Open-to-Buy
Open-to-buy (OTB) is a budget for how much new inventory can still be purchased in a period without exceeding planned ending inventory, after accounting for planned sales, markdowns, and stock already on order.
Why it matters for ecommerce brands
Open-to-buy keeps purchasing tied to a cash plan, so buyers cannot commit to more inventory than planned sales support. It is most useful for seasonal and fashion brands that place orders months ahead. It also shows when reorders must wait for stock to sell. For example, with $200,000 of planned sales, $10,000 of markdowns, a $150,000 ending inventory target, $180,000 on hand, and $60,000 on order, open-to-buy is $120,000. If sales run below plan, that budget should shrink before more orders go out.
Formula and calculator
OTB = planned sales + planned markdowns + planned ending inventory − beginning inventory − inventory on order
Common questions
- How do you calculate open-to-buy?
- Add planned sales, planned markdowns, and planned end-of-period inventory, then subtract beginning-of-period inventory and anything already on order. The result is the amount you can still buy for that period.
- Is open-to-buy measured at cost or at retail?
- Either works if every number uses the same basis. Retailers often plan at retail value, while many ecommerce brands plan at cost to match purchase orders.
- How often should open-to-buy be updated?
- Update it at least monthly with actual sales, markdowns, and receipts. Weekly updates help during peak or a launch, when sales move fastest.