What does open-to-buy mean in retail?

An Open-To-Buy relates directly to retail merchandise, is structured specifically to address the needs of retailers, and is a tool designed to assist retailers manage and replenish their most significant asset, their inventory investment. An Open-To-Buy is a budget, and involves the full range of budgetary functions.

What is an open-to-buy?

Definition of open-to-buy : the portion of a budget allotment remaining available for additional purchases at any given moment of a budgetary period an open-to-buy is an amount which is budgeted for the placement of purchase orders— H. D. Broehm.

What is the meaning of OTB in retail?

Open-to-buy
Open-to-buy (OTB) is an inventory management system that works with your retail business. It’s the amount of merchandise your retail store can buy during a certain time period.

How do you do OTB in retail?

Here are the simple steps to calculating your OTB.

1. Determine your planned sales – Based on history and other factors, forecast your sales for the month.
2. Determine planned markdowns – Based on your planned discounts and promotions, calculate the amount in dollars of product markdowns for the month.

Why do retailers adopt open-to-buy?

In the simplest terms, open-to-buy (OTB) is a financial budget for merchandise buyers. By understanding inventory needs from a financial perspective, including revenue and margin, retailers gain insight into their open-to-buy process and ensure the organization will not overspend merchandising budgets.

What is buying and planning in retail?

Merchandise Buying involves sourcing goods from vendors and wholesalers at the best possible cost to achieve maximum profitability. Merchandise Buying and Planning work hand in hand as the buyer must understand the merchandise financial plan and what products will drive sales in that category.

How do you buy retail price?

Retail Price = Cost of Goods + Markup. Markup = Retail Price – Cost of Goods. Cost of Goods = Retail Price – Markup.

What is a buy plan?

A buying plan, or buying club, is a type of plan that obligates a buyer to purchase items on a set schedule, to buy items that a seller may deliver without notice, or to pay membership fees for the opportunity to purchase at a supposed discount.

What is OTB formula?

The OTB formula looks like this: Planned sales. + planned markdowns. + planned end of month inventory. – planned beginning of month inventory.

What is open merchandising?

What is assortment planning?

Assortment planning is defined at its simplest, as the process retailers use to decide which products and variations to carry and sell in an upcoming season. Retailers plan their assortment along two dimensions: Breadth/width: the number of product types and categories.

Which method is used for retail buying?

The retail inventory method is an accounting method used to estimate the value of a store’s merchandise. The retail method provides the ending inventory balance for a store by measuring the cost of inventory relative to the price of the goods.