to buy and when.
3. Stay flexible: The retail environment is constantly changing, so it’s important to be flexible and willing to adjust your OTB plan as needed. This might mean cutting back on inventory for slow-selling products or increasing your order for hot sellers.
4. Use technology: There are many software tools available that can help you manage your open to buy. These tools can help you forecast sales, track inventory, and make better purchasing decisions.
5. Communicate with your vendors: Maintaining open communication with your vendors can help you stay informed about product availability and lead times, which can help you plan your inventory purchases more effectively. Additionally, working closely with your vendor can help you negotiate better prices and terms.