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Open-to-Buy (OTB)
Open-to-Buy (OTB)
Open-to-Buy is the dollar or unit budget a retail buyer has available to purchase new inventory in a given period, given the sales plan, current stock, and merchandise already on order. It is the financial control that answers "how much room is left to buy?" and is the in-season pulse of Merchandise Financial Planning (MFP) — the layer where planners convert a financial sales target into a constrained purchasing budget. For a fashion/apparel retailer it governs seasonal buying, markdown budgeting, and in-season reforecasting.
What it is and how it's calculated
Per Shopify (2026) and Linenow, OTB is "the spending limit each buyer works within for a given period," recalculated each month or buying season from planned sales, planned markdowns, and current inventory (Shopify 2026; Linenow). A positive OTB means buying capacity remains; a negative OTB means the period is already over-purchased relative to plan — a signal to delay receipts, reduce outstanding orders, or revise the sales plan upward (Linenow).
The retail-method formula reported by these sources:
OTB (@ retail) = Planned Sales + Planned Markdowns + Planned EOM Stock − Planned BOM Stock − On Order
Linenow flags "On Order" (merchandise ordered but not yet received) as the component most commonly omitted in manual calculations — the single most frequent OTB error (Linenow). Shopify notes the end-of-month (EOM) inventory of one month is the beginning-of-month (BOM) inventory of the next, and that purchases convert to cost via Planned Purchases @ cost = Planned Purchases @ retail × (1 − % IMU) (Shopify 2026).
Retail vs cost method
Shopify (2026) reports retailers generally use one of three OTB methods. The retail (revenue-based) method plans projected sales and target stock at full retail price and suits fashion/seasonal brands managing markdowns; the cost-based method focuses on actual cash paid for stock and suits cash-flow / working-capital-sensitive brands (Shopify 2026).
How fashion/apparel retailers use it
OTB sits inside a continuous pre-season → in-season cycle. TrueGradient describes the pre-season plan as setting budget, assortment, and starting allocation, and the in-season plan as managing the season as actuals arrive — using in-season data for reforecasting, replenishment, and markdown optimisation, treating forecasting as continuous rather than a one-off (TrueGradient, vendor). Centric Software frames OTB as "the in-season pulse" that compares actual sales and inventory against forecasts to adjust buys, reallocate budgets, or cancel orders (Centric Software, vendor).
Markdowns are a planned OTB input, not an afterthought: TrueGradient describes them as price reductions to clear slow-moving or aged seasonal stock before it becomes dead stock, applied progressively in-season or at end of season (TrueGradient, vendor). This connects OTB directly to Markdown Optimisation and Size Curve Optimisation (clearing broken size runs).
OTB vs adjacent concepts
daVinci Retail lists seven elements of merchandise planning: sales forecasting, inventory management, OTB planning, assortment planning, allocation/replenishment, pricing strategy, and performance analysis (daVinci Retail, vendor). The reported hierarchy: Merchandise Financial Planning (MFP) maps strategic financial goals into merchandising plans and sets the OTB guardrails; assortment planning then works within those limits to quantify styles and localise ranges — "the bridge between financial targets and customer demand" (Centric Software; daVinci Retail, both vendor). Demand Forecasting feeds the budget and OTB decisions upstream (daVinci Retail, vendor). OTB is therefore an output/constraint of the planning stack, fed by S&OP (Sales & Operations Planning) and Promotional Uplift Modelling.
Key terms
| Term | Meaning (per sources) |
|---|---|
| BOM / EOM stock | Beginning- / end-of-month inventory; EOM of month N = BOM of month N+1 (Shopify 2026) |
| On Order | Merchandise ordered but not yet received; most-omitted OTB component (Linenow) |
| IMU | Initial markup; converts retail purchases to cost (Shopify 2026) |
| MFP | Merchandise Financial Planning — the layer that sets OTB guardrails (Centric) |
| GMROI | Gross Margin Return on Inventory Investment — a key OTB performance metric |
Benchmarks (all volatile — treat as illustrative)
- Fashion & apparel inventory turnover: 6.0–12.0 (≈30–60 days), with mid-market apparel framed at 4×–8× and fast fashion / value at 8×–12× annual turns (as-of 2025, Onramp Funds). Zara and H&M cited at ≈12× annually (as-of 2025, Onramp Funds).
- GMROI: fashion/apparel cited between $1.86 and $3.01, with ecommerce apparel at 2.5–4.0 and a "mid-2" range as a benchmark; 2.0+ considered strong for family clothing (Opensend, undated — internally inconsistent, low confidence).
- Sell-through near 100% signals stockout risk; below 50% signals weak demand / over-ordering (Wair, vendor, undated).
- OTB cadence: commonly monthly, or per buying season (Shopify 2026; Jeff Sward / LinkedIn).
Tooling: spreadsheets vs systems
OTB is a niche merchandising-finance topic dominated by software vendors. Tools surfaced as offering OTB / MFP capability (all vendor self-description, conflict of interest): Toolio (cloud-native MFP for mid-market/DTC, covering OTB, assortment, in-season), Cogsy (DTC, $10M–$100M revenue band, per-SKU model selection), plus Retalon, RELEX, Increff, ToolsGroup, Board, Centric Software, daVinci Retail, Inventory Planner, Management One (web-source 2026-06-25). Gartner maintains a "Retail Merchandise Financial Planning" reviews market (Gartner).
On the spreadsheet question, Canopy (vendor) reports most brands hit a "spreadsheet tipping point" between 200 and 500 SKUs — workable below 200, unreliable above 500 as maintenance burden and error rates compound (as-of undated, Canopy). SupplierWiki notes retailers persist with Excel because it is cheap, flexible across budgeting/reporting, and macro-automatable — while a single copy-paste error can cascade into systemic inaccuracy (SupplierWiki, undated). This mirrors the run-79 finding that 37% of retailers still run promotions on spreadsheets (Promotional Uplift Modelling).
What practitioners report
[!unverified] No Reddit practitioner signal was captured this run — the reddit-research MCP was unavailable (see Reddit — Open-to-Buy (OTB) 2026-06-25). Practitioner perspectives on spreadsheet-vs-system adoption, in-season reforecasting discipline, and overbought/stuck-inventory pain remain an open gap.
Frontier links
Merchandise Financial Planning (MFP) · Assortment Planning · Markdown Optimisation · GMROI · Sell-Through Rate · Weeks of Supply (WOS) · Initial Markup (IMU)