What is open-to-buy (OTB) in fashion retail?
The budget a retailer still has available to purchase stock for a given period, after existing orders and inventory are accounted for.
In short
Open-to-buy is the budget a retailer still has available to purchase stock for a given period, after planned sales, existing inventory and orders already placed are taken into account. It stops buyers from overcommitting and leaves room for in-season opportunities.
How does it work in practice?
Merchandise planners calculate open-to-buy by month and category. The basic logic is planned sales plus planned closing stock and planned markdowns, minus current stock and orders already on order. The result is the amount the buyer can still spend. Buyers check their OTB before writing pre-orders, and planners update it regularly as actual sales and deliveries come in.
Why does it matter?
Open-to-buy is the financial discipline behind buying. It keeps inventory in line with sales, protects cash flow and prevents the excess stock that leads to markdowns. Holding back part of the budget allows buyers to react during the season, for example by placing re-orders for strong sellers or picking up opportunities from brands. For brands, understanding a retailer's OTB helps sales teams time their offers.
How is AI changing it?
AI makes open-to-buy planning more dynamic. Instead of fixed monthly budgets, forecasting models update planned sales continuously based on actual demand, weather and trends, and recalculate OTB automatically. AI can recommend how to split budget between categories and brands, and warn buyers when a new order would push stock above plan.
Common pitfalls
- Spending the whole budget pre-season, leaving no room for re-orders.
- Using outdated sales plans, so OTB no longer reflects reality.
- Ignoring orders already placed but not yet delivered.
- Managing OTB at too high a level, hiding problems in specific categories.
Frequently asked questions
How do you calculate open-to-buy?
Open-to-buy equals planned sales plus planned closing stock and planned markdowns, minus opening stock and stock already on order for the period.
Why is open-to-buy important for wholesale brands?
A retailer's remaining open-to-buy determines how much it can order. Brands that understand it can time their sales approach and suggest realistic order sizes.
